Financial Ratio PDF

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Explain some important financial ratio...

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Financial Ratio: Total Asset: 2018 2017 2016 2015 2014 Microsoft 258,848 250,312 193,468 174,472 172,384 Oracle 137,851 134,991 112,180 110,903 93,266 Apple Inc. 375,319 321,686 490,345 231,839 207,000 Intel Corporation 127,963 123,249 113,327 101,459 91,900 HP Inc. 34,622 32,913 28,987 106,882 103,206 Interpretation: Total asset of Apple Inc. is the highest from the other four firms. Also Hp Inc. has the lowest amount of asset.

Total Sale: 2018 2017 2016 2015 2014 Microsoft 110,360 96,571 91,154 93,580 86,833 Oracle 39,383 37,792 37,047 38,226 38,275 Apple Inc. 265,595 229,234 215,639 233,715 182,795 Intel Corporation 70,848 62,761 59,387 55,355 55,870 HP Inc. 58,472 52,056 48,238 51,463 56,651 Interpretation: Apple Incorporation products are very popular which is proved by the number of total sale. Also Oracle faces some technology problem that is why the number of sale is lowest than others.

Liquidity Ratio: 2018 2017 2016 2015 2014 Microsoft 3.12 2.89 2.05 3.00 2.45 Oracle 2.8 5.07 3.96 4.26 4.34 Apple Inc. 1.30 1.24 1.23 1.00 1.13 Intel Corporation 1.73 1.75 1.69 2.45 1.73 HP Inc. 0.85 1.00 0.98 1.23 1.15 Interpretation: The standard ratio of the current ratio is 2:1.Microsoft hold a good proportion of 2:1 in their current asset and liabilities. HP Inc. could not maintain the standard of keeping double current assets in proportion of current liabilities.

Acid Ratio: 2018 2017 2016 2015 2014 Microsoft 2.08 2.85 2.02 2.93 2.41 Oracle 0.00 5.04 3.94 4.25 4.33 Apple Inc. 1.25 1.20 1.20 0.97 1.90 Intel Corporation 1.30 1.29 1.48 2.12 1.47 HP Inc. 0.61 0.74 0.74 1.13 1.00 Interpretation: The standard ratio of acid ratio is 1:1. Apple constantly holds the standard ratio of 1 on around 1. Microsoft holds a ratio of more than 2:1 over the years.

Leverage Ratio (Total Debt/Total Assets): 2018 2017 2016 2015 2014 Microsoft 0.30 0.36 0.27 0.19 0.13 Oracle 0.41 0.36 0.36 0.36 0.25 Apple Inc. 0.25 0.26 0.24 0.18 0.13 Intel Corporation 0.20 0.20 0.18 0.19 0.13 HP Inc. 0.15 0.23 0.26 0.07 0.16 Interpretation: Oracle asset was gradually increased by the fund of debt which indicates that the financial risk also increasing. HP Inc. total asset was funded by the equity greater than the debt which bears a good indication that company had smaller portion of financial risk.

Leverage Ratio (Long-term Debt / Total Assets): 2018 2017 2016 2015 2014 Microsoft 0.30 0.33 0.21 0.16 0.12 Oracle 0.41 0.36 0.35 0.36 0.25 Apple Inc. 0.25 0.26 0.23 0.18 0.12 Intel Corporation 0.19 0.20 0.18 0.19 0.13 HP Inc. 0.13 0.20 0.23 0.06 0.15 Interpretation: Most of the Oracle asset was funded by the long term asset which increased the degree of risk and decreased the solvency ratio. In these five firms, HP Inc. was improving their financial situation by decreasing invested in long term debt.

Leverage Ratio (Short-term Debt/Total Assets): 2018 2017 2016 2015 2014 Microsoft 0 0.04 0.07 0.03 0.01 Oracle 0 0 0 0 0 Apple Inc. 0.003 0.003 0.003 0.003 0.003 Intel Corporation 0.003 0.0003 0.0002 0.0004 0.005 HP Inc. 0.02 0.03 0.03 0.005 0.007 Interpretation: In the last five years, Oracle had no short term debt in their asset. Also HP Inc. had higher short term debt than others firm.

Leverage Ratio (Debt / Equity): 2018 2017 2016 2015 2014 Microsoft 0.82 1.01 0.86 0.53 0.20 Oracle 1.66 1.03 1.03 0.86 0.68 Apple Inc. 0.79 0.74 0.56 0.42 0.26 Intel Corporation 0.34 0.36 0.31 0.33 0.22 HP Inc. -7.08 -1.98 -1.73 0.21 0.59 Interpretation: We can see that the HP Inc. had negative debt/equity ratio which means the book value of the share price was negative. On the other side Intel Corporation had lower leverage ratio which was good for the shareholder because the financial risk decreased.

Return on Asset: 2018 2017 2016 2015 2014 Microsoft 39.45% 17.00% 31.54% 14.44% 23.02% Oracle 9.29% 18.25% 18.49% 19.21% 23.11% Apple Inc. 50.92% 37.37% 34.94% 42.79% 37.36% Intel Corporation 29.42% 13.94% 16.38% 19.79% 20.42% HP Inc. -303.92% -63.04% -57.02% 16.61% 17.78% Interpretation: Apple Incorporation managed to produce around 50% return on their asset. But HP made loss in the last three years.

Earnings per Share: 2018 2017 2016 2015 2014 Microsoft 2.13 3.25 2.56 1.48 2.63 Oracle 0.85 2.24 2.07 2.21 2.38 Apple Inc. 11.91 9.21 8.31 9.22 6.25 Intel Corporation 4.48 1.99 2.12 2.33 2.31 HP Inc. 3.26 1.48 1.43 2.48 2.62 Interpretation: Apple Inc. EPS was gradually increasing that means their financial position is in profitable. While Oracle gave small amount of profit to his shareholders which indicated that they could not earn enough profit like others. Price Earnings Ratio: 2018 2017 2016 2015 2014 Microsoft 23.47 57.34 28.06 36.93 16.99 Oracle 47.62 20.56 18.66 17.65 16.49 Apple Inc. 12.92 17.06 13.39 10.55 13.81 Intel Corporation 10.41 22.60 16.21 13.44 13.80 HP Inc. 7.38 15.02 9.60 4.47 5.51 Interpretation: P/E ratio explained that Oracle share was overvalued while HP Inc. share was undervalued. Apple Inc. share price was in stable position. Microsoft share price was overvalued in 2017 and also declined in 2018.

Ending Price of Stock: 2018 2017 2016 2015 2014 Microsoft 101.57 85.54 62.14 55.48 46.45 Oracle 45.15 47.28 38.45 36.53 44.97 Apple Inc. 157.74 169.29 115.82 105.82 110.30 Intel Corporation 46.93 46.16 36.27 34.45 36.29 HP Inc. 20.46 21.01 14.84 11.84 40.13 Interpretation: The highest share price was Apple Incorporation and the lowest share price was HP Incorporation. But Apple Inc. share price was declined in2018 from 2017. Also the performance of Microsoft share price was also improving.

Industry Average: Semiconductor industry: 2018 2017 2016 2015 2014 Current Ratio 3.27 3.39 3.69 3.66 3.67 Quick Ratio 2.35 2.59 2.85 2.48 2.49 Debt-to-equity ratio 0.41 0.56 0.46 0.38 0.39 ROE 2.8% 1.6% 5% 3.1% 4.4% Interpretation: Intel Corporation belongs to the semiconductor industry. Current ratio of the industry was greater than 3 while Intel Corporation was greater than 1.5 which means it

Computers software industry: Current Ratio Quick Ratio Debt-to-equity ratio ROE Interpretation:

2018 1.19 1.16 0.49 -41.5%

2017 1.19 1.15 0.44 -39.8%

2016 1.10 1.07 0.46 -45.3%

2015 1.41 1.27 0.50 -40.1%

2014 1.34 1.23 0.41 -33.9%

2017 1.85 1.11 0.72 -2.1%

2016 1.88 1.18 0.82 8.9%

2015 1.83 1.19 0.96 9.2%

2014 2.01 0.95 0.76 16.9%

Computers minicomputers industry: Current Ratio Quick Ratio Debt-to-equity ratio ROE Interpretation:

2018 1.62 1.29 0.55 -9.9%

Single factor- Regression Model: Expected Expected Return (monthly) Return (yearly) Microsoft 0.0217 0.2607 Oracle 0.0073 0.0876 Apple Inc. 0.0159 0.1910 Intel Corporation 0.0089 0.1079 HP Inc. 0.0073 0.0885 Portfolio Expected Return Portfolio Standard Deviation Firm Name

Standard Deviation Standard (monthly) Deviation (yearly) 0.062579604 0.21677575 0.053674503 0.185928477 0.075572118 0.261781818 0.062969803 0.218127398 0.072346771 0.250609216 0.20623615 0.183706445

Interpretation: Investor of Microsoft is expected highly return from the firm because its financial position is better than others. Also Microsoft is not deviated as much as Apple Incorporation, Where the expected return is lower than Microsoft. Oracle expected return deviation is too much for the low expected return. Firm Name Microsoft Corporation Oracle Apple Inc. Intel Corporation HP Inc.

Multiple R 0.672249 0.736635 0.569365 0.494094 0.675717

R Square 0.451919 0.542631 0.324176 0.244129 0.456594

Adjusted R 0.442469 0.534746 0.312524 0.231097 0.447225

Standard Error 0.04658 0.03667 0.06304 0.05538 0.05412

Significance F 4.06E-09 1.96E-11 2.06E-06 6.02E-05 3.15E-09

Interpretation: Oracle is strongly positive correlated with the S&P 500 index but their variation of excess return is 54%. On the other side Intel Corporation has fairly strong relation but their excess return is lower than others. Apple Incorporation faces more firm specific risk from the others while Oracle has lower. Firm Name Microsoft Corporation Oracle Apple Inc. Intel Corporation HP Inc.

Alpha 0.016006 0.000852 0.010623 -7.04554 0.003919

P-value 0.013821 0.864245 0.218071 0.992531 0.594709

Beta 1.195081 1.128419 1.233566 0.889181 1.401738

P-value 4.06E-09 1.96E-11 2.06E-06 6.02E-05 3.15E-09

Interpretation: : The five firm’s regression result show that only Intel Corporation has negative alpha which indicates that it cannot generate returns at the same rate as the border sector. Also Intel corporation beta is less than 1 while other’s firm beta is greater than 1. Microsoft Company is in best position because its beta is greater than 1 but alpha indicates that it generates more return from other company.

Fama French 3 factors: Firm Name Microsoft Corporation Oracle Apple Inc. Intel Corporation HP Inc.

Multiple R 0.740258 0.740621 0.649597 0.477098 0.679671

R Square 0.547982 0.548519 0.421977 0.227623 0.461953

Adjusted R 0.523766 0.524332 0.391011 0.186246 0.433129

Standard Error 0.043148 0.03698 0.05897 0.056789 0.054476

Significance F 1E-09 9.71E-10 8.69E-07 0.002204 1.22E-07

Interpretation: Multiple R explains that Microsoft Corporation and Oracle are highly correlated to the market but Intel Corporation is not correlated as much as others. Also Microsoft and Oracle have more than 50% R Square which is good but not as much according to the market standards. Apple Inc. standard error is higher than others which is not good for their firms because it means that the actual data deviation is more from the expected data. Oracle has lower standard error. Firm Name Microsoft Corporation Oracle Apple Inc. Intel Corporation HP Inc.

Alpha 0.00885 -0.00364 0.00034 0.00067 -0.00612

P-value 0.13467 0.46989 0.96604 0.93068 0.40971

Interpretation: Microsoft and HP both have negative alpha which means they can’t generate enough return from their asset. On the other side Microsoft Corporation generates higher return from its asset. Firm Name Microsoft Corporation Oracle Apple Inc. Intel Corporation HP Inc.

Beta Mkt-RF 1.30103 1.14867 1.17743 0.85537 1.39005

P-value 8.85E-11 3.57E-11 2.23E-06 0.000201 9.31E-09

Beta SMB P-value -0.97849 0.00010 -0.32678 0.11307 -0.16849 0.60198 -0.11679 0.70720 -0.15407 0.60567

Beta HML 0.06245 0.05206 -0.99743 0.01079 -0.08404

P-value 0.79386 0.79936 0.00331 0.97261 0.78066

Interpretation: In this table explain that the highest excess return is HP Incorporation and the lowest is Intel Corporation. That means HP Inc. investment performance is outperformed from others. Beta SMB shows that all the firms are dominated by large capitalization stock and Microsoft Corporation has high large capitalization stock rather than others. Beta HML indicates that Microsoft Corporation has greater high book to-market than others firm. But Apple Inc. and HP Inc. have small amount high book-to-market of stock in their portfolio of stocks....