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Microsoft Excel LibreOffice Calc

HP Inc. (HPQ)


Analysis of Investments

Difficulty: Advanced


Investment Accounting Policy

HP determines the appropriate classification of its investments at the time of purchase and re-evaluates the classifications at each balance sheet date. Debt and marketable equity securities are generally considered available-for-sale. All highly liquid investments with maturities of three months or less at the date of purchase are classified as cash equivalents. Marketable debt securities with maturities of twelve months or less are classified as short-term investments and marketable debt securities with maturities greater than twelve months are classified based on their availability for use in current operations. Marketable equity securities, including mutual funds, are classified as either short-term or long-term based on the nature of each security and its availability for use in current operations.

Debt and marketable equity securities are reported at fair value with unrealized gains and losses, net of applicable taxes, in Accumulated other comprehensive loss in the Consolidated Balance Sheets. Realized gains and losses on available-for-sale securities are calculated based on the specific identification method and included in Interest and other, net in the Consolidated Statements of Earnings. HP monitors its investment portfolio for potential impairment on a quarterly basis. When the carrying amount of an investment in debt securities exceeds its fair value and the decline in value is determined to be other-than-temporary (i.e., when HP does not intend to sell the debt securities and it is not more likely than not that HP will be required to sell the debt securities prior to anticipated recovery of its amortized cost basis), HP records an impairment charge to Interest and other, net in the amount of the credit loss and the remaining amount, if any, is recorded in Accumulated other comprehensive loss in the Consolidated Balance Sheets.

Source: 10-K (filing date: 2018-12-13).


Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities

HP Inc., adjustment to Net Earnings

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Oct 31, 2018 Oct 31, 2017 Oct 31, 2016 Oct 31, 2015 Oct 31, 2014 Oct 31, 2013
Net earnings (as reported) hidden hidden hidden hidden hidden hidden
Add: Change in unrealized components of available-for-sale securities hidden hidden hidden hidden hidden hidden
Net earnings (adjusted) hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-12-13), 10-K (filing date: 2017-12-14), 10-K (filing date: 2016-12-15), 10-K (filing date: 2015-12-16), 10-K (filing date: 2014-12-18), 10-K (filing date: 2013-12-30).


Adjusted Ratios: Mark to Market Available-for-sale Securities (Summary)

HP Inc., adjusted ratios

Microsoft Excel LibreOffice Calc
Oct 31, 2018 Oct 31, 2017 Oct 31, 2016 Oct 31, 2015 Oct 31, 2014 Oct 31, 2013
Net Profit Margin
Reported net profit margin hidden hidden hidden hidden hidden hidden
Adjusted net profit margin hidden hidden hidden hidden hidden hidden
Return on Equity (ROE)
Reported ROE hidden hidden hidden hidden hidden hidden
Adjusted ROE hidden hidden hidden hidden hidden hidden
Return on Assets (ROA)
Reported ROA hidden hidden hidden hidden hidden hidden
Adjusted ROA hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-12-13), 10-K (filing date: 2017-12-14), 10-K (filing date: 2016-12-15), 10-K (filing date: 2015-12-16), 10-K (filing date: 2014-12-18), 10-K (filing date: 2013-12-30).

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. HP Inc.’s adjusted net profit margin deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by shareholders’ equity.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by total assets. HP Inc.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

HP Inc., Ratios: Reported vs. Adjusted


Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Oct 31, 2018 Oct 31, 2017 Oct 31, 2016 Oct 31, 2015 Oct 31, 2014 Oct 31, 2013
As Reported
Selected Financial Data (USD $ in millions)
Net earnings hidden hidden hidden hidden hidden hidden
Net revenue hidden hidden hidden hidden hidden hidden
Ratio
Net profit margin1 hidden hidden hidden hidden hidden hidden
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (USD $ in millions)
Adjusted net earnings hidden hidden hidden hidden hidden hidden
Net revenue hidden hidden hidden hidden hidden hidden
Ratio
Adjusted net profit margin2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-12-13), 10-K (filing date: 2017-12-14), 10-K (filing date: 2016-12-15), 10-K (filing date: 2015-12-16), 10-K (filing date: 2014-12-18), 10-K (filing date: 2013-12-30).

2018 Calculations

1 Net profit margin = 100 × Net earnings ÷ Net revenue
= 100 × hidden ÷ hidden = hidden

2 Adjusted net profit margin = 100 × Adjusted net earnings ÷ Net revenue
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. HP Inc.’s adjusted net profit margin deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Oct 31, 2018 Oct 31, 2017 Oct 31, 2016 Oct 31, 2015 Oct 31, 2014 Oct 31, 2013
As Reported
Selected Financial Data (USD $ in millions)
Net earnings hidden hidden hidden hidden hidden hidden
Total HP stockholders’ equity (deficit) hidden hidden hidden hidden hidden hidden
Ratio
ROE1 hidden hidden hidden hidden hidden hidden
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (USD $ in millions)
Adjusted net earnings hidden hidden hidden hidden hidden hidden
Total HP stockholders’ equity (deficit) hidden hidden hidden hidden hidden hidden
Ratio
Adjusted ROE2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-12-13), 10-K (filing date: 2017-12-14), 10-K (filing date: 2016-12-15), 10-K (filing date: 2015-12-16), 10-K (filing date: 2014-12-18), 10-K (filing date: 2013-12-30).

2018 Calculations

1 ROE = 100 × Net earnings ÷ Total HP stockholders’ equity (deficit)
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROE = 100 × Adjusted net earnings ÷ Total HP stockholders’ equity (deficit)
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by shareholders’ equity.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Oct 31, 2018 Oct 31, 2017 Oct 31, 2016 Oct 31, 2015 Oct 31, 2014 Oct 31, 2013
As Reported
Selected Financial Data (USD $ in millions)
Net earnings hidden hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden hidden
Ratio
ROA1 hidden hidden hidden hidden hidden hidden
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (USD $ in millions)
Adjusted net earnings hidden hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden hidden
Ratio
Adjusted ROA2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-12-13), 10-K (filing date: 2017-12-14), 10-K (filing date: 2016-12-15), 10-K (filing date: 2015-12-16), 10-K (filing date: 2014-12-18), 10-K (filing date: 2013-12-30).

2018 Calculations

1 ROA = 100 × Net earnings ÷ Total assets
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROA = 100 × Adjusted net earnings ÷ Total assets
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by total assets. HP Inc.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.