The Microsoft Company’s Financial Analysis

Words: 550

Pages: 3

November 3, 2024

Table of Contents

Introduction
Microsoft’s financial analysis
Conclusion
References

Introduction

The efficiency of a company’s choice of strategies is apparent in its financial performance. Judging by a firm’s financial ratios, it is possible to identify the course set by its directors. In this case study, Microsoft’s financial analysis will be provided alongside a comparison with its direct competitor – Apple, Inc. Three ratios will be taken into consideration for both companies, including debt to asset, current, and cash ratios.

Microsoft’s financial analysis

Financial Statements Data	2018	2019	2020	2021
Cash and Cash Equivalents	11,946	11,356	13,576	14,224
Current Liabilities	58,488	69,420	72,310	88,657
Current Assets	169,662	175,552	181,915	184,406
Total Liabilities	176,130	184,226	183,007	191,791
Total Assets	258,848	286,556	301,311	333,779

Table 1: Microsoft Fiscal Reports Data, in Millions $.

Financial Statements Data	2018	2019	2020	2021
Cash and Cash Equivalents	25,913	48,844	38,016	34,940
Current Liabilities	115,929	105,718	105,392	125,481
Current Assets	131,339	162,819	143,713	134,836
Total Liabilities	258,578	248,028	258,549	287,912
Total Assets	365,725	338,516	323,888	351,002

Table 2: Apple, Inc. Fiscal Reports Data, in Millions $.

Over time, long-term decisions made by the company’s executives will either decrease or increase its stability. In the case of Microsoft, this leverage ratio indicates that the firm succeeds at expanding its total assets ahead of acquired debt. Its continuous technological breakthroughs are reflected in its total assets, and many acquisitions only accelerate the company’s growth (“Annual report 2019,” n.d.). Unlike Apple, Inc., Microsoft succeeds at gradually decreasing its financial risks, which is apparent in its debt to asset ratio (see Figure 1). It allows Microsoft to ensure that the company generates revenue for its investors with great success.

Figure 1: Microsoft vs. Apple, Inc. Debt to Asset Ratio.

Short-term goals also play a crucial part in financial analysis. While Microsoft did acquire total assets that overshadow its total liabilities, it rapidly uses its earned cash to expand its operations (“Annual report 2021,” n.d.). Both companies are losing their liquidity, although Microsoft has made successful efforts to increase its total assets over the past four years (see Figure 2). At the same time, Apple, Inc. appears to be struggling to expand without accumulating significant debts.

Figure 2: Microsoft vs. Apple, Inc. Current Ratio.

The last selected ratio to be analyzed is the cash ratio which also refers to a company’s liquidity. It takes into account only currency and easily convertible assets that a firm possesses to represent its ability to cover its debts rapidly. Both Microsoft and Apple, Inc. do not keep a significant amount of their respective assets in such form (see Figure 3). Moreover, the companies are apparently rapidly spending their cash assets to transfer their benefits to shareholders and further expand the firms’ operations.

Figure 3: Microsoft vs. Apple, Inc. Cash Ratio.

Conclusion

In conclusion, judging from these ratios, Microsoft’s strategy grants it significant financial effectiveness, as the company rapidly puts its acquired assets back into work in an attempt to accumulate momentum. The share of debt-financed assets gradually decreases as the firm continues to make many successful acquisitions to the benefit of its stakeholders. Although Apple, Inc. also strives to achieve the same goal, its debt to assets ratio signifies that the firm underperforms in comparison with Microsoft.

References

Annual report 2019. (n.d.). Microsoft. Web.

Annual report 2021. (n.d.). Microsoft. Web.

Investor relations. (n.d.). Investor Relations – Apple. Web.