Lucent TechnologiesAxia College of University of PhoenixLucent Technologies is a company based on networking for service providers, government, and enterprises worldwide (Lucent Technologies, n.d., Para 1). The products and services they work with are separated into three categories; service and maintenance, wireless mobility networking, and wire line networking. Lucent Technologies is backed by Bell Labs, which does research and development in networking technologies.During the years of 2001 to 2003 this company has experienced a decrease in demand because of other companies’ loss or capital used toward spending. This is mainly due to a downturn in the economy. As an investor this information is necessary to know because it explains the decrease or increase in sections of the balance sheet. In order to compare the growth or decline of the company’s profit, an investor must change a balance sheet into a common-size balance sheet. First when looking at the balance sheet an investor will see that the amount of paidin capital has increased from the year of 2003 to 2004, the assets have increased, but the liabilities have decreased. When running a debt/asset ratio it is noticed that this ratio drops from 1.2 in 2003 to 1.0 in 2004. This shows the company’s risk is low when concerning financial leverage, usually when the debt ratio is less than one percent it is financed mainly by company equity, so this company is close to being debt free from creditors.After changing the balance sheet to a common-size balance sheet there are several factorsan investor will look at. The current assets have dropped to .48 from .49 in 2004. This does not show harm to the company because only the accounts receivable dropped while the rest of the current assets increased. This means the company is not in as much danger of default on money owed to it. It does have a rise in marketable securities. The one concern in the assets is the increase of prepaid cost of pensions and goodwill. Goodwill can be used for tax breaks but prepaid pensions cannot benefit the company.When looking at the liabilities section an investor will see a drop in pension and liabilities and an increase in long term debt, both of these could be affected because of the drop in the economy. Long term liabilities are often increased to help a company control interest rate increases so as an investor cutting back on pension liabilities cuts back cost to the company and watching interest rate increase show the company is concerned with its earning and investors. This would be encouraging or an investor. The stockholders deficit shows a drop in accumulated deficits from -1.43 to -1.22 and total deficits of -.26 to -.08. This shows the company is working to control any money loss and turning it to the company’s advantage. Overall it shows the company is still earning a profit although small. With an increase of assets and a drop in liabilities the company is showing it is working in a low risk capital. After reviewing this information, a creditor or investor must be able to compare this company to the industry totals. By comparing how this company compares to other companies similar to it, a person can see if it is competitive and worth taking a risk. Running ratios will also show if the company is capable of paying off any debts it has or if it can acquire the needed cash in case of emergencies. Overall as an investor, I would say this company would be worth investing in.ReferenceAxia College. (2007). Understanding Financial Statements. Retrieved May 10, 2010 fromAxia College, Week 2 Assignment,
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