Sun Microsystem Paper

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

Year 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.

Year 2001 2000 1999 1998

Net income 927 1,854 1,030 755

Net revenue 18,250 15,721 11,806 9862

Profit Margin 19.6% 11.7% 11.4% 7.6%

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3. What is the major reason for the change in the answer for question 2 between 2000 and 2001?

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 603 917

Net Revenues 18,250 15,721

Ratio Cost of Sales to Net Revenue 55% 48%

Ratio Research and Development to Net Revenue 11% 10%

Ratio Selling, General & Administrative Expenses to Net Revenue 25% 26%

Ratio Provision for Income Taxes to Net Revenue 3% 6%

4. Compute return on stockholders' equity for 2000 and 2001 using data from Exhibits 1 and 2.

Year 2001 2000

Net income $927 $1,854

Stockholder equity $10,586 $7,309

Return 8.8% 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

2000 $ 1,854 $ 15,721 11.8%

2001 $ 927 $ 18,250 5.1%

2a. Return on Assets

net income total assets income / assets

2000 $ 1,854 $ 14,152 13.1%

2001 $ 927 $ 18,181 5.1%

2b. Return on Assets

net income net sales (revenue) income / sales net sales (revenue) total assets sales/ assets

2000 $ 1,854 $ 15,721 11.8% $ 15,721 $ 14,152 1.11

2001 $ 927 $ 18,250 5.1% $ 18,250 $ 18,181 1.00

3b. Return on Equity

Return on assets debt/assets