In Chapter 3, we looked at Dunkin’ Brands’ financial statements. In this chapter, we will use a financial Internet website, morningstar.com, to analyze HP Inc., a computer hardware company. Once on the website, you simply enter HP Inc.’s ticker symbol (HPQ) to obtain the financial information needed.

We will also perform a trend analysis, where we evaluate changes in key ratios over time.

Through the Morningstar website, you can find the firm’s financials (Income Statement, Balance Sheet, and Cash Flow) on an annual or quarterly basis for the five most recent time periods by clicking on each statement’s name as you scroll down your screen. In addition, the site contains Key Ratios

(Profitability, Growth, Cash Flow, Financial Health, and Efficiency) for 10 years. (From the home screen, click on “Key Ratios” and “Full Key Ratios Data.” Then the next screen shows 10 years’ worth of key ratios.) We will use the Key Ratios on this site to conduct the firm’s trend analysis. (At the top of the home screen, you will see that you can click on the “Learn” tab and select “Investing Glossary”

to find definitions.)

Questions

1. Looking at Morningstar’s Financial Health ratios, what has happened to HP’s liquidity position over the past 10 years?
2. Looking at Morningstar’s Financial Health ratios, what has happened to HP’s financial leverage position (looking at both its financial leverage and debt/equity ratios) over the past 10 years? Note that Morningstar’s Financial Leverage Ratio is the same as the Equity Multiplier that we use in the textbook.
3. Looking at Morningstar’s Profitability ratios, what has happened to HP’s profit margin (net margin %)
over the past 10 years? What has happened to its return on assets (ROA) and return on equity (ROE) over the past 10 years?
4. Looking at Morningstar’s Efficiency ratios, how well has it managed its assets (as measured by days sales outstanding, inventory turnover, fixed assets turnover, and total assets turnover) over the past 10 years?