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Microsoftis a company established in 1975 with the goal to allow businessesand people across the globe to maximize their full potential throughcreating technology that changes the way people communicate, work,and play. The company develops and markets services, software, aswell as hardware devices that provide greater ease, newopportunities, and improved value to everyone’s lives. Microsoftoperates in over 100 nations worldwide. To generate revenue, thecompany develops, licenses, and supports a wide array of softwareservices and products. Further, the company designs and sellshardware devices and delivers pertinent online advertising tocustomers globally.
Microsoftproducts include but are not limited to the following: servers,phones, computing devices, and intelligent devices productivityapplications server application applications for business solutionsoftware development tools online advertising and video games. Thecompany also designs hardware devices such as Surface Pro and SurfaceRT, Kinect for Xbox 360, PC Accessories, and Xbox 360 accessories. Microsoft also provides cloud-based solutions that offer clientswith services, software, and content in the internet through sharedcomputing resources situated in data centers. Some of the knowncloud-based computing services offered by the company includeMicrosoft Dynamics CRM online Microsoft Office 365, Bing, Skype,Windows Azure, Yammer, and Xbox LIVE. Microsoft conducts research andcreates advanced technologies for future hardware, software, andservices.
In2012, the company’s total revenue was $73,723 million. In 2013, thecompany was able to increase its revenue by 5% thereby amounting to$77,849 million. As for current liabilities, Microsoft had $32,688million in 2012 and $37,417 million in 2013. This shows an increaseof 12.6%. On the other hand, the company’s current asset in 2012was $85,084 million and on the year after that, current asset of thecompany was $101,466 million. This is an increase of 16.1%. Thecompany’s inventories in 2012 was $1,137 million while in 2013,this increased to $1,938 million. The company’s total stockholder’sequity for 2012 was $66,363 million and in 2013, the totalstockholder’s equity was $78,944 million. Microsoft’s net incomein 2012 was $16,978 million while in 2013, the company’s net incomeincreased by 22.3% thus amounting to $21,863 million. Lastly, thecompany’s total liabilities in 2012 was $54,908 million while in2012, this increased by 14% thereby amounting to $63,487.
Thedebt to equity ratio is a measurement of the company’s financialleverage which is projected by dividing the total liabilities by theshareholder’s equity. This indicates the proportion of debt andequity utilized by the firm to fund its assets. Microsoft’s debt toequity ratio in 2012 is 0.83. In 2013, the company’s debt to equityratio is 0.80. Current ratio pertains to a liquidity ratio whichprojects the capacity of a firm to settle short-term obligations.Current ratio is also referred to as liquidity ratio, cash ratio, andcash asset ratio. A greater current ratio signifies the greaterability of the firm to settle its debts. Microsoft’s current ratioin 2012 is 2.6. In 2013, the company’s current ratio is still 2.7.Quick ratio is also known as the quick assets ratio or the acid testratio. This ratio measures the firm’s short term liquidity. Thequick ratio is beneficial in gauging the short term debts of thecompany with its most liquid assets. Microsoft’s quick ratio in2012 is 2.6. In 2013, the company’s quick ratio is 2.7. Returnon equity pertains to the amount of returned net income as aproportion of shareholders equity. In addition, the return on equityapproximates the productivity of a firm by revealing the profitproduced by a firm with the money spent by the shareholders.Likewise, the return on equity ratio is stated as a percentage.Microsoft’s return on equity ratio in 2012 is 0.11. In 2013, thecompany’s return on equity ratio is 0.07.
Thedebt to equity ratio is a leverage ratio that functions by comparingthe total liabilities of a company to the overall shareholder’sequity. A debt to equity ratio is used to measure how much lenders,suppliers, creditors, as well as obligors have allotted to the firmcompared to what the shareholders have pledged. To a broad extent,the debt to equity ratio offers another advantage of the leverageposition of a firm, in this event we compare the total liabilitiesof the company to its shareholders’ equity. When debt to equityratio is a lower percentage, this implies that a firm is making useof less leverage but has a robust equity position. Based on theresults of the computation, it can be said that Microsoft isperforming well and has a strong equity position. Current ratiocompares the company’s current assets with its current liabilities.This, in turn, tells us whether the company’s current assets areadequate to settle its current liabilities. When current ratio isbelow 1, this means that the company has a critical liquidity problembecause this simply implies that overall current liabilities exceededthe overall current assets. The higher the current ration, the betteris the company’s position. However, when the value of current ratiois too high, this may also signify presence of idleness orunderutilization of resources in the firm. With Microsoft’s currentratio of 2.6 and 2.7 in 2012 and 2013 respectively, this implies thatthe company is in good position in terms of settling its currentliabilities. Quick ratio signifies the solvency of a certain entityand should be examined over some time and likewise in the context ofthe industry in which the company operates. Companies must seek tosustain a quick ratio that offers enough leverage against liquidityrisk provided the predictability level as well as volatility in aparticular business sector is taken into account. If the businessenvironment is uncertain, the greater would be the possibility thatcompanies require a higher quick ratio. The company’s quick ratioimplies that it has the capacity to settle its debts over the nexttwelve months. Return on equity demonstrates how many dollars ofearnings is derived from dollar of equity. Return on equity differsconsiderably across varied industries. Thus, it is best to comparereturn on equity of the company against the company’s past valuesor return on equity. Some companies have greater return on equity dueto the fact that they need lesser capital to invest. On the otherhand, other industries need to build bigger infrastructure in orderto produce greater revenue. A low return on equity signifies thatthere is restricted competition. Microsoft’s return on equity ratiois quite low. This signifies strong competition among othercompanies.
ForMicrosoft to increase its financial status, it has to market itsproducts and services well using all forms of promotional tools. Thecompany has to increase its return on equity ratio by creating moreinnovative products that are unique from other competitors.
Ccdconsultants.com,.`Current Ratio Interpretation | Liquidity Ratio | Financial Ratios`.N. p., 2014. Web. 19 May. 2014.
MicrosoftInvestor Relations,. `Microsoft Corporation Form 10-K For The FiscalYear-End June 30,2013`. http://www.microsoft.com/investor/SEC/default.aspx.N. p., 2014. Web. 19 May. 2014.
SmallBusiness – Chron.com,. `What Are The Five Common Financial Ratios OfAccounting?`. N. p., 2014. Web. 19 May. 2014.