Sun Microsystem Paper
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A complete analysis was conducted on the financial statements and status of Sun Microsystems. After examining the research findings and analysis it is fair to say that evidence determines that Sun Microsystems finances has not been on a steady incline. In fact, it had definitely experienced some highs and lows in its return on investment and stockholders? In order to get a concise understanding of where problems are within the company’s operations the following factors were considered and examined: the annual percentage change in net income per common share diluted, net income/net revenues, the major income statement accounts to net revenues, return on stockholders? In order for Sun Microsystems to see a greater return in its bottom line assets it must consider an alternative approach of operating its organization. The following is a comprehensive view of the finances of Sun Microsystems from 1998-2001. Sun Microsystems has experienced significant fluctuations in performance
1. Compute annual percent change in net income per common share diluted.
Formula: % change= P2-P1/P1
2001-2000
2000-1999
1999-1998
Net income per common share-dilution
0.55-0.27=0.28
0.55-0.31=0.24
0.31-0.24=0.07
Annual %
0.28/0.27=103%
0.24/0.31=77%
0.07/0.24= 29%
2. Compute net income/net revenue.
1998
Net income
1,854
1,030
Net revenue
18,250
15,721
11,806
9862
Profit Margin
19.6%
11.7%
11.4%
7.6%
Page 2
3. What is the major reason for the change in the answer for question 2 between 2000 and 2001?
2000
Cost of Sales
10,041
7,549
Research and Development
2,016
1,630
Selling, General, and Administrative Expenses
4,544
4,072
Provision for Income Taxes
Net Revenues
18,250
15,721
Ratio Cost of Sales to Net Revenue
Ratio Research and Development to Net Revenue
Ratio Selling, General & Administrative Expenses to Net Revenue
Ratio Provision for Income Taxes to Net Revenue
4. Compute return on stockholders equity for 2000 and 2001 using data from Exhibits 1 and 2.
2000
Net income
$1,854
Stockholder equity
$10,586
$7,309
Return
25.4%
Sun Microsystems saw tremendous growth in net income between 1999 and 2000 leading up to a sharp decline between 2000 and 2001. The income statements show increased revenues in 2001, contradicting the data above. Further analysis provides an explanation for the deceleration in income growth in spite of increased revenue.
5. Analyze your results to question 4 more completely by computing ratios 1, 2a, 2b, and 3b (all from this chapter) for 2000 and 2001.
1. Profit Margin
net income
net sales (revenue)
income / sales
$ 1,854
$ 15,721
11.8%
$ 927
$ 18,250
2a. Return on Assets
net income
total assets
income / assets
$ 1,854
$ 14,152
13.1%
$ 927
$ 18,181
2b. Return on Assets
net income
net sales (revenue)
income / sales
net sales (revenue)
total assets
sales/ assets
$ 1,854
$ 15,721
11.8%
$ 15,721
$ 14,152
1.11
$ 927
$ 18,250
$ 18,250
$ 18,181
1.00
3b. Return on Equity
Return on assets
debt/assets