1. Finance Analysis of Hewlett-Packard
Company (HP)
Based on the Annual Report of the Fiscal Year 2014
YAHYA ABDULQADER
MBA 583.1
DR. JEREMY CRIPPS

2. Introduction
• Hewlett-Packard Company is one of the world's largest computer
and peripheral manufacturers.
• Founded in 1939 by Stanford University Engineering graduates
William R. Hewlett and David Packard.
• Product lines include PCs and other computing devices, enterprise
and industry standard servers, storage devices, networking
products, software, printers, scanners, plotters and other imaging
products.

3. Introduction
• Why Choose Hewlett-Packard Company?
• The company is one of the most profitable companies.
• The availability of company’s annual report of the most recent
fiscal year 2014.
• The company is following ‘First In First Out’ method for valuation
of inventories.

4. Introduction
Net revenue of $111.5
billion
Cash flow from
operations was $12.3
billion
Return $3.9 billion to
stockholders through
dividends and shares
repurchases.

5. Introduction
• HP will separate its businesses into two independent, publicly
traded companies.
• Hewlett-Packard Enterprise: A leader company in the next
generation of technology infrastructure, software, services, and cloud
solutions.
• HP Inc.: A leading personal system and printing company.

6. Description of Budgeting Process
• 1. Certain estimates, judgments, and assumptions that affect the
reported amounts of assets, liabilities, net revenue and expenses,
and the disclosure of contingent liabilities.
• 2. HP management discusses the development, selection and
disclosure of these estimates with the Audit Committee of HP’s
Board of Directors.
• 3. Load of financial information in the company’s system as
accounting principles requirements.

7. Management Accounting Information System
• HP deals with a tremendous amount of data and information, especially
those related to accounting purposes.
• To collect the accounting information, HP uses internal reporting system
for the managers.
• Information are stored in appropriate documentation storages. Also, data
is segregated differently as per the use of internal and external
stakeholders.
• HP is mainly divided its business into seven units. Accordingly, the
information are disseminated throughout the company by making the
budgets for each business unit, division and department.
• HP’s employees can access, when authorized, statistical analysis and
advanced reporting

8. Costing Process
• HP is following a very effective method in all costing procedures.
• Inventory: Valued inventory at the lower of cost or market.
• Property, Plant and Equipment: Stated at cost less accumulated depreciation.
Depreciation expense is recognized on a straight-line basis over the estimated useful
lives of the assets.
• Software Development Costs: Amortized capitalized software development
costs using the greater of the straight-line amortization method.
• Advertising: Expensed as incurred during production.
• Shipping and Handling: Included costs related to shipping and handling in cost
of sales.

9. Capital Decisions
• 1. Generation of Project Information: Gathering information.
• 2. Evaluation of the Projects: Evaluating the profitability from the capital
investments
• 3. Project Selection: HP management makes the decision about funding the
project.
• The methods for the project evaluation are chosen on the basis of long term solvency
and profitability of the business.

10. Capital Acquisition and Structure
• HP uses cash generated by operations as its primary source of liquidity.
• The company was able to supplement short-term liquidity, if necessary,
with broad access to capital markets and credit facilities made available
by various domestic and foreign financial institutions.

11. Capital Acquisition and Structure
• The capital structure of HP is a significantly strong than most of its competitors. This
position allows it to catch several opportunities and widens its investments.
• The capital structure of HP includes short term debt and long term debt with a good
debt-to-equity ratio.
• For short- and long-term debt, HP estimates the fair value of its debt primarily using an
expected present value technique.