Week 2 Individual: Lucent Technologies Case Assignment: Read Case 2. 1: Lucent Technologies on pp. 79 and 80 (Ch. 2) of the text. Compose a 500- to 750-word paper that includes your answers to questions 2-4 on p. 79. Question #2: Evalutat the asset, debt, and equity structure of Lucent Technologies, as well as trends and changes found on the common-size balance sheet. After reviewing the case of Lucent Technologies, we discover that the assets for Lucent Technologies suffered a decline between 2003 and 2004.
According to the information provided in the case revealing, the current assets in 2003 was 49. 4% of Lucent Technologies total assets, whereas the current assets in 2004 decreased to 48. 5%. Although, after reviewing the case the percentage of inventory rose from 4. 0% in 2003 to 4. 8% in 2004. We can then calculate there is about a 20% increase in the total inventory holdings. Also it is apparent that Lucent Technologies entire assets in 2003 was 24% and had a decrease in 2004 to about 20%. This can be measured by the company’s cash equivalents and cash.
The total debt structure of Lucent Technologies decreased between 2003 and 2004. Lucent Technologies had a decrease in their current liability. In 2003 their current liability was 25. 6% and decreased to 24. 3% during 2004. According to the debts that increased from 23% in 2003 to 26. 4% a year later in the company’s total liability, the debts of Lucent Technologies would be considered long term. In 2003, Lucent Technologies had decreased in the representation of total liabilities and shareholders equity on the equity side for Lucent Technologies when compared to a year later.
Improvements can happen and the situation of the company now can improve as the year progresses so the company won’t look deficit. Question #3: What concerns would investors and creditors have based on only this information? Based on only this information for Lucent Technologies, a concern investors and creditors would have when looking at this balance sheet would be the debt structure. When looking at the given information we see a decrease in the total liability, but an increase in the long term liabilities.
This could caurse harm to the company since the current liabilities are decreasing from one year to the next. Although, since there is an increase shown for the long term liabilities it balances out to prevent showing a loss. The equity portion is in a superior position for the company. In conclusion, with the given information, Lucent Technologies has been improving looking at 2003 and 2004 and will continue to improve steadily. Question #4: What additional financial and non financial information would investors and creditors need to make investing and lending decision for Lucent Technologies?
Some additional financial information that investors and creditors would need in order to make investing and lending decisions for Lucent Technologies would be the company’s financial statements. Investors and creditors would need financial statements for Lucent Technologies because the financial statements contain all the financial information that the investors and creditors would need to make sound investing and lending decisions for Lucent Technologies. The financial statements are the inner workings in a company.
The financial statements of a company can be looked at and compared with previous years, in order to find trends in the financial statements and guide investors and creditors to figure out where the company stands and what direction the company may have facing them. Some nonfinancial information that investors and lending decisions for Lucent Technologies would be to know the operating units were created to work together in order to provide cost-efficient solutions and innovative for customers. The business structure can sometimes play a key roll in financial decisions.