Tuesday, January 29, 2019
Financial Analysis of Microsoft Corp. Essay
This report is issued in order to inform the public about Microsoft Corpo dimensionn. We analyzed the networkability and runniness of this lodge. In addition, we were open to propose commendations for redactments or credits in Microsoft for the surpass elicit of the public. Profitability proportionalitys refer to the relative measure to what an actual created profit. done and through these ratios the bon ton is allowed to see how profit win the comp some(prenominal). In addition it can behave as an examination of the oerall performance of the companys trading operations and how do these comp are to past performances or other companies. The ratios in which story measures the profitability of a company are Profit Margin, Price over cabbage, Return on Equity and Return on As square offs.In scathe of Profit Margin it has a high ratio, which actor that our company is bout 76.3% much of severally dollar that we mete out. The results of this could be the increase i n the bill sold, increase in the price, and decrease in costs. Compared to apple, whose profit strand ratio is 46.2%, Microsoft is able to be more profitable in terms of profit margin. The Price over Earnings ratio helps to determine how untold does a share cost is compare to how much the company is earning and it is interpreted as how long it go forth take you to earn back what you invested in a company. In this case for someone who invests in Microsoft it provide take them somewhat 15.3 years, compare to Apples 13.5 years, to earn back the amount that they will invest.The Return on Equity ratio helps to measure the profitability of a company for the investor and how it manages its equity. In this case, Microsoft experiences a 10.3% of Return on Equity. Ideally, a company would like to have a high Price over Earnings ratio compared to Apples 51.5% Return o n Equity, Microsoft stands at a lower part which might non attract others to invest in the company. Return on Assets ratio evaluates how a company is able to produce a profit before being on debt it reflects on the efficiency of the management. In this case Microsofts 5.9% was again below Apples 33.4% in its ratio.Cash Flows are the inflows and outflows of cash in a company, which are directly related to the revenues and disbursements in Microsofts income statement. The Net Income that Microsoft enter for 2012 was $16,978.00 and its Cash Flows from Operating Activities equaled to 31,626.00. In this case the company recorded higher cash flows from operating activities compared to its net income. This was a result of the companys management on its on-going liabilities and its menstruation summations. Also, the addition in dispraise and amortization, goodwill, and stock-based compensation these accounts are not part of the cash flows yet they ease make an carry on on the income of the company.Liquidity being, that which represents how fast the company is able to convert its assets into cash, is denoted with various ratios. The veritable ratio (D) takes the current assets of a firm and divides them by the staunchs current liabilities. Currently Microsofts current ratio is 2.9, exhibit that its current assets exceeds its current liabilities. Apple Inc., which is Microsofts contender, has 1.6 for its current ratio indicating that its not as quick in converting its assets into cash. other liquidity ratio is the quick ratio (E) this ratio is calculated by subtracting gunstock from current assets and dividing that difference by the trustys current liabilities. Microsofts quick ratio is 2.6, showing that the company is still doing easily in converting its assets into cash even after removing its most liquid asset inventory. Apples quick ratio is 1.1, which shows how much inventory constructs the companys current assets. Microsoft has been doing very well inside its liquidity measures and meets its obligations as they drive due.When discussing solvency, we analyze rati os that measure the long-run liability of a note to pay off its debts. The times evoke earned ratio (H) is a solvency ratio taking earnings before rice beer and tax, and dividing that agree by the participation expense. Microsofts times amuse earned ratio is 87.7, showing that this firm is very successful especially before any interest or tax is deducted from its overall earnings. Apples times interest earned ratio could not be calculated due to the event that their information didnt indicate a specific interest expense to complete the equation. Another solvency ratio is the debt to equity ratio (I) taking the firms total liabilities and dividing that total by owners equity.Currently Microsofts debt to equity ratio is 0.8, showing that there is less risk among the firms financials. This also means that the company doesnt rely besides much on impertinent lenders. Apples debt to equity ratio seems to also be inside good standing because it is .5, so it doesnt rely too much on external lenders either. Overall, some(prenominal) liquidity and solvency ratios represent how financially abiding this company is within converting its current debt into cash as well as its long-term debt. In most cases Apple Inc. falls behind Microsoft Corp. within its short and long term debt solvency.When analyzing Microsofts capital organise the percentage of liabilities that construct the firms total assets is 42.87%. exhibit that less than fractional of the firms total assets are represented by liabilities. now the percentage of the total assets that are represented by stockholders equity is 57.12%. masking that stockholders equity represents slightly more than half of Microsofts total assets.When analyzing the capital structure of Microsofts competitor Apple, there are distinct differences. The percentage of liabilities that construct the firms total assets is 36.06%. Showing that unlike Microsofts percentage of liabilities to assets, there are a diffuse fewer liab ilities representing the total assets of the firm. Now the percentage of stockholders equity that constructs the total assets of the firm is 64.93%. Showing that more than half of the firms total assets are constructed out of its stockholders equity. Apple seems to have fewer liabilities supporting its total assets and a higher percentage of stockholders equity. Overall, it seems that Microsoft Corp. has a significantly different capital structure than that of its competitor Apple Inc..IFRS refers to the global Financial Reporting Standards it is a set of accounting standards constructed by an independent, not-for-profit organization called the International Accounting Standards Board (IASB). IFRS provides rule for the company to prepare its financial statements off of, rather than setting rules for industry-specific reporting. The International Accounting Standards Board (IASB) is an independent, private-sector body based in London that soon develops and approves International F inancial Reporting Standards. The IASB is thoroughly responsible for all proficient matters of the IFRS Foundation including, the full discretion in developing and pursuing its agenda, subject to certain consultation requirements with the Trustees and the public, and exposure drafts, following the approval and issuing of Interpretations actual by the IFRS Interpretations Committee.Some of the differences amidst IFRS and generally accepted accounting principles is that IFRS is considered to be more of a principles based accounting standard whereas in contrast the U.S. GAAP is considered more of a rule based accounting standard. chthonic IFRS, the last in first out manner for accounting for inventory costs is not allowed. Under U.S. GAAP, either LIFO or FIFO inventory can be used. The move to a single method of inventory costing could potentially enhanced similarities between countries, and removes the need for analysts to adjust LIFO inventories in their comparison analysis.The reporting for each would differ. For instance the treatment of intangible under U.S. GAAP is recognized at fair value, while under IFRS, it is only recognized if the asset will have a future economic benefit and has measured reliability. Under IFRS, if inventory is written down, the write down can be change by reversal in future periods if specific criteria are met. Under U.S. GAAP, once inventory has been written down, any reversal is prohibited. The potential adoption of IFRS is likely to impact not only reporting structures but also how individual minutes are captured and processed. In many cases, operating leases under GAAP could become finance leases under IFRS. Impacts could be mostly identified on taxes and brace sheet ratios. IFRS may generate running obligations sooner than under GAAP due to the more likely than not principle. Contracts would need to be evaluated cautiously under GAAP.Based on the previous analyses of the companys data I can say I would definitely loan m oney to Microsoft Corp. short-term and long-term. The liquidity of the company calculated using current ratio and quick ratio represents how fast the company is able to convert its assets into cash. beholding that the firm showed signs of quick asset to cash turnover within both current and quick ratio, shows that they are able to pay off any loans they might incur. In contrast to Apple its contender, which had low ratios depicting disconfirming signs of asset to cash turnover.When looking at the solvency measures, we can see the long-term viability of a business to pay off its debts. We used the times interest earned ratio and the debt to equity ratio to depict what trend this firm had with balancing debt. Microsoft seemed to show very high earnings before interest and taxes, which resulted in a high times interest earned ratio overall. This high ratio means that this firm has great ability in paying off its interest and debt this serves to be another viable case for Microsoft t o be approved for a loan. Another solvency measure that was taken was through the debt to equity ratio, which represents the degree to which the assets of the business are financed by the debts and the shareholders equity of a business. This ratio showed that Microsofts overall business doesnt rely too much on the external lenders of the company.It shows it can attain profit through its own activities, and therefore has overall less risk. Overall, due to the fact that Microsoft has quick asset to cash turnover, increasingly high earnings before interest and tax, and a low debt to equity ratio Microsoft would be an ideal chance for short and long term loans. When discussing whether an individual should buy, sell, or hold on the stock of this company, I would recommend the hold on stocks. Based on the profitability ratios, which help us calculate how a firm is performing, Microsoft, compared to its ambition Apple, is behind in terms of profitability.Microsoft has a higher profit mar gin then Apple does however, its price over earnings, returns on equity and returns on assets fall below its competition. This can be a discouragement for anyone who is kindle in the company. Yet, even though Microsofts overall profitability is not as good as Apples profitability, there could be still a chance in which the company can provide investors with more profitable income since the company is not at risk. Thus, this could take agelong then expected, that is why it is better to hold on the stocks of this company. So, I recommend this individual hold on their stocks and see how the turnout ends for the most new-fashioned advancements Microsoft has made as a company, and from those figures on either decide to sell or buy more stocks.