We’ll Start with a brief explanation of what Microsoft is.
Microsoft Corporation, founded on September 22, 1993, is a technology company. The company develops, licenses and supports a range of products, services and software devices. The company’s segments include productivity and business processes, intelligent cloud and more personal computing. The company’s products include operating systems; Productivity-to-device applications; server applications; Commercial solution applications; Desktop and server management tools; Software development tools; Videogames and training and certification of integrators and developers of computer systems. It Also designs, manufactures and sells devices, including personal computers (PCS), tablets, game and entertainment consoles, telephones, other smart devices and related accessories, that integrate with your cloud-based offerings. It Offers a variety of services, including cloud-based solutions that provide customers with software, services, platforms and content, and provides support for consulting solutions and services. It Also offers online advertising to a global audience.
Its best known products are the Microsoft Windows operating system, the Office suite Microsoft Office and Internet browsers, Internet Explorer and Edge. Its flagship hardware products are the Xbox video game consoles and the Microsoft Surface tablet line. Until the year 2016, it is the largest software company in the world, taking into account its revenues and, in addition, one of the most valuable in the world market. The word «Microsoft» is an acronym for «Microcomputer» and «software».
Once you have entered a little full with the history of the company, we will begin the financial analysis more thoroughly.
The collection of reports included in this document is based on the sample client data that has been transferred. The reports provided include two years of comparison reports, five-year trend analysis reports, industrial and group comparison reports, category definitions and relationship formulas.
To determine the Ratios that we are going to present, these have been compared with those of the industry (software and programming) and with those of the sector (Technology)
Liquidity indices measure a company’s ability to meet its short-term liabilities. In other words, Can a company quickly convert its cash assets without a loss of value if necessary to meet its short-term obligations?, favorable liquidity ratios are critical for a company and its creditors within a business or Industry that does not provide a stable and predictable cash flow. They are Also a predictor of a company’s ability to make timely payments to creditors and continue to meet lenders ‘ obligations when faced with an unforeseen event.
CURRENT RADIUS = CURRENT ACTIVE/CIRCULATING LIABILITIES
This relationship reflects the number of times short-term assets cover short-term liabilities and is an accurate indicator of a company’s ability to meet its current obligations. A higher number Is preferred because It indicates a great capacity to meet short-term obligations. The composition of current assets is a key factor in the evolution of this relationship. DePending on the type of business or industry, assets may include slow inventories that could affect a company’s liquidity analysis. How long could it potentially lead to converting raw materials and inventory into finished products?
The current proportion of Microsoft is 3.40 compared to the industry that is 3.03 and the sector that is 2.23, indicates the capacity that the company has in the short term, however, the value of the quick relationship provide a clearer indication of the company , success in this area.
QUICK REASON = (Cash + negotiable values + accounts receivable)/Current Liabilities
This relationship, also known as the acid test relationship, measures the immediate liquidity, the number of times of cash, accounts receivable and negotiable securities that cover short-term obligations. A higher number is preferred because it suggests that a company has a great ability to meet short-term obligations. This relationship is a more reliable variation of the current relationship because inventory, prepaid expenses and other less-liquid current assets are eliminated from the calculation.
The fast ratio for Microsoft is 3.35 compared to the industry of 1.94 and the sector with a total of 1.73, indicates the company’s ability to serve short-term obligations is favorable.
DEBT To CAPITAL = Total liabilities/Total assets
This ratio measures the financial leverage of a company by indicating the proportion of debt and equity it is using to finance its assets. A number involved for creditors and a solid long-term financial security for a company.
The debt-to-capital ratio of Microsoft is 97.97% compared to that of the industry which is 24.46% and that of the sector that is 8.85%, indicates that the yield is not solid in this area.
P/E persentence (TMD or the following 12 months)
The Price-Earnings ratio is the relationship to assess a company that measures the current price of its action in relation to its earnings per share. The Price-earnings ratio is also sometimes known as multiple price or multiple earnings.
The share of Microsoft’s price-gain is 28.00 compared to the industry with a total of 38.30 and a total of 11.47 of the sector, I feel this the best of the three.
Beta is a measure of volatility, or systematic risk, of a value or a portfolio compared to the market as a whole. Beta is used in the Capital asset pricing model (CAPM), which calculates the expected performance of an asset based on its beta and expected market yields. Beta is also known as the beta coefficient
The Beta ratio for Microsoft is 1.03 compared to that of the industry with a total of 0.73, being the best, compared also with the sector with a total of 1.26.
PRICE ON SALES (TMD)
The Price/Sales ratio is an indicator of the value that is allocated to each dollar of the sales, or the income of a company. It can be calculated by dividing the company’s market capitalization among its total sales over a period of 12 months.
The Price/Sales ratio for Microsoft is 7.48, the best compared to the industry with a total of 6.33 and the sector with a total of 2.82
Price to book (most recent Quarter) Ratio P/B = Market price per share/value per share
The price-to-value ratio (P/B ratio) is a relationship used to compare the market value of an action with its market value of an action with its book value. It Is calculated by dividing the current closing price of the shares by the last quarter’s book value per share.
The price-to-value ratio for Microsoft is 9.79 being the best in comparison with the industry with a total of 7.46 and the sector with a total of 2.19.
PRICE OF THE TANGIBLE BOOK (MRQ) = Market Cap/Tangible Assets Book Value.
The price of tangible value in books (PTBV) is an index of valuation that expresses the price of a value in comparison with its value in tangible or tangible books, as reported in the company’s balance sheet.
The Price ratio of the tangible book for Microsoft is 27.43, being the best in comparison with the industry with a total of 13.64 and the sector with a total of 4.73.
CASH FLOW PRICE (TMD) = stock Price/operating cash Flow per share
The relationship takes into account the operational cash flow of an action, which adds non-monetary gains, such as depreciation and amortization, to net income.
The price ratio to Microsoft cash flow is 20.34 compared to that of the industry with a total of 26.43, being the best in comparison also with the sector with a total of 14.22.
DIVIDEND PROFITability = Annual Dividend per share/price per share
A financial index that indicates how much a company pays in dividends each year in relation to the price of its shares
The share of profitability per dividend for Microsoft is 1.67%, compared to the industry with 1.49% and the sector with a total of 1.99% being the best.
PAYMENT RATIO (TMD) = Dividend per share (DPS)/Ganancias per share (EPS)
The rate of payment is the proportion of earnings paid as dividends to shareholders, generally expressed as a percentage.
The payment ratio for Microsoft is 45.34% being the best in comparison with the industry with a total of 36.32% and the sector with a total of 16.13%
TOTAL DEBT To EQUITY (MRQ) = Total liabilities/stockholders ‘ Equity
Indicates The amount of debt a company is using to finance its assets in relation to the amount of value represented in stockholders ‘ equity
The total debt ratio for Microsoft is 102%, compared to the industry with a total of 33.55% and the sector with a total of 15.24% being the best
INTEREST COVERAGE (TMD)
The Interest Coverage index is a debt ratio and a profitability index used to determine how easily a company can pay interest on outstanding debt. The Interest Coverage index can be calculated by dividing the earnings of a company before interest and taxes (EBIT) for a period determined by the amount a company must pay in interest for its debts during the same period.
The share of interest coverage for Microsoft is 0, compared to the industry with a total of 64.47, being the best in comparison also with the sector with a total of 16.81
GROSS MARGIN (TMD) = Gross Profit/Income
Gross margin represents the percentage of total sales income that the company retains after incurring the direct costs associated with the production of the goods and services it sells
The Proportion of gross margin for Microsoft is 64.2%, being the best in comparison with the industry with a total of 55.01% and the sector with a total of 42.78%
EBITDA MARGIN (TMD)
EBITDA margin is a measure of the operating profitability of a company as a percentage of its total income. It Is equal to earnings before interest, taxes, depreciation and amortization (EBITDA) divided by total revenues. Because EBITDA excludes interest, depreciation, amortization, and taxes, the EBITDA margin may provide an investor, business owner, or financial professional with a clear view of the operational profitability and cash flow of A company.
The EBITDA margin ratio for Microsoft is 36.98%, being the best in comparison with the industry with a total of 25.44% and the sector with a total of 22.39%.
Operating MARGIN (TMD) = Net sales/operating income
It refers to the earnings that a company retains after eliminating operating expenses (such as the cost of goods sold and wages) and depreciation.
The share of the operating range for Microsoft is 28.92%, this being the best in comparison with the industry with a total of 18.87% and the sector with a total of 20.41%
NET PROFIT MARGIN (TMD) = Net Income/Sales
The net profit margin is the relationship between net earnings and income of a business or commercial segment.
The proportion of the profit margin in Microsoft is 27.04%, being the best in comparison with the industry and the sector with a total of 14.10% and 16.13% respectively.
EFFECTIVE TAX RATE (TMD)
The Effective tax rate is the average rate at which a person or corporation is taxed. The effective tax rate for individuals is the average rate at which their labor income is taxed, and the effective tax rate for a corporation is the average rate at which their earnings are taxed before taxes.
The proportion of the tax rate for Microsoft is 10.62%, being the best in comparison with industry and the sector with a total of 23.12% and 25.27% respectively.
Income per employee is a reason that is calculated as the company’s income divided by the current amount of employees. This relationship is more useful when compared to other companies in the same industry. Ideally, a company wants the highest employee income possible, because it indicates greater productivity and effective use of the company’s resources.
The share of income-employees for Microsoft is $835.419 compared to the industry with a total of $10,984,753 being the best, compared also with the sector with a total of $3,081,354
NET INCOME/EMPLOYEES (TMD)
It Is An index that is calculated as the net income of the company divided by the current number of employees. Ideally, a company wants the largest net income per employee possible.
The Share of net income-employees for Microsoft is $225.895 compared to the industry and the sector with a total of $1,758,153 and $454.317 respectively, the latter being the best of the three
TURNOVER RECEIVABLE = net Sales of credit/prom. Accounts receivable
An accounting measure used to quantify the effectiveness of a company in the extension of the credit and in the collection of debts in that credit
The proportion of the figures for Microsoft is 6.89, compared with the industry and the sector with a total of 7.43 and 8.29 respectively, the last being the best of the three
TURNOVER RECEIVABLE (DAYS) = 365/Accounts receivable
An accounting measure used to quantify the effectiveness of a company in the extension of the credit and in the collection of debts in that credit.
The proportion of the turnover receivable for Microsoft is 55.24, compared to industry and the sector with a total of 48.45 and 43.43 respectively, I feel the latter the best of the three
INVENTORY ROTATION (TMD) = Cost of Goods Sold/Average Inventory
Inventory rotation measures How fast a company is selling inventories and is usually compared with industry averages. Low turnover implies weak sales and therefore excess inventory. A high proportion implies strong sales and/or big discounts.
The proportion of the rotation for Microsoft is 18.25, compared to the industry with a total of 63.37, being the best in comparison also with the sector with a total of 12.80
INVENTORY VOLUME (DAYS) = 365/Inventory Volume
Inventory rotation measures How fast a company is selling inventories and is usually compared with industry averages. Low turnover implies weak sales and therefore excess inventory. A high relationship implies strong sales and/or big discounts
The share of the volume of inventory in Microsoft is 19.73, compared to the industry with a total of 5.68, being the best in comparison also with the sector with a total of 28.13
ROTATION OF ASSETS (TMD) = Sales/Assets
The asset turnover rate is the relationship between the value of a company’s sales or the revenues generated in relation to the value of its assets. The asset turnover ratio can often be used as an indicator of the efficiency with which a company is deploying its assets to generate revenue.
The share of the rotation of assets for Microsoft is 0.44, compared to the industry with a total of 0.72, being the best, compared also with the sector with a total of 0.86
Return OF ASSETS (TMD) = Net Income/Total assets
Asset performance (ROA) is an indicator of how profitable a company is in relation to its total assets. ROA gives an idea of how efficient the administration is in using its assets to generate profits.
The share of the returns of assets for Microsoft is 11.91%, compared to industry and sector with a total of 9.89% and 13.70% respectively, the latter being the best
inVERSION RETURN (TMD) = Net investment/Total Investment Benefit
ROI measures the amount of investment performance relative to the investment cost (per project, some fixed assets, etc.)
The share of the return on investment for Microsoft is 15.04%, compared to industry and the sector with a total of 15.31% and 18.27% respectively, the latter being the best
Return on Equity (TMD) = Net Income/Shareholder Equity
Capital Yield (ROE) is the amount of net income returned as a percentage of stockholders ‘ equity. The return on equity measures the profitability of a corporation by revealing how much profit a company generates with the money that the shareholders have invested.
The proportion in Microsoft is 37.61%, being the best in comparison with industry and sector with a total of 16.67% and 19.54 respectively
A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of several different investments. (NET INCOME/TOTAL ASSETS)
The proportion for Microsoft is 15.04% compared to industry and sector, with a total of 15.31% and 18.27% respectively, the latter being the best
Capital Yield (ROE) is the amount of net income returned as a percentage of stockholders ‘ equity (NET INCOME/EQUITY)
The proportion for Microsoft is 37.61%, being the best in comparison with the industry with 16.67% and the sector with 19.54%
To finish All this analysis that can be seen in the attached file that is accompanied by this analysis, we can see that in some respects the company analyzed is much better than the sector and industry, but in other respects is the opposite.
In my opinion Microsoft is a fairly large and profitable company, can irle much better as long as it applies some strategies to correct the errors that we can see in the analysis and for the company to grow even more. Although the price of the action of Microsoft is high I feel it is worth investing in a company so profitable, it is correct that the bags go up and down and for this company is not the exception but you could invest in it in one day recover and earn more than you Invested is a matter of knowing what time to sell the shares purchased, is something fascinating the world of finances but you must handle it carefully if you want to win and not lose.