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
Both companies have the ability to pay back their short term debts.
Current assets Current liabilities
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
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
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
Receivable Turnover Ratio
Net credit sales Average Net Receivables
It looks like Microsoft has a better Receivable turnover then oracle, but not by much.
Average Collection Period
365 Receivable Turnover Ratio
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
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
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
Microsoft has beaten Oracle in this area and is on a better track for the interest Earned.
Cash dividend declared on common stock Net income
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
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
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...
Please join StudyMode to read the full document