8/9/2019 Microsoft_Financial Statements Analyisis _Aarif Shah_City University_Peshawar[1].
1/30
Y o u r P o t e n t i a l O u r P a s s i o n
Submitted b y:
Muhammad Arif Shah
ID No: 2882
Semester: 5th
Under the Guidance of:SIR. MUHAMMAD ANEES
Lecturer in Financial Statement Analysis
City University of Information Technology
City University of Information Technology
Project onFinancial Statements
Analysis
8/9/2019 Microsoft_Financial Statements Analyisis _Aarif Shah_City University_Peshawar[1].
2/30
g{| c}xv | wxw|vtx ` ctx 9exxvtux gxtv{x
8/9/2019 Microsoft_Financial Statements Analyisis _Aarif Shah_City University_Peshawar[1].
3/30
Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}1
TABLE OF CONTENTS
Sr. #: TOPICS NAME: PAGE NO:
1. Acknowledgment: 02
2. Executive Summary: 03
3. Nature of Business: 04
4. Business Description: 05-06
5. Objectives of the Project: 07
6. Scope of the Project: 07
7. Limitations of the Project: 08
8. Framework for Financial Analysis: 09-10-11
9. Use of Financial Analysis: 11
10. Liquidity Ratios:
11.
Efficiency Ratios:
12. Profitability Ratios:
13. Financial Leverage Ratios:
14. Financial Coverage Ratios:
10-20
15. Balance Sheet & Income Statement: 21
16. Summarized Table of Microsofts: 22
17. Comments: 23
18. Summary & Finding: 24
19. Observations: 25
20. Major Suggestions: 26
21. Conclusion: 27
22. References: 28
8/9/2019 Microsoft_Financial Statements Analyisis _Aarif Shah_City University_Peshawar[1].
4/30
ACKNOWLEDGEMENT:
To Him belongs the dimensions of the Heavens and theEarth, it is HE, who give life and death and HE has the
Power over all things
(Al-Quran)
All acclamation to ALLAH, who has empowered and enabled me to
accomplish the perspectives of the project successfully. First of all, I would
like to thank my ALLAH Mighty, who really helps me in every problem during
the completion of this project. I would like to express my sincere and humble
gratitude to ALLAH Almighty, whose blessings; help guidance has been a real
source of all my achievements in my entire life.
I wish to express my appreciation to my honorable & respectable
Lecturer i.e. SIR. MUHAMMAD ANEES, Lecturer in Financial Statement
Analysis, City University of Information Technology, Peshawar, who help me a
lot and introduced me to new dimensions of knowledge. I am sure that thesame support would be continued to help to achieve the entire Programme /
MBA Degree Objectives smoothly in near future as well.
I express my deepest affection for my parents; who prayed for my
success and encourage me. I appreciate their patience, cooperation and love
for me. It is, of courses, the reward of their good wishes and kin blessing.
The acknowledgment will be incomplete without special thanks to all
my University peers, office colleagues for their excellent cooperation and nice
companionship.
(Muhammad Aarif Shah)
MBA (Finance)
ID No: 2882
Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}2
8/9/2019 Microsoft_Financial Statements Analyisis _Aarif Shah_City University_Peshawar[1].
5/30
8/9/2019 Microsoft_Financial Statements Analyisis _Aarif Shah_City University_Peshawar[1].
6/30
Nature of Business:
Microsoft provides software and services that help people
communicate, do their work, be entertained, and manage their personal lives.Over the past 30 year, innovate technology has transformed how we access
and share information, changed the ways of business and institutions operate,
and make the world smaller by giving us instant access to people and
resources everywhere.
Microsoft was founded in 15th Sep, 1975 and remains a leader in the
wave of innovation that has crated so much new opportunity, convenience,
and values over the past three decades. During that time, Microsoft has
crated many new products, added new lines of Business, and openhanded
their operation worldwide, along the ways, Microsoft was guided by their
corporate mission and the six core values it reflects and will continue to guide
us in the future.
Microsoft is committed to being a responsible industry partner, working
with businesses, communities, and government to help advance social and
economics well being and to enable people around the world to realized
their full potential. Microsofts commitment and responsibilities as a global
corporate citizen are grounded in their company mission and values,
manifested through their business practices and operations, and carried out
by thousands of Microsoft employees and supplies worldwide.
Microsofts Global Citizenship Initiative is organized around three
themes, or strategic concepts, which from the foundation of their citizenship
activities worldwide:-
o Responsible Business Practice;o Security and Internet Safety;o Building a Knowledge Economy.
Each of these themes is fundamental to Microsofts Business. Microsoft
organizes their Global Citizenship Initiative this ways to help ensure it
business strategies fully support their commitment to corporate governance,
business ethics, and global citizenship.
Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}4
8/9/2019 Microsoft_Financial Statements Analyisis _Aarif Shah_City University_Peshawar[1].
7/30
BUSINESS DESCRIPTION:
Our mission is to enable people and businesses throughout the world
to realize their full potential. Since the company was founded in 1975, we
have worked to achieve this mission by creating technology that transforms
the way people work, play, and communicate. We develop and market
software, services, hardware, and solutions that we believe deliver new
opportunities, greater convenience, and enhanced value to peoples lives. We
do business throughout the world and have offices in more than 100
countries.
We generate revenue by developing, manufacturing, licensing, and
supporting a wide range of software products and services for many different
types of computing devices. Our software products and services include
operating systems for servers, personal computers, and intelligent devices;
server applications for distributed computing environments; information
worker productivity applications; business solutions applications; high-
performance computing applications; software development tools; and video
games. We provide consulting and product and solution support services, and
we train and certify computer system integrators and developers. We also
design and sell hardware including the Xbox 360 video game console, the
Zune digital music and entertainment device, and peripherals. Online offerings
and information are delivered through Bing, Windows Live, Office Live, our
MSN portals and channels, and the Microsoft Online Services platform which
includes offerings for businesses such as Microsoft Dynamics CRM Online,
Exchange Hosted Services, Exchange Online, and Share Point Online. We
enable the delivery of online advertising across our broad range of digital
media properties and on Bing through our proprietary ad Center platform.
We also conduct research and develop advanced technologies for
future software products and services. We believe that delivering
breakthrough innovation and high-value solutions through our integrated
software platform is the key to meeting our customers needs and to our
future growth. We believe that we will continue to lay the foundation for long-
Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}5
8/9/2019 Microsoft_Financial Statements Analyisis _Aarif Shah_City University_Peshawar[1].
8/30
term growth by delivering new products and services, creating new
opportunities for partners, improving customer satisfaction, and improving our
internal processes. Our focus is to build on this foundation through ongoing
innovation in our integrated software platforms; by delivering compellingvalue propositions to customers; by responding effectively to customer and
partner needs; and by continuing to emphasize the importance of product
excellence, business efficacy, and accountability.
Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}6
8/9/2019 Microsoft_Financial Statements Analyisis _Aarif Shah_City University_Peshawar[1].
9/30
Objectives of the Project:
So far, as Microsoft is concerned the objectives is to find out the whole
funds investment and its areas of investment including its future analysis,which will assisted in comparing the other software relating to this project is
as follows:-
To find out the total investment of the organization.
To find out the rate of progress.
To find out the utilization of fund.
To know the sources of fund generated.
To know the utilization of excess fund.
To assess the rate of income in earning oninvestments etc
Scope of the Project:
The scope of the project Financial Statement Analysis of Microsoft is
to carryout the Maximum analysis during 2005 and 2006 ratio analysis. At the
same time this project also contains the profit analysis as well as some pare
of financial aspects of the organization.
Now, some analysis charges of Microsoft are as under:-
Balance Sheet;
Income Statement;
Cash Flow Statement;
Stock Holders equity Statement;
Selected Financial Data, Stock Process Information andIssuer Purchases of Equity Securities.
Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}7
8/9/2019 Microsoft_Financial Statements Analyisis _Aarif Shah_City University_Peshawar[1].
10/30
Limitation of the Project:
At the last instance, I try my best to collect adequate data for
completing all the aspect for Financial Condition of Microsoft in a collectivemanner. Though, it is a time consuming process, which will Carrey more
result-oriented information to the organization. But to some extent I tried my
all effort to make it best in spite of my following limitations:-
o Due office activities; and load shedding problems; there is nosufficient time provided for preparation of this project work.
o Lack of sufficient magazines and publications.
o Inadequacy financial conditions and political condition of theregion/ especially of our Country i.e. Pakistan.
o Unable to have Authorization, required for log-In intoMicrosoft Directors Desk.
Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}8
8/9/2019 Microsoft_Financial Statements Analyisis _Aarif Shah_City University_Peshawar[1].
11/30
FFrraammeewwoorrkkffoorrFFiinnaanncciiaallAAnnaallyyssiiss
Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}9
AAnnaallyyttiiccaallTToooollssUUsseeddSources and Uses Statement
Statement of Cash FlowsCash Budgets
TTrreenndd//SSeeaassoonnaallCCoommppoonneenntt
How much funding will berequired in the future?11.. AAnnaallyyssiiss ooff tthhee ffuunnddss
Is there a seasonalcomponent?
nneeeeddss ooff tthhee ffiirrmm..
FFrraammeewwoorrkkffoorrFFiinnaanncciiaallAAnnaallyyssiiss
Health of a Firm
Financial Ratios
1. Individually2. Over time3. In combination4. In comparison
1. Analysis of the fundsneeds of the firm.
22.. AAnnaallyyssiiss ooff tthhee ffiinnaanncciiaallccoonnddiittiioonn aanndd pprrooffiittaabbiilliittyyooff tthhee ffiirrmm..
8/9/2019 Microsoft_Financial Statements Analyisis _Aarif Shah_City University_Peshawar[1].
12/30
FFrraammeewwoorrkkffoorrFFiinnaanncciiaallAAnnaallyyssiiss
Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}10
EExxaammpplleess::Volatility in sales
Volatility in costsProximity to break-
even point
BBuussiinneessssrriisskkrelates tothe risk inherent in theoperations of the firm.1. Analysis of the funds
needs of the firm.
2. Analysis of the financialcondition and profitabilityof the firm.
33.. AAnnaallyyssiiss ooff tthhee bbuussiinneessssrriisskk ooff tthhee ffiirrmm..
FFrraammeewwoorrkkffoorrFFiinnaanncciiaallAAnnaallyyssiiss A
FinancialManager
mustconsiderall three
jointlywhen
determining the
financingneeds ofthe firm.
11.. AAnnaallyyssiiss ooff tthhee ffuunnddssnneeeeddss ooff tthhee ffiirrmm.. DDeetteerrmmiinniinngg
tthhee22.. AAnnaallyyssiiss ooff tthhee ffiinnaanncciiaall
ffiinnaanncciinnggccoonnddiittiioonn aanndd pprrooffiittaabbiilliittyy
nneeeeddss ooffooff tthhee ffiirrmm..
tthhee ffiirrmm..33.. AAnnaallyyssiiss ooff tthhee bbuussiinneessss
rriisskk ooff tthhee ffiirrmm..
8/9/2019 Microsoft_Financial Statements Analyisis _Aarif Shah_City University_Peshawar[1].
13/30
FFrraammeewwoorrkkffoorr
FFiinnaanncciiaallAAnnaallyyssiiss
11.. AAnnaallyyssiiss ooff tthhee ffuunnddssnneeeeddss ooff tthhee ffiirrmm.. DDeetteerrmmiinniinngg NNeeggoottiiaattiioonnss
tthhee wwiitthh22.. AAnnaallyyssiiss ooff tthhee ffiinnaanncciiaallffiinnaanncciinngg ssuupppplliieerrss ooffccoonnddiittiioonn aanndd pprrooffiittaabbiilliittyy nneeeeddss ooff
ooff tthhee ffiirrmm.. ccaappiittaall..tthhee ffiirrmm..33.. AAnnaallyyssiiss ooff tthhee bbuussiinneessss
rriisskk ooff tthhee ffiirrmm..
UUsseeooffFFiinnaanncciiaallRRaattiiooss
TTyyppeessooffCCoommppaarriissoonnss
A Financial Ratioisan index thatrelates twoaccounting
numbers and isobtained bydividing one
number by theother.
IInntteerrnnaallCCoommppaarriissoonnss
EExxtteerrnnaallCCoommppaarriissoonnss
Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}11
8/9/2019 Microsoft_Financial Statements Analyisis _Aarif Shah_City University_Peshawar[1].
14/30
1. LIQUIDITY RATIOS:
YEAR:
2005 2006
48,73716,87749,01022,442
Current Ratio: =Current Assets
Current Liabilities
2.89 2.18
COMPARISON:
Microsofts had strong Current Ratio in 2005 as compared to 2006, so
the company was in stronger position in 2005. Theses calculation
also indicated that Microsoft had almost $3 to meet $1 currentliabilities, on the other hand; it had in the 2006 2.18 $ to meet $1
current liabilities.
YEAR:
2005 2006
48,737-49116,877
49,010-1,478
22,442
Quick Ratio: =Current Assets-Inv.Current Liabilities
2.86 2.12
COMPARISON:
Microsofts had strong Quick Ratio in 2005 as compared to 2006, so
the company was in stronger position in 2005 to meet their current
liabilities with Quick Assets i.e. Cash / Bank Deposits/ M/S & A/R.
Moreover; the two years calculation indicated that the firm had
almost $3 & $2 Quick Assets to meet $ 1 current liabilities.
Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}12
YEAR:
2005 2006
31,86070,81526,56869,597
N.W. Cap. Ratio: =Net Working CapitalCurrent Liabilities
45% 38%
COMPARISON:
Net Working Capital Ratios indicated that the company was in
stronger position in 2005 as compared to 2006.
8/9/2019 Microsoft_Financial Statements Analyisis _Aarif Shah_City University_Peshawar[1].
15/30
YEAR:
2005 2006
48,737-[7180+491]16,87749,010[9316+1478]
22,442
Cash Ratio: =Curr. Asset (R/A+Inv.)
Current Liabilities
2.43 1.70
COMPARISON:
Cash Ratio indicated that in 2005 the firm had $2.43 to meet 1 $
short term liability, while, in 2006 had $1.70 to meet 1$, so it
showed that the firm was much stronger position in 2005 to meet their
current liabilities with the most current assets i.e. Cash & M/S.
Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}13
8/9/2019 Microsoft_Financial Statements Analyisis _Aarif Shah_City University_Peshawar[1].
16/30
2. EFFICIENCY RATIOS
YEAR:
2005 2006
39,7887,18044,2829,316
Receivable Turnover: =Annual Net Credit Sales
Receivable
5.54 4.75
COMPARISON:
In 2005, the firm was efficient to receive its R/A as compare to
2006, the above mentioned calculation showed that firm was much
better positions as compared to 2006.
YEAR:
2005 2006
3655.543654.75
Avg. Collection Period: =No. of Days in a YearReceivable Turnover
66 Days 77 Days
COMPARISON:
The Firms received its R/A in 66 Days in 2005, while in 2006 its
was 77 Day, this indicated that the firms performance was better in
2005.
YEAR:
2005 2006
6,2007,1807,6509,316
Days Sales Inv. : =Cost of Goods Sold
Inventory
0.86 0.82
COMPARISON:
In 2005, the effectiveness of the inventory management practices of
the firm was better as compared to 2006
Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}14
8/9/2019 Microsoft_Financial Statements Analyisis _Aarif Shah_City University_Peshawar[1].
17/30
YEAR:
2005 2006
3650.863650.82
Inv. Turnover in Day : =
No. of Days in Year
Inventory Turnover
424 Days 445 Days
COMPARISON:
In 2005, the effectiveness of the inventory management practices of
the firm was better as compared to 2006.
YEAR:
2005 2006
4916,200/3651,478
7,650/365
Days Sales Inv. : =Inventory
Cost of Goods Sold/365
29 Days 70 Days
COMPARISON:
In 2005, the effectiveness of the inventory management practices ofthe firm was better as compared to 2006.
YEAR:
2005 2006
39,78870,81544,28269,597
Total Assets Turnover : =Sales
Total Assets
56% 63%
COMPARISON:
The Assets Turnover Ratios of 2006 indicated that the firm
effectively utilized its assets to generate sales, as compared to
2005.
Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}15
8/9/2019 Microsoft_Financial Statements Analyisis _Aarif Shah_City University_Peshawar[1].
18/30
3. PROFITABILITY RATIOS:
YEAR:
2005 2006
12,25439,78812,59944,282
Profit Margin : =Net Income
Sales
30% 28%
COMPARISON:
In 2005, the firm Profit Margin is greater than 2006, is cleared
show the profitably of the firm after taking account of all expenses
an income taxes was better than 2006
YEAR:
2005 2006
12,25470,81512,59969,597
Return on Assets: =Net Income +Int{EBT}
Total Assets
17% 18%
COMPARISON:
In 2006, the firms ROA ratio performance was better than 2005, this
indicated that the profitably on the assets of the firm after all
expenses and tax was better than 2005.
YEAR:
2005 2006
12,25448,11512,59940,104
Return on Equity: = Net Income +Int{EBT}Shareholders Equity
25% 35%
COMPARISON:
In 2006, the firms ROE ratio performance was better than 2005, this
indicated that the profitably on the Shareholders Equity of the
firm after all expenses and tax was better than 2005.
Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}16
8/9/2019 Microsoft_Financial Statements Analyisis _Aarif Shah_City University_Peshawar[1].
19/30
YEAR:
2005 2006
3.402.250.352.41
Payout Ratio: = DividendsEarnings (EPS)
1.51 0.84
COMPARISON:
The Company Payout Ratio in 2005 was absolutely higher which isalmost: 150 % as compared to 2006 where it was 84%, this indicatedthat the company some hidden reserve in its accounts
YEAR:
2005 2006
2.253.402.410.35
Retained Earning Ratio:Earnings (EPS)
Dividends
66% 84%
COMPARISON:
In these two year; the company RE Ratios is absolutely high, for thedetail see last, in which I discussed them in details
YEAR:
2005 2006
1-1.51 1-0.84Plowback: = 1-Payout Ratio
-0.51 0.16
COMPARISON:
Comparatively Microsoft maintained it Plowback ratio better in 2006
Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}17
8/9/2019 Microsoft_Financial Statements Analyisis _Aarif Shah_City University_Peshawar[1].
20/30
YEAR:
2005 2006
-0.51*0.17 0.16*0.18
Growth in Equity from
Plowback : = Plowback x ROE
-8.67% 2.88%
COMPARISON:
In growth in equity from Plowback in 2005, its indicated Negativegrowth, while in 2006 its was 2.88% almost 3.00%, which goodenough.
Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}18
8/9/2019 Microsoft_Financial Statements Analyisis _Aarif Shah_City University_Peshawar[1].
21/30
4. Financial Leverage Ratios:
YEAR:
2005 2006
5,82348,115+5,8237,051
40,104+7,051
Capitalization Ratio: =Long-Term Debt
Capitalization*(Debt+Equity)
11% 15%
COMPARISON:
This Ratio indicated that the firm had 11% long term debt in 2005,
while in 2006, the firmed is financed by 15% long term debt, this
indicated that was in better position in 2005 as compared to 2006
YEAR:
2005 2006
5,82348,1157,05140,104
Debt to Equity Ratio: =Long-Term Debt
Shareholders Equity
12% 18%
COMPARISON:
Debt To Equity Ratio indicated, that the how much the firms assets
supported by debt financing, this is cleared from the calculation,
the firms was in better position in 2005 as compared to 2006.
YEAR:
2005 2006
16,877+5,82370,81522,442+7,051
69,597
Total Debt Ratio: =Total Liabilities*Total Assets*
32% 42%
COMPARISON:
This ratio indicates, that the how much the firms assets supportedby total liabilities, it cleared from the picture, the firms was in
better position in 2005 as compared to 2006.
Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}19
8/9/2019 Microsoft_Financial Statements Analyisis _Aarif Shah_City University_Peshawar[1].
22/30
5. Interest Coverage Ratios:
YEAR:
2005 2006
14,5612,06716,4721,790
Time Interest Earned: =EBIT
Interest Expense
7.044% 9.20%
COMPARISON:
Microsoft had 9.20% interest Earned ratio in 2009, which is goodsing for the company.
YEAR:
2005 2006
14,5612,06716,4721,790
Cash Coverage : =EBIT+ Depreciation *
Interest Expense
7.044% 9.20%
COMPARISON:
Microsoft had 9.20% interest Earned ratio in 2006, which is goodsign for the company. While in 2005, it wash 7.044% which iscomparatively less than 2006.
* There was no depreciation mentioned in the balance
sheet; that why the value of Deprecation was taken ZERO
Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}20
8/9/2019 Microsoft_Financial Statements Analyisis _Aarif Shah_City University_Peshawar[1].
23/30
Balance Sheets (Annex-A):
From the Balance sheet, I conclude the there is decrease total cash
and short-term investment, the figure reduces from $ 37,756 million to $
34,161 million with a 10.5% of decrease, whereas; the total current assets
has increase of $ 273 million. But the total current liability has been increased
$ 16,877 million to $ 22,442 million with a total change of $ 5,565 million and
75.2% in change where as the stock holders equity has been tremendously
reduction of $ 8,011 million. But overall the balance sheet show net decease
of $ 1,218 million from the previous year. The statements are not satisfactory
according to me, but I think there must be some hidden reserve investment
or some gain kept secret which is not furnished for valuation of statement.
Income statement (Annex-B):
Form the Income Statement Analysis, I find that the total operation
expenses had a tremendous increase of $ 2,583 million with a 10.23 % of
change, the revenue increased from 39,788 million to $ 44,282 million with an
absolute change of $ 4,494 million with 11.29 % of change, where as the net
income from all sources is just increased to $ 345 million, the earning per
share has an increase of 7.07% and 7.14 %, whereas, the weighted average
share outstanding is reduced to 3.69 % and 3.43 %.
(See Annexed: Balance Sheet & Income Statement for details)
Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}21
8/9/2019 Microsoft_Financial Statements Analyisis _Aarif Shah_City University_Peshawar[1].
24/30
Summarized table of Ratios Analysis of Microsoft.
YEAR:SR.#: RATIOS NAME:
2005 20061. LIQUIDI TY RATIOS:
Current Ratio: 2.89 2.18
Quick Assets Ratio: 2.86 2.12
NWC Ratio: 45% 38%
Cash Ratio: 2.43 170
2. EFFICIENCY RATIOS:
Relievable Turnover: 5.54 4.75
Avg. Collection Period: 66 Days 77 Days
Days Sales Inventory: 0.86 0.82
Inv. Turnover in Days: 424 Days 445 Day
Days Sales Innovatory: 29 Days 70 Days
Assets Turnover: 56% 63%
3. PROFITABILITY:
Profit Margin: 30% 28%
Return on Assets: 17% 18%
Return on Equity: 25% 35%
Payout Ratio: 1.51 .84
Retained Earning Ratio: 66% 84%
Growth in Equity from Plowback: 8.67% 2.88%
4. FINANCIAL LEVERAGE RATIOS: Capitalization Ratio: 11% 15%
Debt to Equity Ration: 12% 18%
Total Debt Ratio: 32% 42%
5. INTEREST COVERAGE RATIOS:
Time Interest Earned: 7.044% 9.20%
Cash Coverage Ratio: 7.44% 9.20%
Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}22
8/9/2019 Microsoft_Financial Statements Analyisis _Aarif Shah_City University_Peshawar[1].
25/30
Comments:
From the above ratios analysis of Microsoft that the current
ratio of the company is quit satisfactory in the Year: 2006,but not in 2005, because the ratio should lies within the
standard limit of 2.11, but in the year: 2006 it just above
standard limit which can be ignored but in 2005, the ratio
largely exceed the standard limit, which means the company
is inefficient in proper utilization of funds.
Acid test ration or the Quick Ratios on the other hand is quit
more the normal standard of 1.1, in the year: 2005 the
company holds more than the standard limit which means
the firms has not utilized the funds, in 2006, the firms has
maintained the standard limit by keeping the Ratio by:
1.937.1 which is just good enough than the previous year:
2005.
Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}23
8/9/2019 Microsoft_Financial Statements Analyisis _Aarif Shah_City University_Peshawar[1].
26/30
Summary and Finding:
From this project report, I got to know Microsofts
financing position, investments plan, liquidity position,
solvency position, profitability ratios, net income, total
assets and liabilities, income from all possible operation,
considering income statement & balance sheet.
Moreover, I learnt the comparative statement analysis of
year: 2005 & 2006.
The total operating expenses has increased by: $ 2,583
million with a ratio increase 10.23% and net income
increase to $ 12,599 million.
The total current assets increased by 273 million with
0.58 %. the detail analysis and observation has been
discussed in the next page as Heading of Observation
Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}24
8/9/2019 Microsoft_Financial Statements Analyisis _Aarif Shah_City University_Peshawar[1].
27/30
OBSERVATION:
From the ratios calculation / analysis; I have observedthat the company is passing through many up and downs
in the middle of the previous year, but some how the
company mange to control the total return at the end of
the period. But in the year: 2006 the company total
operating expenses had a tremendous increased of $
2,583 million with a 10.23 % of change, the revenue
increased from $ 29,788 million with 11.29% of change.
Where as the net income from all sources is just
increased to $ 345 million.
The earning per share has an increased of 7.07 $ and7.14 % whereas the weighted average share ousting is
reduce to 3.69%. But there is decreased total cash and
short term investment, the figure reduces from $ 37,756
million to $ 34,161 million with a 10.5% of decrease,
whereas the total current asset has an increase of $ 273
million. But the total current liability has been increased $
16,877 million to $ 2,2442 million with a total change of $
5,565 million and 75.2 % change whereas, the stock
holders equity has been tremendously reduction of $
8,011 million.
But overall the balance sheet shows net decrease of $
or some gains kept secrete which is not disclosed or
on of stock and income of the year:
2006.
1,218 million from the previous year i.e. 2005. The
statements are still not satisfactory according to me, but
I think there must be some hidden reserve, involvement
declared for valuati
Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}25
8/9/2019 Microsoft_Financial Statements Analyisis _Aarif Shah_City University_Peshawar[1].
28/30
Major Suggestion:
Microsofts has tremendously increased the per capitaincome of the company in year: 2006 upto $ 12,599 million
with a net increase of $ 345 million and with 2.81% of
increase, but in 2006 the companys investment income is
greatly reduce $ 277 million with a net fall of 13.4% from
the pervious year; i.e. 2005. The company should try to
maintain a positive figure towards investment income by safe
guarding the invested amount in proper way. Microsofts
should give more attention towards short term investments
including securities.
I suggest that Microsofts should expand its business toHardware manufacturing and assembling Moreover, there is
opportunity for Microsoft to develop software for Mobile
Phone Sector. Though Microsofts is one of the leading
software firm, so should try to hold a position in hardware
production & Cell Phone Software Sector and than
Microsofts might be become the Global Leader in overall
Information Technology (IT) and as well as Mobile Phone
sector, which now a growing sector.
other funds. Particularly, the long-term investment also
management to improve the rate of
growth.
At last I suggest to the management of Microsoft to improve
their investment by imposing new policies, plans as well as
increased during the: 20052006. In case basic analysis I
want to suggest the
Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}26
8/9/2019 Microsoft_Financial Statements Analyisis _Aarif Shah_City University_Peshawar[1].
29/30
CONCLUSION:
Microsoft is one of the most leading Software firm and remainson top among other software industries, creating a new
dimension for the next generations technology.
From the above, study I conclude that Microsofts has relativelyhigh earned revenue in an increasing order with an average net
growth rate of 9% to 18% and with a net income increases
every year with every new product and product update launch,
since last decade.
ies of product assurance and soas of its shareholders.
rm investment also increases to a high by the end of
2006.
ing launches of
Windows 07 & Microsoft Office 2010 System.
een
I do not expect a significant impact from year-over-year foreigncurrency exchange rates in fiscal year; 2010.
Microsofts always kept is polic
For this project report, I found that the Microsofts will increases
its amount of investment in a speed way. Microsofts also
generates new system eve in the firms production. Here; the
long-te
No doubt in the fiscal 2009-1-, I expect double digit revenue
growth primarily as a result of the upcom
I estimate worldwide PC shipments will grow between 10 % to
15 % and PC unit growth rates will be higher in the consumer
segment than in the boniness segment and higher in emerging
markets than in mature markets.
I estimate worldwide sever unit shipments will grow betw
15% to 20 % in fiscal year: 2010 as compare to 2005-2009.
Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}27
8/9/2019 Microsoft_Financial Statements Analyisis _Aarif Shah_City University_Peshawar[1].
30/30
REFERENCE:
o http://finance.yahoo.com/news/category-stocks/
o http://finance.yahoo.com/news/category-economy-govt-and-policy
o http://in.finance.yahoo.com/
o http://www.microsoft.com/msft/reports/ar09/index.html
o http://www.microsoft.com/msft/reports/ar09/10k_fh_fin.html
o http://www.microsoft.com/msft/reports/ar09/10k_fr_mar.html
o http://www.microsoft.com/msft/reports/ar09/10k_fr_not.html
o http://www.microsoft.com/msft/reports/ar09/10k_fr_not_06.html
http://www.microsoft.com/msft/reports/ar09/10k_fr_dis.htmlo
http://www.microsoft.com/msft/reports/ar09/10k_fr_aud.htmlo
http://www.microsoft.com/msft/stock/default.mspxo
o http://www.thocp.net/companices/micrsoft/microsoft_company.htm
o www.morningstar.com
o http://wps.pearsoned.co.uk/wps/me
o
dia/objects/1669/1709846/023685988_ch06.pdf
http:// www.wikpedia.org.micrsoft.
************************************