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Financial Analysis of the Computer Associates (CA)

The financial analysis of the Computer Associates (CA) includes the revenue analysis and EPS analysis.

Revenue Analysis

The Exhibit 1 shows the calculations for the improper and the total actual revenue of the Computer Associates (CA). The company for the Q1 FY2000 showed the proper revenue of amount $977,165,281 while on the other side, the amount of the improper revenue is $244,834,719.This showed that the actual total revenue from the contract should be around $1,222,000,000 that must be recognized, but the company showed the amount less than the original revenue. The improper recording of the revenue in percentage is 20% indicating the percentage for the total improper revenue recognition for both the client and the company itself.

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Similarly, for the Q2 FY2000 showed the proper revenue of amount $1,047, 256,904 however on the other side, the amount of the improper revenue is $$557, 743,096. .This showed that the actual total revenue for the contracts should be around $1,605,000,000 that must be recognized. The improper recording of the revenue in percentage is 35% showing the percentage for the total improper revenue recognition for the quarter 2 of the year 2000.

The revenue analysis of the Q3 FY2000 displayed that the proper revenue of amount $1,239,902,741 whereas, the amount of the improper revenue is $$572, 097,259. . This showed that the actual total revenue from the contract should be around $1,812,000,000 that must be recognized. The improper recording of the revenue in percentage is 32% displaying the percentage for the total improper revenue recognition for the quarter 3 of the year 2000.

Furthermore, Q4 FY2000 showed the proper revenue of amount $1,748,131,031 while on the other side, amount for the improper revenue is $378,868,969. . This showed that the actual total revenue for the contracts should be around$2, 127,000,000 that must be recognized. The improper recording of the revenue in percentage is 18% displaying the percentage for the total improper revenue recognition for the quarter 4of the year 2000.

From the revenue analysis of the year 2001, it is exhibited that Q1 FY2001 showed the proper revenue for the quarter 1 is $1,135,600,000 while on the other side, the amount of the improper revenue is $142,400,000. . This showed that the actual total revenue for the contracts should be around $1,278,000,000 that must be recognized. The improper recording of the revenue in percentage is 11% indicating the percentage for the total improper revenue recognition for both the client and the company itself. Lastly, Q2 FY2001 showed the proper revenue of amount $1,462,040,000 while on the other side, the amount of the improper revenue is $218,960,000. . This showed that the actual total revenue for the contracts should be around $1,681,000,000 that must be recognized. The improper recording of the revenue in percentage is 13% displaying the percentage for the total improper revenue recognition for the quarter 2 of the year 2001.

It is concluded from the overall analysis of the revenue that there is a great break between the actual total revenue and the amount that is recognized in the company’s recode. In order to overcome these types of problems, company have to take analyze in detail the factors that plays a vital roles in these conditions in order to overcome with an effective solution.

EPS Analysis

The exhibit 2 shows the estimated EPS, announced EPS, EPS without Improperly Recognized Revenue and the difference between announced EPS and EPS without Improperly Recognized Revenue.

The estimated EPS by the analyst for the Q1 FY2000 is $0.47 while announced EPS by the company is $0.49 showing that estimation by the analysts for the Quarter 1 went wrong. In addition to this, EPS without Improperly Recognized Revenue for the Q1 FY2000 is $0.29. This amount of EPS without Improperly Recognized Revenue indicating that the company has misled the investors by showing the higher EPS as well as it is also trying to show a good image of the company by announcing the higher earnings per share (EPS). The difference between EPS without Improperly Recognized Revenue and EPS without Improperly Recognized Revenue is $0.20 indicating the amount that is improperly included by the company in the EPS.

Moreover, the estimated EPS by the analysts for the Q2 FY2000 is $0.59 whereas the amount of announced EPS by the company is $0.60.These figures shows that estimation by the analyst for the Quarter 2 went wrong. In addition to this, EPS without improperly recognized revenue for the Q2 FY2000 is $0.05 and it indicates the actual proper EPS without improperly recognized revenue Additionally..............................

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