Over three years, net cash from operations has exceeded net income creating more than enough cash to cover reported depreciation amounts and normal common stock cash dividends. This indicates that Microsoft can support its cash needs with its operations and points to why the company does not rely on borrowing. Account receivables increased twofold each year, which indicates potential future growth. Also, deduction trends in current assets and liabilities demonstrate sustained increases in operating assets and decreases in operating liabilities.
Stock repurchase has been more than doubled since 2004. This could possibly be because of undervaluation issues or an effort to boost Microsoft’s P/E ratio. The large net decrease in cash in 2005 can be entirely attributed to the abnormal jump in common stock cash dividends that year. In ’05, Microsoft paid 1400% more in dividends than the yearly average. There is no other significant decrease in any other item for ’05 on the cash flow statement.
Since ’04, Microsoft has steadily increased acquisition of other companies, which is typical of companies as large as Microsoft. This is also a good indicator of future growth. Microsoft’s purchase of investments has declined over the three years whereas the sale of investments has remained relatively stable. In ’06, they sold more investments than they bought. This may mean the company has less cash to invest because of losses or the money is being used elsewhere, such as stock dividends.
The Essay on Shares and Joint Stock Companies in the New Economic Model
Introduction Good morning, dear colleagues. I’m glad to see everyone here. Thank you for your coming. Let me start by introducing myself. My name is Elena Torlopova. I’m a freshman of the State University of the Ministry of Finance of the Russian Federation. I study at the department of the international economic relations. My aim for today’s presentation is to give you information about Shares ...
COMPETITORSAdobe, Oracle, and CA, Inc. are Microsoft’s main competitors. These companies are the biggest ones in the software application industry of technology sector.
1.Profitability Ratios
profit margin and ROIC are two ratios that relate the earnings of the company to capital that has been sacrificed for more than the company’s operating cycle. Profit margin is a measurement that portrays the effects of instability in price. Although profit margin is not considered as efficient, the company’s margin ranges from 20-30%. Net sales for Microsoft exceed net income by almost three times the amount. Microsoft has a ROIC relatively close to the percentages for profit margin. A significant of Microsoft’s revenue is going to long-term investments as to their shareholders’ pocket. Microsoft has good financial standing and controls a lot of the computer industry.
2.Efficiency Ratios
Asset turnover ratio and net income per employee are good measures for a company’s efficiency. The former ratio shows management’s ability to use assets to produce sales, while the latter indicates the employee’s productivity. If either of these two ratios is low, inefficiency may be an issue that should be concerned in that company. Among the four companies, CA, Inc. has the worst asset turnover ratio and net income per employee. Perhaps, CA, Inc. is a small company, and they might face economies of scale problem. Microsoft has a high net income per employee and an increasing asset turnover ratio. In general, Microsoft is doing more efficient than the overall industry, whose asset turnover ratio is 0.6. For Oracle and Adobe, they are becoming less efficient, as their asset turnover ratio decreased by about 30% from 2004 to 2006.
The Business plan on The Mission Of Microsoft Company As A Business And The
The mission of Microsoft Company as a business and the mission as a corporate citizen are one and the same: helping enable individuals and their communities to achieve their full potential. As a company, the optimism and passion for innovation are balanced with focus on creating real solutions for the tough challenges facing communities around the world. To help meet these challenges, last year ...
3.Leverage Ratios
The current and quick ratios were chosen to analyze Microsoft and its competitors to see how liquid each company is. Debt ratios and TIE are not very informative for companies such as these in the technology industry because many of these companies have little to no debt issued, distorting the results and analysis of such ratios. Microsoft and most of its competitors have current and quick ratios greater than one, with the exception of Computer Associates. This indicates that these firms are, at any time, capable of paying off any current liabilities they may have, and thus have high liquidity.
These ratios being greater than one are healthy for companies in the technology industry because they usually have continuous cash inflows from contracts and licensing of their software products. Low or falling current and quick ratios may be an indicator of poor sales and performance, or an increase in liabilities. The current ratios for all four companies were just a fraction larger than their accompanying quick ratios because most of all four of these companies’ current assets are “quick” assets.
4.Market Related RatiosMicrosoft’s price earnings ratios and dividend payout seems to have good results. Investors are being satisfied with their positive percentages from the earnings ratio, and they are receiving dividends for their investments. We chose these ratios to see if Microsoft was a good candidate to invest in. Although these ratios weren’t needed to know that it would be a good idea to invest in Microsoft, they do show the fluctuation of the prices and can expect some money after investing. Microsoft is a well established company with many years of business and experience. Most risks that one can encounter when investing in Microsoft is when there is new research. Microsoft is known for its innovation and risks they disregard when it is time for a state of the art software, gaming console, and research on products.
Conclusion
The Statements of Cash Flow indicates that Microsoft has a healthy amount of cash and cash equivalents and a steady increase in net income over the last three years. Besides, the financial ratios shows that Microsoft has a good financial position, in comparison to its competitors and the overall market.
The Term Paper on Microsoft Company Software Sony
Abstract: The following research is designed to provide the reader with an understanding as to how Microsoft and Sony have developed as a company throughout the years. The research will show the combined efforts of two large companies and there mark into the gaming industry. Microsoft and Sony's environment, company, and leadership styles are what have kept the company on the leading edge of ...
References
Bloomberg [Computer software]. (n.d.).
FORM 10-K [Data file]. (2006).
Retrieved from http://www.microsoft.com/msft/download/FY06/MSFT_10-K.doc
