Oracle Ratios

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Microsoft

Oracle

Interpretation and Comparison between the two companies' ratios (Reading the Appendix of Chapter 13 will help you prepare the commentary) According to this Oracle gives more per share to their stock holders then Microsoft does.

Earnings per share

As given in the income statement

$2.73

Basic Common

$1.69

Both companies have the ability to pay back their short term debts.

Current ratio

Current assets Current liabilities

$74,918 $28,774

=

2.60

$73,535 $14,192

=

5.18

When reading this we can tell that for every dollar spent, Microsoft has 78cents left over and Oracle has 76cents that can be used towards future investments.

Gross Profit Ratio

Gross profit Net Sales

$54,366 $69,943

=

77.7%

$27,224 $35,622

=

76.4%

Microsoft has a nice number of 33% of its sales that are contributed to their income while Oracle has only 24% to contribute.

Profit margin ratio

Net Income Net Sales

$23,150 $69,943

=

33.1%

$8,547 $35,622

=

24.0%

Microsoft has inventory that that can be pushed and sold out at almost 15 times per sale figure while Oracle has a higher number of almost 30 times push out for sales. Inventory Turnover Cost of Goods Sold Average Inventory $15,577 $1,056 14.8 times $8,398 $281 29.9 times

By looking at these figures we can see that Microsoft takes a little longer to push their inventory out by 25 days verses Oracles 12 days.

Days in Inventory

365 days Inventory turnover

365 14.8

=

25 days

365 29.9

=

12 days

Receivable Turnover Ratio

Net credit sales Average Net Receivables

$69,943 $14,001

=

5.0

$35,622 $6,107

=

5.8

It looks like Microsoft has a better Receivable turnover then oracle, but not by much.

Average Collection Period

365 Receivable Turnover Ratio

365 5.0

=

73.1 days

365 5.8

=

62.6

When looking at these numbers we can see that when Microsoft is doing their collections they have more time then Oracle. It would seem that Oracle does better on it's collections.

Assets Turnover Ratio

Net Sales Average Total Assets

$69,943 $97,409

=

0.72

$35,622 $67,557

=

0.53

These figures show that Microsoft has a better Asset turnover of 0.72 then Oracle with their 0.53.

Even here we see that Microsoft has a better return on their assets that is reflected in the Assets Turnover ratio. They have a much higher amount then Oracle and seem to be in a better position here. Return on Assets Ratio Net Income Average Total Assets $23,150 $97,409 = 23.8% $8,547 $67,557 = 12.7%

Debt to Total Assets Ratio

Total Liabilities Total Assets

$51,621 $108,704

=

47.5%

$14,192 $73,535

=

19.3%

Microsoft has a much higher Debt to Total Assets Ratio then Oracle. Again Oracle looks like it is a better position with a lower debt ratio.

Times Interest Earned Ratio

Net Income + Int Expense + Tax Expense Interest Expense

$28,366 $295

=

96.2

$12,219 $808

=

15.1

Microsoft has beaten Oracle in this area and is on a better track for the interest Earned.

Payout ratio

Cash dividend declared on common stock Net income

$5,180 $23,150

=

22.4%

$1,061 $8,547

=

12.4%

Microsoft is showing that when it comes to paying out, they stand at a better percentage of how much they pay out to their stockholders.

Return on Common Stockholders' Equity

Net income - Preferred stock dividend Average common stockholders' equity

$23,150 $51,629

=

44.8%

$8,547 $67,557

=

12.7%

Again Microsoft has a higher percentage and is showing that they have a better return rate then Oracle.

Free cash flow

Cash provided by operations minus capital expenditures minus cash dividends paid

$19,459

=

$19,459

$9,703 =

$

Even though Oracle has done better in some areas, Microsoft is betting them in how much extra cash 9,703 flow they have that can be used for...
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