MGT 4329 Finance Part - This course has a final project worth almost half of your grade and divided PDF

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This course has a final project worth almost half of your grade and divided into 17 parts. This is part 8...

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Finance As we begin the financial analysis of Microsoft we will use the latest fiscal year end financials and ratios. The past four years ended June 30th, Microsoft has reported increased revenues and earnings in the billions. Mostly because of the reduction in corporate taxes, as well as reduction in interest rates by the Federal Reserve. See figure one below. Revenues, while a key figure in performance, are not the only indicator. When it comes to the share price, both the dividend per share and share price have been steadily increasing over the past five years from $44 per share at fiscal yearend 6/30/2015 to $133 per share at fiscal yearend 6/30/2019. In addition, throughout the .com Tech Bubble and the 2008 Financial Crisis, Microsoft has consistently paid a dividend to its shareholders, and progressively increased it over the years (Yahoo Finance)i. When looking at the Statement of Profit and Loss and the Balance Sheet for the past three years, their operating income as a percentage of revenue increased both years; their income before income taxes as a percentage of revenue increased both years as well, and Microsoft Corp.’s net income as a percentage of revenue decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level. See Figure Four below for an illustration. The same is true on the balance sheet for Microsoft. Current and long term assets and property and equipment, net of accumulated depreciation increased both times while liabilities both saw decreases over the same period while shareholders’ equity increased. Once again the increase in equity is in part due to an increase of treasury stock on the balance sheet. Many corporations, in light of the Tax Cuts and Jobs Act of 2017 have taken the opportunity to buy back shares on the market, increasing their ownership control over shareholders. Looking at Microsoft’s capital ratios, we begin to have a greater understanding of the company’s position. Figures two and three below give us a snapshot of just three of Microsoft's

ratios, the Current Ratio, Quick Ratio, and Cash Ratio. The cash ratio is a liquidity ratio calculated as current assets divided by current liabilities. Microsoft’s current ratio improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019 not reaching 2017 level. Quick ratio is another liquidity ratio calculated as (cash plus short-term marketable investments plus receivables) divided by current liabilities. Microsoft’s quick ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019. And finally the cash ratio is a liquidity ratio calculated as (cash plus short-term marketable investments) divided by current liabilities. Microsoft Corp.’s cash ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019. When comparing these three ratios across some of Microsoft’s competitors Adobe, Alphabet, Facebook, IBM, Intuit, Oracle, and Salesforce, Microsoft has performed better than all in each instance and when compared to the Software & Computer Services Sector and the Technology Industry, Microsoft's ratios were better than the average (Stock Analysis)ii. Not only does Microsoft possess significant leverage in the market over their competitors, while other companies, such as Google and Amazon, have turned down lucrative government research contracts, Microsoft has left the door open to the possibility of fulfilling them, which will in turn result in even greater revenues and share prices over their competitors. Overall, based on the figures and facts, Microsoft is in a strong financial position in their sector and industry. It is always justified to look for ways to diversify revenues to ensure financial stability. When a crisis occurs, such as the mandates issued by the government amid the Wuhan COVID-19 outbreak, Microsoft can use this to enhance their cloud computing technologies with a greater number of people across the country working from home.

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i “Microsoft Corporation (MSFT) Stock Price, Quote, History & News.” Yahoo! Finance, Yahoo!, 29 Mar. 2020, finance.yahoo.com/quote/MSFT?p=MSFT. ii Dybek, Martin. “Microsoft Corp. (MSFT): Analysis of Liquidity Ratios.” Stock Analysis on Net, Stock Analysis on Net, 2 Aug. 2019, www.stock-analysis-on.net/NASDAQ/Company/MicrosoftCorp/Ratios/Liquidity....