Q3 ACTIVITY 31 ANALYSIS OF HEWLETT-PACKARD COMPANY Q2 Q4 Purpose: Fiscal years ended October 31, Sales revenue Cost of goods sold (COGS) Gross profit Selling, general, and admin expense (SGA) Research and development expense (R&D) Restructuring changes Understand and interpret amounts reported on the income statement Hewlett-Packard (HPQ) INCOME STATEMENTS ($ in millions) 2010 2009 2008 $ 126,033 $ 114,552 $ 96,089 87,524 29,944 27,028 12,585 11,613 2,959 2,819 1,144 640 1,777 1,820 18,465 16,892 11,479 10,136 (505) (721) (505) (721) 10,974 9,415 2,213 1,755 8,761 7,660 0 0 8,761 $ 7,660 $ Other operating expenses Total operating expenses Operating income Interest income (expense) and other Total nonoperating revenue (expense) Income before income tax Provision for income tax Income from continuing operations Nonrecurring items / Minority interest Net income a. b. $ C. d. 118,364 $ 90,069 28,295 13,326 3,543 311 642 17,822 10,473 Refer to the series of income statements presented above to answer the following questions. Since 10/31/2007, sales revenue growth was $ Q1 million, which is a in sales revenue. The annual revenue growth rate can be compared between companies. Assume less than 5% is low, 5 to 15% is moderate, and more than 15% is high The three-year average revenue growth rate is considered (low / moderate / high). Using 10/31/2007 as the base year, compute the trend index on 10/31/2010 for: trend index trend index trend index 0 0 10,473 2,144 8,329 0 8,329 $ 2007 104,286 78,887 25,399 12,226 3,611 387 456 16,680 8,719 +458 +458 9,177 1,913 7,264 0 7,264 % change Sales revenue Cost of goods sold Gross profit From 10/31/2007 to 10/31/2010, COGS increased at a (greater / lesser) rate than sales revenue, which is considered (favorable / unfavorable). As a result, gross profit margin will also (increase / decrease). Compute ROS (Net income / Sales revenue) for fiscal years ended on: 10/31/2010 %; 10/31/2009 % 10/31/2008 % 10/31/2007 The trend is (increasing / decreasing / steady), which is (favorable/ unfavorable / neutral). % Review all of the information presented above. If you had $10,000, would you consider investing in this company? (Yes/No) Why?

Refer to the series of income statements presented above to answer the following questions. Q1 Since 10/31/2007, sales revenue growth was \$ million, which is a % change in sales revenue. The annual revenue growth rate can be compared between companies. Assume less than 5% is low, 5 to 15% is moderate, and more than 15% is high The three-year average revenue growth rate is considered (low / moderate / high). Q2 Using 10/31/2007 as the base year, compute the trend index on 10/31/2010 for: a. Sales revenue trend index b. Cost of goods sold trend index c. Gross profit trend index d. From 10/31/2007 to 10/31/2010, COGS increased at a (greater / lesser) rate than sales revenue, which is considered (favorable / unfavorable). As a result, gross profit margin will also (increase / decrease). Q3 Compute ROS (Net income/Sales revenue) for fiscal years ended on: 10/31/2010 \%; 10/31/2009 \% 10/31/2008 \% 10/31/2007 % The trend is (increasing / decreasing / steady), which is (favorable / unfavorable / neutral). Q4 Review all of the information presented above. If you had $10,000, would you consider investing in this company? (Yes / No) Why