Check out some similar questions!

casslac1981 · Oct 2, 2009, 08:52 PM

For Microsoft Corporation:

Once you have found the financial statements, you will calculate the past three year's worth of financial ratios . You will need to calculate all of the Liquidity and Asset Management ratios, Total debt to total assets ratio, all of the Profitability ratios, the P/E and M/B ratio. I have tried everything, no luck.
Please I need help with this so badly, this assignment is due Tuesday, October 6th.

morgaine300 · Oct 3, 2009, 03:52 AM

"All" -- there are a lot of ratios. You need to be using the ones that have been introduced in your class. There are variations on some of these equations -- you may be allowed to use any variation or only the one shown to you in class.

There are a lot of equations and three years to do. That's a lot of work. We can't know what you have done and what you are getting incorrect, or why you are getting it incorrect, unless we see your work. We're not here to just do the entire assignment for you, so if you want us to help with whatever is going wrong, you need to show some work, and you also need to show which equations you are actually supposed to be doing.

It might help if it were attached in an Excel file or something. We probably really only need one year to see why the calculations are off.

NeedKarma · Oct 3, 2009, 03:57 AM

First question: have you found the Microsoft financial statements?

morgaine300 · Oct 3, 2009, 04:16 AM

Ah, well that's a good question too. :-)

NeedKarma · Oct 3, 2009, 04:22 AM

:)
I'll give the OP their first bit of help: MSFT Annual Report 2008

casslac1981 · Oct 3, 2009, 06:16 PM

This is what I did:

Ratio
2008
2007
2006

Current
0.79:1
0.78:1
1.22:1

Quick
0.52:1
0.57:1
0.9:1

Inventory turnover
9.9 times
10.9 times
10.8 times

Receivable turnover
29.5 days
32.5 days
30.6 days

Fixed asset turnover
0.7 times
0.65 times
0.61 times

Total asset turnover
0.58 times
0.54 times
0.50 times

Total debt ratio
0.52
0.52
0.54

Interest cover
12 times
12.3 times
12 times

Profit margin
14.46%
13.9%
12.71%

Return on investment
8.39%
7.49%
6.4%

Return on equity
17.38%
15.49%
13.8%

P/E ratio
18.4 times
20.28 times
22.2 times

Price/cash flow
9.3 times
8.6 times
8.3 times

Market price/book value
3.1 times
3.1 times
3.1 times

The calculations are as under

Current ratio = current assets/current liabilities

The calculations are as follows

2008
2007
2006

=24515/30958

=0.79:1
=24031/30717

=0.78:1
=24392/19985

=1.22:1

Quick ratio=(current assets-inventory)/current liabilities

The calculations are as follows

2008
2007
2006

=(24515-8416)/30958

=0.52:1
=(24031-6819)/30717

=0.57:1
=(24392-6291)/19985

=0.90:1

Inventory turnover = sales/year-end inventory

The calculations are as follows

2008
2007
2006

=83503/8416

=9.9 times
=74476/6819

=10.9 times
=68222/6291

=10.8 times

Receivables turnover = (receivables/sales)*365

The calculations are as follows

2008
2007
2006

=(6761/83503)*365

=29.5 days
=(6629/74476)*365

=32.5 days
=(5725/68222)*365

=30.6 days

Fixed asset turnover = sales/fixed assets

The calculations are as follows

2008
2007
2006

=83503/119477

=0.70 times
=74476/113983

=0.65 times
=68222/111366

=0.61 times

Total asset turnover = sales/total assets

The calculations are as follows

2008
2007
2006

=83505/143992

=0.58 times
=74476/138014

=0.54 times
=68222/135695

=0.50 times

Total debt ratio = total debt/total assets

The calculations are as follows

2008
2007
2006

=74498/143992

=0.52
=71254/138014

=0.52
=72787/135695

=0.54

Interest cover = earnings before interest and tax/interest charge

The calculations are as follows

2008
2007
2006

=17545/1467

=12 times
=16104/1304

=12.3 times
=13532/1119

=12 times

Profit margin=(net income/sales) *100

The calculations are as follows

2008
2007
2006

=(12075/83503)*100

=14.46%
=(10340/74476)*100

=13.9%
=(8684/68222)*100

=12.71%

Return on investment = (net income/total assets)*100

The calculations are as follows

2008
2007
2006

=(12075/143992)*100

=8.39%
=(10340/138014)*100

=7.49%
=(8684/135695)*100

=6.4%

Return on equity = (net income/shareholders' equity) * 100

The calculations are as follows

2008
2007
2006

=(12075/69494)*100

=17.38%
=(10340/66760)*100

=15.49%
=(8684/62908)*100

=13.8%

P/E ratio = market price per share/ earnings per share

The calculations are as follows

2008
2007
2006

=71.01/3.86

=18.4 times
=65.31/3.22

=20.28 times
=61.91/2.79

=22.2 times

Price/cash flow = market price per share/cash flow per share

The calculations are as follows

2008
2007
2006

=71.01/7.634

=9.30 times
=-65.31/7.59

=8.6 times
=61.91/7.5

=8.3 times

Market price/book value = market price per share/book value per share

The calculations are as follows

2008
2007
2006

=71.01/22.91

=3.1 times
=65.31/21.36

=3.1 times
=61.91/19.79

=3.1 times

ArcSine · Oct 4, 2009, 07:02 AM

Casslac, from scanning your definitions of each of the metrics, it looks like you're good on most of them. Just a few suggestions...

In the Quick Ratio, any Prepaid Expenses are usually excluded from the numerator (Current Assets) just as Inventory is excluded. So just make sure that you don't have--or weren't provided--any Prepaids among the Current Assets. If not, then your Quick Ratio is good just as it stands.

Couple of thoughts on your Inventory Turnover: If it's available, use Cost of Goods Sold in the numerator, rather than Sales. It's appropriate to use Sales as a proxy for COGS--albeit a poor one--when the COGS number isn't available.

Also, in your denominator, it's more accurate to use Average Inventory instead of Ending Inventory. For this purpose, most folks just take an average of the beginning and ending inventories for the year, and in this context that's probably all you have available. But before you warm up your eraser, first check your text to see exactly how Inventory Turnover has been defined. If your books specifies using Ending Inventory, then that's how you should go.

Finally, Receivables Turnover is [Credit Sales] divided by [Average Receivables*]. What you've done is actually to calculate a different ratio, one which is frequently called "Days Sales Outstanding" or "Average Collection Period". The two are related, but if your question specifically calls for Receivables Turnover, then that's the one you should compute.

*(As with the denominator in Inventory Turnover, the Receivables TO ratio will be more accurate if you use Average Receivables in the denominator. But again, check your text--use Average or Ending, whichever is specified in your book.)