4. Compute return on stockholders' equity for 2000 and 2001 using data from Exhibits 4 and 5. Exhibit 4 1998 Dollars $9,862 SUN MICROSYSTEMS INC. Summary Consolidated Statement of Income (in millions) 2001 2000 1999 Dollars Dollars Dollars Net revenues $18,250 $15,721 $11,806 Costs and expenses: Cost of sales $10.041 $ 7,549 $ 5,670 Research and development 2,016 1.630 1,280 Selling, general and administrative 4,544 4,072 3,196 Goodwill amortization .... 261 65 19 In-process research and development 77 12 121 Total costs and expenses $16,939 $13,328 $10,286 Operating income 1,311 2,393 1,520 Gain (loss) on strategic investments (90) 208 Interest income, net 363 170 85 Litigation settlement Income before taxes $ 1,584 $ 2,771 $ 1,605 Provision for income taxes 603 917 575 Cumulative effect of change in accounting principle, net (54) Net income $ 927 $ 1,854 $ 1.030 Net income per common share-diluted $ 0.27 $ 0.55 $ 0.31 Shares used in the calculation of net income per common share-diluted 3,417 3,379 3,282 $4,713 1,029 2,826 4 176 $8,748 1,114 48 $1,162 407 $ 755 $ 0.24 3,180 BB 5. Analyze your results in Question 4 more completely by computing Ratios 1, 2a, 2b, and 3b (all from this chapter) for 2000 and 2001. Actually the answer to Ratio 1 can be found as part of the answer to Question 2, but it is helpful to look at it initially. What do you think was the main contributing factor to the change in return on stockholders' equity between 2000 and 2001? Think in terms of the Du Pont system of analysis. SUN MICROSYSTEMS INC. Consolidated Balance Sheets (in millions) 2001 2000 $ 1,472 387 2.955 $ 1,849 626 2,690 Assets Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net of allowances of $410 in 2001 and $534 in 2000 Inventories Deferred tax assets Prepaids and other current assets Total current assets Property, plant and equipment, net Long-term investments ........ Goodwill, net of accumulated amortization of $349 in 2001 and $88 in 2000 Other assets, net 1,049 1,102 969 $ 7,934 2.697 4,677 557 673 482 $ 6,877 2,095 4,496 2,041 832 $18.181 163 521 $14,152 $ 3 1,050 488 1.374 1,827 314 90 $ 5,146 744 1.705 $ 7,595 $ 7 924 751 1,155 1.289 211 209 $ 4,546 577 1.720 $ 6,843 Liabilities and Stockholders' Equity Current liabilities: Short-term borrowings Accounts payable Accrued payroll-related liabilities Accrued liabilities and other Deferred revenues and customer deposits Warranty reserve Income taxes payable Total current liabilities Deferred income taxes Long-term debt and other obligations Total debt Commitments and contingencies Stockholders' equity: Preferred stock, S0.001 par value, 10 shares authorized (1 share which has been designated as Series A Preferred participating stock); no shares issued and outstanding - Common stock and additional paid-in-capital, 50.00067 par value, 7,200 shares authorized; issued: 3,536 shares in 2001 and 3,495 shares in 2000 ... Treasury stock, at cost: 288 shares in 2001 and 301 shares in 2000 Deferred equity compensation Retained earnings Accumulated other comprehensive income (loss) Total stockholders' equity 6.238 2,728 (2.435) (73) 6.885 (29) $10,586 $18,181 (1.438) (15) 5,959 75 $ 7,309 $14,152