In Chapter 3, we looked at Dunkin Brands financial statements. In this chapter, we will use a financial Internet website, www.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 firms financials (Income Statement, Balance Sheet, and Cash Flow) on an annual or quarterly basis for the five most recent time periods. In addition, the site contains Key Ratios (Profitability, Growth, Cash Flow, Financial Health, and Efficiency) for 10 years. We will use the Key Ratios on this site to conduct the firms trend analysis. (At the bottom of the screen you will see that you can click Glossary to find definitions for the different ratios. For example, Morningstars Financial Leverage ratio is the same as the Equity multiplier that we use in the textbook.)

Discussion Questions

1. Looking at Morningstars Financial Health ratios, what has happened to HPs liquidity position over the past 10 years?

2. Looking at Morningstars Financial Health ratios, what has happened to HPs financial leverage position (looking at both its financial leverage and debt/equity ratios) over the past 10 years?

3. Looking at Morningstars Profitability ratios, what has happened to HPs 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 Morningstars 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