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Financial Statement Analysis of Microsoft

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Financial Statement Analysis of Microsoft
Ⅰ Introduction
Microsoft is a company that is famous for its various products such as the Windows series. The firm is well known and is frequently cited as an example of good management. However, how good is it? As of December 1st, 2007, one share of Microsoft was approximately $33. Every investor would be curious if that price is reasonable. Also, it is too dangerous to rely completely on intuition or rumor when you buy stocks. Therefore, we decided to analyze Microsoft in a more rational, reasonable, fact-based way, and refer to that information in determining whether to buy Microsoft 's stock or not.
The 10-K financial statement from Microsoft is an enormous document, and it would take too much time to read the entire material. We thus decided to read the report selectively and analyze the company in the following steps: First, we will calculate several useful financial ratios. Second, we will look into the firm 's major accounting policies. Third, we will observe the trend, which shows how the company performed in the recent few years. Fourth, we will compare Microsoft with its competitors.

Ⅱ Body
1. Calculation of Ratios
Here we present several accounting ratios that helped us analyze Microsoft.

Chapter
Ratio
Value(rounded off to three decimals)
2
Financial Leverage Ratio
66384/35600.5=1.865
3
Total Asset Turnover Ratio
51122/66384=0.770
4
Net Profit Margin
14065/51122=0.275
5
Return on Equity
14065/35600.5=0.395
6
Gross Profit Percentage
40429/51122=0.791

Receivables Turnover
51122/10327=4.950
7
Inventory Turnover
10693/1302.5=8.210
8
Fixed Asset Turnover
51122/3697=13.827
9
Current Ratio
40168/23754=1.691

Accounts Payable Turnover
10693/3078=3.474
10
Debt-to-Equity Ratio
32074/31097=1.031
11
Earnings Per Share
Basic 14065/9742=1.44
Diluted 14065/9886=1.42

Dividend Yield
0.4/33.42-0.0120, 1.2%
12
Return on Assets
14065/66384=0.212
13
Quality of Income Ratio
17796/14065=1.265

Capital
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