Question

Compute the Financial Ratios of this company for the year 2018

ENGR 314 FALL 2019- HOMEWORK NO.1 - FINANCIAL STATEMENTS 2.1 The Balance Sheet & Income Statement that follows summarizes the financial conditions for Microsoft Corporation. Microsoft has reported a profit for several years running. Compute the various financial ratios and interpret the firm's financial health during fiscal-year 2018 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INCOME STATEMENTS n mili ons, except per share amounts) Year Ended June 30. 2017 2016 2018 Revenue: Product Service and other 64,497 $ 45.863 63,811 32,760 67,336 23,818 Total revenue 110,360 96,571 91,154 Cost of revenue: Product Service and other 17.880 15,420 22,933 15,175 19,086 14.900 Total cost of revenue 38,353 34,261 32,780 72.007 14,726 17.469 Gross margin Research and development Sales and marketing General and administrative Impairment and restructuring 62.310 13,037 15.461 4,481 306 58.374 11,988 14,635 4,563 1,110 4,754 35,058 1,416 Operating income Other income (expense), net 29,025 876 26,078 (439) Income before income taxes Provision for income taxes 36,474 19,903 29,901 4,412 25,639 5,100 16,571 S 25,489 $ Net income 20,539 Eamings per share: Basic Diluted 2.15 $ 2.13 $ 3.29 3.25 $ 2.59 2.56 Weighted average shares outstanding Basic Diluted 7,700 7,794 7,746 7,832 7,925 8.013 1.56 $ Cash dividends declared per common share 1.68 $ 1.44

Answer 1

Ratios for the year 2018:
SL. No.	Ratio	Formula	Calculation	Result
a	Current Assets	Current Assets	169662	169662
b	Current Liabilities	Current Liabilities	58488	58488
c	Debt Ratio, times	TD / TA	176130/258848	0.68
d	Times interest earned ratio	EBIT / Interest exp.	NA	NA
e	Current ratio, times	CA / CL	169662/58488	2.90	Good
f	Quick ratio, times	(CA-Inv)/CL	(169662-2662)/58488	2.86	Good
g	Inventory turnover ratio, times	T Rev. / Average inventory	(110360*2)/(2662+2181)	45.58	Good
h	Days' sales outstanding, days	365*Average AR/Sales	365*(26481+22431)/(2*110360)	80.88
i	Total Assets turnover, times	T Rev. / Average TA	(110360*2)/(258848+250312)	0.43
j	Profit margin, percentage	Net Income/T Rev.	16571/110360	0.15
k	Return on Total assets, percentage	Net Income/TA	16571/258848	0.06
l	Return on common equity, percentage	Net Income/Avg. Equity	16571/82718	0.20
m	Price to earnings ratio, times	MP of share/(NI/Outstanding Shares)	98.61/(16571/7600)	45.23
n	Book Value per share, $	Stockholders'Equity/Outstanding shares	82718/7600	10.88
Analysis:
1) Collection of sales: the sales outstanding remains for 81 days shows the weak collection process.
2) Operations: The assets turnover is not even one time shows over assets used in operation or sales is less according to investment.
3) Share Price : the company's shares are highly valued by market, thus investors and market value the company and its performance.
4) Stockholders value: The higher book value per share shows that company is generating value for its owner ie. shareholders.
5) Liquidity: The company is maintaining a good liquidity.
6) Leverage: The company is highly leveraged one as around 68% of its assets are financed through debt.