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
Column120192018201720162015
Revenues                 125,843                 110,360                   89,950                   85,320                     93,580
COGS                   42,910                   38,353                   34,261                   32,780                     33,038
Gross Profit                   82,933                   72,007                   55,689                   52,540                     60,542
SG&A                   23,098                   22,223                   20,020                   19,260                     15,713
Depreciation                           -                           -                           -                           -                            -
R & D                   16,876                   14,726                   13,037                   11,988                     12,046
Other                           -                           -                           -                           -                            -
Operating Expenses                   39,974                   36,949                   33,057                   31,248                     27,759
EBIT                   42,959                   35,058                   22,632                   21,292                     18,161
Other Income                     3,415                     4,149                     2,739                     2,222                          346
Interest Expense                           -                           -                           -                           -
EBT                   43,688                   36,474                   23,149                   19,751                     18,507
Taxes                     4,448                   19,903                     1,945                     2,953                       6,314
Net Income                  39,240                  16,571                  21,204                  16,798                   12,193

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
Column120192018201720162015
Revenues                 125,843                 110,360                   89,950                   85,320                     93,580
Revenue Growth14.0%22.7%5.4%-8.8%N/A

Microsoft 2015 to 2019 Balance Sheet Summarized

Summary Balance Sheet
Column120192018201720162015
Cash                     11,356                 11,946                   7,663                   6,510                   5,595
Short Term Investment                   122,463               121,822               125,318               106,730                 90,931
Account Receivable                     29,524                 26,481                 19,792                 18,277                 17,908
Inventory                       2,063                   2,662                   2,181                   2,251                   2,902
Other                     10,146                   6,751                   4,897                   5,892                   5,461
Current Assets                 175,552             169,662             159,851             139,660             124,712
Net PPE                     43,856                 36,146                 23,734                 18,356                 14,731
Goodwill                     42,026                 35,683                 35,122                 17,872                 16,939
Other                     14,723                   7,442                   6,250                   3,642                   2,953
Total Assets                 286,556             258,848             241,086             193,694             176,223
Accounts Payable                       9,382                   8,617                   7,390                   6,898                   6,591
Accrued Expense                             -                        -                   5,819                   5,264                      606
Accrued Taxes                             -                        -                        -                        -                 23,223
Notes Payable                             -                        -                        -                        -                   6,766
LT Debt - Current                             -                        -                        -                        -                   2,499
Other                             -                        -                        -                        -                        -
Total Current Liabilities                     69,420                 58,488                 64,527                 59,375                 49,858
LT Debt                     66,662                 72,242                 76,073                 40,783                 27,808
Other                       7,581                   5,211                 17,184                 13,640                 13,544
Total Liabilities                 184,226             176,130             168,692             121,697               96,140
Common Stock                     78,520                 71,223                 69,315                 68,178                 68,465
Treasury                             -                        -                        -                        -                        -
Retained Earnings                     24,150                 13,682                   2,648                   2,282                   9,096
Other                             -                        -                        -                        -                        -
Total Equity                 102,330               82,718               72,394               71,997               80,083
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
Balance Sheet
Column120192018201720162015
Cash                     11,356                 11,946                   7,663                   6,510                   5,595
% of Sales9.0%10.8%8.5%7.6%6.0%
% of Total Assets4.0%4.6%3.2%3.4%3.2%

Microsoft 2019 Financial Ratios

Liquidity Ratios
20192018201720162015
Current Ratio                          2.53                   2.90                   2.48                   2.35                   2.50
Cash Ratio                          0.16                   0.20                   0.12                   0.11                   0.11
Asset Utilization
20192018201720162015
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
Profitability Ratios
20192018201720162015
Return on Assets13.69%6.40%8.80%8.67%6.92%
Return on Equity38.35%20.03%29.29%23.33%15.23%
Net Profit Margin31.18%15.02%23.57%19.69%13.03%
Long-term Debt
20192018201720162015
Debt Ratio23.26%27.91%31.55%21.06%15.78%

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.