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Project on

Financial Statements
Analysis

Your Potential Our Passion

Submitted by:
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


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TABLE OF CONTENTS

Sr. #: TOPIC’S 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: 10-20

13. Financial Leverage Ratios:

14. Financial Coverage Ratios:

15. Balance Sheet & Income Statement: 21

16. Summarized Table of Microsoft’s: 22

17. Comments: 23

18. Summary & Finding: 24

19. Observations: 25

20. Major Suggestions: 26

21. Conclusion: 27

22. References: 28

Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}
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ACKNOWLEDGEMENT:

“To Him belongs the dimensions of the Heavens and the


Earth, 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 the
same 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}
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EXECUTIVE SUMMARY:
Microsoft provides software and services that help people
communicate, do their work, be entertained, and manage their personal lives.
Microsoft’s 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. Responsible Business Practice; 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. 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. 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 also conduct research and develop advanced
technologies for future software products and services.

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. The total operating expenses has increased by:
$ 2,583 million with a ratio increase 10.23% and net income increase to $
12,599 million. Microsoft’s has tremendously increased the per capita income
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 company’s
investment income is greatly reduce $ 277 million with a net fall of 13.4%
from the pervious year; i.e. 2005. Microsoft’s should give more attention
towards short term investments including securities.

Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}
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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. Microsoft’s 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.

Microsoft’s 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 Microsoft’s 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}
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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 people’s 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}
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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 compelling
value 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}
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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 on


investments 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 Holder’s equity Statement;

Selected Financial Data, Stock Process Information and


Issuer Purchases of Equity Securities.

Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}
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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 collective
manner. 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 no


sufficient time provided for preparation of this project work.

o Lack of sufficient magazines and publications.

o Inadequacy financial conditions and political condition of the


region/ especially of our Country i.e. Pakistan.

o Unable to have Authorization, required for log-In into


Microsoft Director’s Desk.

Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}
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Framework for
Financial Analysis
Trend / Seasonal
Component
How much funding will be
1. Analysis of the funds required in the future?
needs of the firm. Is there a seasonal
component?

Analytical Tools Used


Sources and Uses Statement
Statement of Cash Flows
Cash Budgets

Framework for
Financial Analysis

Health of a Firm

1. Analysis of the funds Financial Ratios


needs of the firm.
2. Analysis of the financial 1. Individually
condition and profitability
of the firm. 2. Over time
3. In combination
4. In comparison

Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}
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Framework for
Financial Analysis

Business risk relates to


the risk inherent in the
1. Analysis of the funds operations of the firm.
needs of the firm.
2. Analysis of the financial Examples:
condition and profitability
of the firm. Volatility in sales
3. Analysis of the business Volatility in costs
risk of the firm. Proximity to break-
even point

Framework for
Financial Analysis A
Financial
Manager
must
consider
all three
1. Analysis of the funds
needs of the firm. Determining jointly
2. Analysis of the financial
the when
financing
condition and profitability
needs of
determinin
of the firm. g the
the firm.
3. Analysis of the business financing
risk of the firm.
needs of
the firm.

Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}
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Framework for
Financial Analysis

1. Analysis of the funds


needs of the firm. Determining Negotiations
the
2. Analysis of the financial w i th
financing
condition and profitability
needs of suppliers of
of the firm. capital.
the firm.
3. Analysis of the business
risk of the firm.

Use of Financial Ratios

A Financial Ratio is Types of


an index that Comparisons
relates two
accounting Internal
numbers and is Comparisons
obtained by
dividing one External
number by the Comparisons
other.

Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}
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1. LIQUIDITY RATIOS:

YEAR:

2005 2006
Current Assets
Current Ratio: =
Current Liabilities 48,737 49,010
⇒ 16,877 22,442

⇒ 2.89 2.18

COMPARISON:
Microsoft’s 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 current
liabilities, on the other hand; it had in the 2006 2.18 $ to meet $1
current liabilities.

YEAR:

2005 2006
Current Assets-Inv.
Quick Ratio: =
Current Liabilities 48,737-491 49,010-1,478
⇒ 16,877 22,442

⇒ 2.86 2.12

COMPARISON:
Microsoft’s 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.

YEAR:

2005 2006
Net Working Capital
N.W. Cap. Ratio: =
Current Liabilities 31,860 26,568
⇒ 70,815 69,597

⇒ 45% 38%

COMPARISON:
Net Working Capital Ratios indicated that the company was in
stronger position in 2005 as compared to 2006.
Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}
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YEAR:

2005 2006
Curr. Asset –(R/A+Inv.)
Cash Ratio: =
Current Liabilities 48,737-[7180+491] 49,010[9316+1478]
⇒ 16,877 22,442

⇒ 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}
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2. EFFICIENCY RATIOS

YEAR:

2005 2006
Annual Net Credit Sales
Receivable Turnover: =
Receivable 39,788 44,282
⇒ 7,180 9,316

⇒ 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
No. of Days in a Year
Avg. Collection Period: =
Receivable Turnover 365 365
⇒ 5.54 4.75

⇒ 66 Days 77 Days

COMPARISON:
The Firms received its R/A in 66 Days in 2005, while in 2006 it’s
was 77 Day, this indicated that the firms performance was better in
2005.

YEAR:

2005 2006
Cost of Goods Sold
Days Sales Inv. : =
Inventory 6,200 7,650
⇒ 7,180 9,316

⇒ 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}
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YEAR:

2005 2006
No. of Days in Year
Inv. Turnover in Day : =
Inventory Turnover 365 365
⇒ 0.86 0.82

⇒ 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
Inventory
Days’ Sales Inv. : =
Cost of Goods Sold/365 491 1,478
⇒ 6,200/365 7,650/365

⇒ 29 Days 70 Days

COMPARISON:
In 2005, the effectiveness of the inventory management practices of
the firm was better as compared to 2006.

YEAR:

2005 2006
Sales
Total Assets Turnover : =
Total Assets 39,788 44,282
⇒ 70,815 69,597

⇒ 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}
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3. PROFITABILITY RATIOS:

YEAR:

2005 2006
Net Income
Profit Margin : =
Sales 12,254 12,599
⇒ 39,788 44,282

⇒ 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
Net Income +Int{EBT}
Return on Assets: =
Total Assets 12,254 12,599
⇒ 70,815 69,597

⇒ 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
Net Income +Int{EBT}
Return on Equity: =
Shareholders’ Equity 12,254 12,599
⇒ 48,115 40,104

⇒ 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}
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YEAR:

2005 2006
Dividends
Payout Ratio: =
Earnings (EPS) 3.40 0.35
⇒ 2.25 2.41

⇒ 1.51 0.84

COMPARISON:
The Company Payout Ratio in 2005 was absolutely higher which is
almost: 150 % as compared to 2006 where it was 84%, this indicated
that the company some hidden reserve in its accounts

YEAR:

2005 2006
Earnings (EPS)
Retained Earning Ratio:
Dividends 2.25 2.41
⇒ 3.40 0.35

⇒ 66% 84%

COMPARISON:
In these two year; the company RE Ratios is absolutely high, for the
detail see last, in which I discussed them in details

YEAR:

2005 2006
Plowback: = 1-Payout Ratio
⇒ 1-1.51 1-0.84

⇒ -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}
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YEAR:

2005 2006
Growth in Equity from
Plowback x ROE
Plowback : =
-0.51*0.17 0.16*0.18

⇒ -8.67% 2.88%

COMPARISON:
In growth in equity from Plowback in 2005, it’s indicated Negative
growth, while in 2006 it’s was 2.88% almost 3.00%, which good
enough.

Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}
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4. Financial Leverage Ratios:

YEAR:

2005 2006
Long-Term Debt
Capitalization Ratio: =
Capitalization*(Debt+Equity) 5,823 7,051
⇒ 48,115+5,823 40,104+7,051

⇒ 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
Long-Term Debt
Debt to Equity Ratio: =
Shareholders’ Equity 5,823 7,051
⇒ 48,115 40,104

⇒ 12% 18%

COMPARISON:
Debt To Equity Ratio indicated, that the how much the firm’s 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
Total Liabilities*
Total Debt Ratio: =
Total Assets* 16,877+5,823 22,442+7,051
⇒ 70,815 69,597

⇒ 32% 42%

COMPARISON:
This ratio indicates, that the how much the firm’s assets supported
by 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}
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5. Interest Coverage Ratios:

YEAR:

2005 2006
EBIT
Time Interest Earned: =
Interest Expense 14,561 16,472
⇒ 2,067 1,790

⇒ 7.044% 9.20%

COMPARISON:
Microsoft had 9.20% interest Earned ratio in 2009, which is good
sing for the company.

YEAR:

2005 2006
EBIT+ Depreciation *
Cash Coverage : =
Interest Expense 14,561 16,472
⇒ 2,067 1,790

⇒ 7.044% 9.20%

COMPARISON:
Microsoft had 9.20% interest Earned ratio in 2006, which is good
sign for the company. While in 2005, it wash 7.044% which is
comparatively 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}
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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 holder’s 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}
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Summarized table of Ratios Analysis of Microsoft.

YEAR:
SR.#: RATIO’S NAME:
2005 2006
1. LIQUIDITY RATIOS:
9 Current Ratio: 2.89 2.18
9 Quick Assets Ratio: 2.86 2.12
9 NWC Ratio: 45% 38%
9 Cash Ratio: 2.43 170
2. EFFICIENCY RATIOS:
9 Relievable Turnover: 5.54 4.75
9 Avg. Collection Period: 66 Days 77 Days
9 Days’ Sales Inventory: 0.86 0.82
9 Inv. Turnover in Days: 424 Days 445 Day
9 Days’ Sales Innovatory: 29 Days 70 Days
9 Assets Turnover: 56% 63%
3. PROFITABILITY:
9 Profit Margin: 30% 28%
9 Return on Assets: 17% 18%
9 Return on Equity: 25% 35%
9 Payout Ratio: 1.51 .84
9 Retained Earning Ratio: 66% 84%
9 Growth in Equity from Plowback: 8.67% 2.88%
4. FINANCIAL LEVERAGE RATIOS:
9 Capitalization Ratio: 11% 15%
9 Debt to Equity Ration: 12% 18%
9 Total Debt Ratio: 32% 42%
5. INTEREST COVERAGE RATIOS:
9 Time Interest Earned: 7.044% 9.20%
9 Cash Coverage Ratio: 7.44% 9.20%

Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}
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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}
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Summary and Finding:

⇒ From this project report, I got to know Microsoft’s


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}
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OBSERVATION:
⇒ From the ratios calculation / analysis; I have observed
that 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 $ and


7.14 % 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 $


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
or some gains kept secrete which is not disclosed or
declared for valuation of stock and income of the year:
2006.

Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}
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Major Suggestion:
⇒ Microsoft’s has tremendously increased the per capita
income 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 company’s 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. Microsoft’s
should give more attention towards short term investments
including securities.

⇒ I suggest that Microsoft’s should expand its business to


Hardware manufacturing and assembling Moreover, there is
opportunity for Microsoft to develop software for Mobile
Phone Sector. Though Microsoft’s is one of the leading
software firm, so should try to hold a position in hardware
production & Cell Phone Software Sector and than
Microsoft’s might be become the Global Leader in overall
Information Technology (IT) and as well as Mobile Phone
sector, which now a growing sector.

⇒ At last I suggest to the management of Microsoft to improve


their investment by imposing new policies, plans as well as
other funds. Particularly, the long-term investment also
increased during the: 20052006. In case basic analysis I
want to suggest the management to improve the rate of
growth.

Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}
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CONCLUSION:
⇒ Microsoft is one of the most leading Software firm and remains
on top among other software industries, creating a new
dimension for the next generations’ technology.

⇒ From the above, study I conclude that Microsoft’s has relatively


high 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.

⇒ Microsoft’s always kept is policies of product assurance and so


as of its shareholders.

⇒ For this project report, I found that the Microsoft’s will increases
its amount of investment in a speed way. Microsoft’s also
generates new system eve in the firm’s production. Here; the
long-term investment also increases to a high by the end of
2006.

⇒ No doubt in the fiscal 2009-1-, I expect double digit revenue


growth primarily as a result of the upcoming launches of
Windows 07 & Microsoft Office 2010 System.

⇒ 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 between


15% to 20 % in fiscal year: 2010 as compare to 2005-2009.

⇒ I do not expect a significant impact from year-over-year foreign


currency exchange rates in fiscal year; 2010.
Project on Financial Ratios Analysis of Microsoft_ {@Aarif Shah_MBA (Finance), Semester: 5th_CU}
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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

o http://www.microsoft.com/msft/reports/ar09/10k_fr_dis.html

o http://www.microsoft.com/msft/reports/ar09/10k_fr_aud.html

o http://www.microsoft.com/msft/stock/default.mspx

o http://www.thocp.net/companices/micrsoft/microsoft_company.htm

o www.morningstar.com

o http://wps.pearsoned.co.uk/wps/media/objects/1669/1709846/02
3685988_ch06.pdf

o http:// www.wikpedia.org.micrsoft.

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