How a company conducts business is important. The U.S. Security and Exchange commission has established guidelines for publicly traded companies so investors and creditors have easy access to the information they need to evaluate the risk to invest or extend credit to a company (Kimmel, Weygandt, & Kieso, 2007). In this paper Hewlett Packard’s ethics policy, U.S. Security and Exchange compliance, financial ratios reported in their 2006 and 2007 annual reports, and filing with the U.S. Security and Exchange Commission are examined.
HO Ethical Behavior
According to Mark Hurd, Chairman and CEO of Hewlett-Packard the company wants to be known for ethical leadership …show more content…
In the following paragraphs the calculations show the finding of these various ratios using Hewlett Packard’s Financial Statements and will also explain what each ratio shows about the financial health of the company.
Current Ratio The Current Ratio can be simply found by dividing the company’s current assets by its current liabilities (Current ratio = Current assets/Current liabilities). This rate can be defined as “a company’s ability to pay its current obligations from current assets” and is also a measure of liquidity (Friedman, Jack P. 2000). From our calculations, for every dollar Hewlett Packard spent $1.35 (for 2006) and $1.21 (for 2007) was either cash or should have become cash during each year. Even though Hewlett Packard’s current ratio for either year is significantly lower than that of the desired 2:1 ratio many industries aspire too, this does not mean that the company is not capable of meeting its obligations. This just means that if the current assets were to deteriorate by 50%, then the company might encounter problems in paying its debts.
Debt/Total assets). This ratio measures the company’s use of debt financing, and is a measure of the company’s financial leverage. From the calculations it shows that Hewlett Packard’s debts were financing 47% of the assets for 2006, and financing 50% of the assets for 2007. These rates indicate that the value of assets for 2006 could have dropped