Use Hewlett Packard’s financial statements to answer these questions. They are in a separate file.
1. Predict revenues in 2015. Revenues fell in 2014 because services sales fell due to key account runoff in ES (Enterprise Services). Assume that revenues grow by 5% in 2015. 111,454,000,000*(1+5%)=117,026,700,000
2. Do products or services have a larger growth rate of revenues in 2014? Products revenue growth rate:(73,726,000,000-72,398,000,000)/72,398,000,000=0.018 Services revenue growth rate:(37,327,000,000-39,453,000,000)/39,453,000,000= -0.054
3. Do products or services have a larger gross profit margin in 2014? Show your calculations.
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Footnote 7 lists the depreciation expense without including amortization. For most firms these figures are similar and it is appropriate to use the numbers in the cash flow statement but HP has a large amount of amortization. If the pattern in 2014 continues, what does the relative amount of depreciation (not including amortization) and capital expenditures suggest about whether the level of property, plant and equipment will increase or decrease in 2015? Projected Net PPE= This year’s net PPE+projected capital expenditures-projected depreciation expense Depreciation rate=depreciation /gross PPE last year=3,300,000,000/26,133,000,000=0.126 Projected depreciation expense=depreciation rate*gross PPE this year=0.126*26,252,000,000=3,315,026,977 The projected depreciation expense in 2015 is almost the same as the depreciation expense in 2014, it increases 15,026,977. From the cash flow statement, it shows that capital expenditures increased 654,000,000 in 2014. If the pattern in 2014 continues, the projected Net PPE in 2015 will increase in 2015.
7. One of the key tasks in producing forecasted pro forma financial statements is to predict the level of level of cash, notes payable and short-term borrowings, long term debt, stock issued, stock repurchases and dividends. These items are less related to operations of the firm. Using