Microsoft Financial Ratios and Financial Statements Analysis and Review
In "Microsoft 2019 Financial Statements and Financial Ratios: Defined, Discussed, and Analyzed for 5 Years” that was written by, Paul Borosky, MBA., doctoral candidate, and owner of Quality Business Plan and Finance Homework Help, the author summarized Microsoft's 2019, 2018, 2017, 2016, and 2015 10k annual reports as the basis for information gathering. After all of Microsoft's 10k annual statements were collected, which included their Income Statements and Balance Sheets, he then used proprietary financial templates to calculate different financial ratios such as Microsoft's ROE, ROA, and debt ratio.
Microsoft 2015 to 2019 Income Statement Summarized
|Income Statement 2019|
|R & D||16,876||14,726||13,037||11,988||12,046|
Microsoft 2019 Revenues Analysis:
Microsoft’s revenue ended 2015 at about $93 billion annually. The revenue then grew at approximately an 8.3% annual average for the next five years. This ended in 2019 with about $125 billion in revenues. This revenue growth seems to be substantially higher than industry competitors.
|Revenues and Growth|
Microsoft 2015 to 2019 Balance Sheet Summarized
|Summary Balance Sheet|
|Short Term Investment||122,463||121,822||125,318||106,730||90,931|
|LT Debt - Current||-||-||-||-||2,499|
|Total Current Liabilities||69,420||58,488||64,527||59,375||49,858|
|Total Equity & Liability||286,556||258,848||241,086||193,694||176,223|
Microsoft 2019 Cash Analysis:
Cash: Microsoft’s cash position ended 2015 at approximately 5.5 billion. Over the next several years, the cash position grew to $11.3 billion. This growth may indicate that Microsoft has less projects to invest their liquid cash into. Also, the increased cash position may be part of a corporate strategy. Over the last several years, Microsoft has held their cash position between 3.2% to 4.6% of their total assets. From this hypothesis, as total assets increase, then the company may increase their cash percentage.
|Cash as a % of Sales|
|% of Sales||9.0%||10.8%||8.5%||7.6%||6.0%|
|% of Total Assets||4.0%||4.6%||3.2%||3.4%||3.2%|
Microsoft 2019 Financial Ratios
|Total Asset Turnover||0.44||0.43||0.37||0.44||0.53|
|Fixed Asset Turnover||2.87||3.05||3.79||4.65||6.35|
|Days Sales Outstanding||85.63||87.58||80.31||78.19||69.85|
|Return on Assets||13.69%||6.40%||8.80%||8.67%||6.92%|
|Return on Equity||38.35%||20.03%||29.29%||23.33%||15.23%|
|Net Profit Margin||31.18%||15.02%||23.57%||19.69%||13.03%|
Microsoft Current Ratio Analysis:
Current Ratio: Microsoft current ratio is at approximately 2.53 as of 2019. This is slightly higher than its 2.50 current ratio in 2015. This indicates that Microsoft prefers to have liquid assets available for operational needs. An interesting note is that there cash position is relatively low as compared to their short-term investments. What I mean by this is that the cash ratio is .16 in the quick ratio is .2 .5. This shows that the organization prefers to keep their liquid assets in short-term investments as compared to cash.
Microsoft 2019 Return on Equity Ratio Analysis:
Microsoft return on equity ended 2015 at approximately 15.23%. Over the next several years, the return on equity group to approximately 38.3%. The substantial growth indicates that the organization took strategic action to greatly increase this ratio. For example, the organization’s debt ratio grew from 15% to 23%. This shows that the firm is using more debt for growth as compared to equity.
Microsoft 2019 Debt Ratio Analysis:
Microsoft ended 2015 with the debt ratio of 15.7%. As of 2019, this debt ratio grew to 23.2%. This shows that the organization is relying more upon debt as compared to equity for business growth. The benefit for the action is that the company is able to make money on borrowed money. As for a challenge, the more debt that Microsoft takes on, the more risk the company is taking on as well.