Analysis and Findings
Ratio analysis is used in this case because on the surface of the financial statements there
is relatively no disparaging difference between the pre and post-split. In order to find a
quantitative method of comparison ratios regarding growth, profitability, cash flow, financial
health, and efficiency were implemented to display the results. These ratios answer many
questions considering the amount of new questions that have been conceived since the
comparison. Hard data concerning the current quarter was difficult to attain so (TTM) trailing
twelve months is used for the comparison whereas current quarter is used where the information
has been made public. The current quarterly report has yet to be released. Only consolidated data
is available due to the fact HP Inc. is yet to be publically traded.
Growth, Profitability, and Financial Ratios for Hewlett-Packard Co
Financials
10/2014 TTM
Revenue USD Mil 111,454 110,139
Gross Margin % 23.9 24
Operating Income USD Mil 7,185 7,108
Operating Margin % 6.4 6.5
Net Income USD Mil 5,013 4,954
Earnings Per Share USD 2.62 2.62
Dividends USD 0.61 0.63
Payout Ratio % 23.3 23.9
Shares Mil 1,912 1,894
Book Value Per Share USD 14.54 14.58
Operating Cash Flow USD Mil 12,333 10,087
Cap Spending USD Mil -3,853 -3,803
Free Cash Flow USD Mil 8,480 6,284
Above are the simplified financials pre and post split..
Profitability
Margins % of Sales 10/2014 TTM
COGS 76.12 75.97
Gross Margin 23.88 24.03
SG&A 11.98 12
R&D 3.09 3.14
Other 2.36 2.44
Operating Margin 6.45 6.45
Net Int Inc & Other -0.56 -0.58
EBT Margin 5.88 5.87
Revenue 100 100
Profitability 10/2014 TTM
Tax Rate % 23.55 23.42
Net Margin % 4.5 4.5
Asset Turnover (Average) 1.07 1.07
Return on Assets % 4.80 4.81
Financial Leverage (Average) 3.86 3.81
Return on Equity % 18.57 18.26
Return on Invested Capital % 10.43 10.12
Generating a profit has been business as usual. The profitability of HP holistically has not
changed. HP is just as profitable on paper as it was at the time of the announcement. The lack of
