Publicly Traded Company Financial Analysis – Microsoft

Introduction

Microsoft as a corporation is one of the most successful companies in the area of technology (Insider, 2015). More Microsoft products are found globally and the company has kept on growing and introducing more innovating products including operating systems and mobile devices among other products, which are used globally.

The financial analysis of the company is very promising and thus provides investors with great returns, which further keeps them glued to the company.

Liquidity ratios are the cash ratio, current ratio quick ratio. There was a deterioration in the cash, current and quick ratios form the year 2013 successively to 2014. The current, quick and cash ratios were 2.5, 2.3 and 1.94 respectively showing reduction from the previous financial year which a slight reduction in first two rations which the cash ration increasing from 1.88 to 1.94.

Current ratio= current assets / current liabilities = 124712/49858= 2.50

Quick ratio = total quick assets/current liabilities=114434/49858=2.30

Cash ratio= total cash assets/current liabilities= 96526/49858=1.94

The profitability of the Microsoft Corporation is shown by various ratios, which are gross profit margin, operation profit margin, net profit margin, return on equity (ROE) and return on assets (ROA). The gross profit margin has greatly deteriorated from the previous years especially from 2013 and successively to 2015. The operating profit margin also showed a decline successively from through the years from 2013 to 2015. In addition, the net profit margin, which was at 13.03, had reduced greatly from the years 2013 to 2015. Furthermore, the ROE, which 15.23% and the ROA at 6.92 had deteriorated from the previous years and even the 2014 to 2015 year, showed a decline.

Gross profit margin= 100*Gross margin/ revenue= 100*60542/93580=19.41%

Net profit margin=100*Net income/ revenue=100*12193/93580=13.03%

Operating profit margin= 100* operating income*Revenue= 100*18161/93580=19.41%

ROE=100*12193/80083= 15.23%

ROA= 100*12193/176223= 6.92%

Microsoft as a company is highly solvent since it is in a better position to generate cash and therefore cannot be termed as bankrupt in the near future. The solvency ratios help determine whether a company can meet its obligations in the long term. Debt to equity, debt to capital and interest coverage are some of the ratios that determine the solvency of companies. Debt to equity ratio deteriorated from that of the 2013 – 2014, which was from 0.25 to 0.44. Debt to capital deteriorated from 0.2 0.31. The interest coverage further deteriorated 47.60 the previous financial to 24.7 in the financial year 2014-2015.

Debt to equity ratio =total debt/ shareholders equity= 35292/80083= 0.44

Debt to capital ratio= total debt/ total debt + shareholders equity = 35292/ (35292+80083) =n0.31

Interest coverage = EBIT/interest payments =19288/ 781= 24.7

Microsoft Corporation take the second slot after Apple, which takes the first position. Some of the major competitors to Microsoft are Apple in computer and mobile devices like the iPhone and iPad together with amazon and google in terms of offering technological services. The company has weathered many economic storms and still it has maintained its profitability (Stewart, 2015).

On environmental sustainability, Microsoft champions for the recycling and reuse of its product and provides various location in its company where the products can be recycled safely and the parts used in other production processes. Since it safeguards the environment and products devices that are, environmentally friendly the company is able to stay in business without affecting the environment negatively through its products. As such, the investor does not have to worry of the company’s closure in the event of pollution or safety hazards since the company makes products that are safe for use by customers (Xia, 2015).

The devices made by the company are sustainable and safe for the customers use and for the safety of the environment. Corporate governance is important in making any investment choice since the investors want to know whether the company is championing its own interests of that of the customers. As such, the investors looks at the transparency of the organization and how honest the company is about its intentions.  A transparent and honest company which has clear intentions of benefiting all parties and not itself thus comes as a better investment and Microsoft is that sort of company which has shown its transparency and its goal towards pleasing stakeholders and meeting their interests together with those of the company. Another important issue is following on legal issues affecting the company. Microsoft as a company carries out its business legally even though it is one of the most successful business ventures therefore the activities of the company cannot be terminated in the near future and the investor thus should expect continuity of the company and his investment (Ribbers et al., 2016).

Conclusion

Microsoft is therefore a company that one can invest in since it ranks high in solvency and though it has performed ab it poorly due to the tough economic conditions it still has a strong stock (Das & Chauhan, 2016). The various innovations in the market have enabled it to take advantage of the technological market especially the computing market. . Choosing a stock is important and therefore considering the transparency and efficiency of Microsoft Corporation and its products it is a worthwhile stock to invest in.

Share with your friends
Order Unique Answer Now

Add a Comment