TEST YOUR UNDERSTANDING Comprehensive Analysis Analyze the income statement, the

Question

TEST YOUR UNDERSTANDING Comprehensive Analysis Analyze the income statement, the Prepare a stasement of retained earnings s balance sheet, and the statement of cash flows. LUCENT TECHNOLOGIES INC. Balance Sheet Cash and cash oquivalents S 1686 s 2,390 3,646 16,103 S 2,894 s 1467 Receivables 1,647 8,782 8,799 Total current assets 20,540 19.240 5,046 6,463 15.463 6,219 Property, plant, and equipment, net Goodwill and other intangibles 224 1,466 S17.791 33664 47512 $35 372 TOTAL assets 1,844 1,500 1,094 1,010 3,468 10,160 3,030 1,705 Current portion of long-term debt Other curent liabilities Total current liabilities 3,274 4,162 11283 1.364 10,638 Other long-tena liabilities Total longterm lisbilities 14,519 11,180 TOTAL liabilities 20,845 20,80721,340 21,436 Preferred stock, redeemable Common stock, par Additional paid-in capital Retained earnings 21,702 (22,025)(10,272) 20,606 7,994 6,130 3.350)(441)(366 (277 (305) 12.857 262 13,9 TOTAL equity TOTAL liabilities and stockhokers' equty $17.791 $33,664 $47.512 535.372

Explanation / Answer

Balance Sheet 1.. b. Total Liabilities remain almost constant over the years 1999 to 2002, with slight decrease in the last two years. c. On 9/30/1999 contributed capital totalled $ (31+7994)= $ 8025 million & on 9/30/2002 contributed capital totalled (35+20606)=$ 20641 million.Total Contributed capital increased more than 2.5 times, over this period. d. Retained Earnings steadily decreased & became negative due to losses in the last 2 years.It decreased by almost 5--(6188+22025)/6188-- times in Fiscal yr. ending 2002 compared to that in 1999 2. Current ratio 2002 2001 2000 1999 Current assets/Current Liabilities Current assets 9155 16103 20540 19240 Current Liabilities 6326 10169 10160 9150 CA/CL 1.45 1.58 2.02 2.10 Current ratio has steadily decreased over the 4 years more due to decrease in almost all components of the current assets 3.. Debt Ratio Total Liabilities/Total Assets Total Liabilities 20845 20807 21340 21436 Total Assets 17791 33664 47512 35372 TL/TA 1.17 0.62 0.45 0.61 Total liabilities have increased to 1.17 times ,the total assets in the fiscal ending 2002 from 0.61 in 1999. 4.. Almost all components of assets,current liabilities & long-term liabilities have been contracting except short-term investments. Other long-term liabilities have been steadily increasing. Contributed capital has increased. Retained earnings have decreased due to losses. Income Statement 5.. Revenues were $ 26993 million for the earliest year reported & $ 12321 for the most recent yr. reported . Since the earliest yr. reported this a/c has decreased by (26993-12321)= $ 14672 million, which is a 14672/26993= 54.35% decrease.During the same time period, net income dipped. 6..Gross Margin % Gross margin 1616 3258 11714 12969 Revenues 12321 21294 28904 26992 GM/Revenues 13.12% 15.30% 40.53% 48.05% CORev. 86.88% 84.70% 59.47% 51.95% Gross Margin % has consistently decreased due to decrease in sales& increased cost of revenues. 7..Return on sales ratio Net Income -11753 -16198 1219 4789 Revenues 12321 21294 28904 26992 NI/Sales -95.39% -76.07% 4.22% 17.74% Yr. ended Strongest return 1999 Weakest 2002 Sales level have steadily decreased in the last 2 yrs. After an increase in yr. ending 2000 CORev. 86.88% 84.70% 59.47% 51.95% But for some unusual expenses in the fiscal ending 2001 , all other expenses show steady decreases. Statement of Cash Flows 9.. Cash from Operating activities reported a cash OUTFLOW all 4 years, which is an UNFAVOURABLE sign. 10.PRIMary source of Cash 1999 Financing Borrowing 2000 Financing Issuing stock 2001 Financing Issuing stock 2002 Investing Disposing of businesses 11..Operating cash flow This indicates that net income was adjusted for non-cash items & changes in the working capital accounts' balances. Indicates cash outflows. 2002 2001 2000 1999 Net Cash flow 757 1951 -1559 -1066 sold sold Purchased Purchased Favourable Favourable Unfav. Unfav. Indicating Cash Inflow Inflow Outflow Outflow 13.. 2002 2001 2000 1999 Equities issued 64 2053 1444 725 Indicating Cash Inflow Inflow Inflow Inflow Appears to have financed paying back borrowed amounts 14.. 2002 2001 2000 1999 Amts. Borrowed -1151 901 1040 2887 Cash outflow Inflow Inflow Inflow Appears to have financed purchase of common stock

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