Evaluation of Corporate Performance Research Paper

Evaluation of Corporate Performance - Research Paper ExampleIts Server and Tools division offers server software, training to developers, cloud-based services. Its descent division offers Microsoft Office and related products. The company markets its products and services across most part of the world. Income Statements (all figures in millions) Year ended June 30, 2011 2012 2013 2014 (projected) Revenue $ 69,943 73,723 77,849 85,634 Cost of Revenue $ 15,577 17,530 20,249 22,274 flagrant Profit $ 54,366 56,193 57,600 63,360 Total operating expense $ 27,205 34,430 30,836 33,920 Income before income tax $ 28,071 22,267 27,052 29,940 Provision for income tax $ 4,921 5,289 5,189 5,689 Net income $ 23,150 16,978 21,863 24,251 Figures for the year ended 2014 has been bringd at by projecting 10% growth on revenues and cost of revenues. Income tax provision has been made in the same percentage as made in the trustworthy year to arrive at the boodle income after tax. dimension Analysis Liquidity Ratios Liquidity of the company privy be denoted by several kinds such as modern ratio, quick ratio, cash ratio, and cash conversion cycle. a. flow Ratio is given as Current Assets/Current Liabilities For the year ended 2013, Microsofts current Ratio = 101,466/37,417 = 2.71 b. Quick Ratio This is also known as the acid-test ratio. This takes into account the most liquid current assets to cover current liabilities. Inventory and less liquid current assets that cannot be converted to cash quickly are eliminated while calculating this ratio. This informs more liquid status of the company. Quick Ratio = (Cash & Equivalents + Accounts Receivable + Short-term Investments)/ Current Liabilities = (3804 + 17,486+73,218)/37,417 = 2.52 Financial Leverage c. The debt-equity ratio is one of the popular financial leverage ratios that provides information regarding the companys leverage state. This is given as = total liability/shareholders equity = 63,487/78,944 = 0.8 This indicates that for all(prenominal) single dollar of share holders equity, there is 0.8 dollar of debt. d. Debt Ratio Debt ratio is defined as total liabilities/total assets For Microsoft, it is calculated as 63,487/142,431= 0.45 In other words, 45% of the assets of Microsoft have been created from debt funds. Asset Management The return on assets employed in the company will provide information about(predicate) how assets are used to generate return for shareholders. e. Return on Total Assets It is defined as Net Profit/ total assets employed = 21,863/142,431 =15.34% However, to extrapolate how expeditiously current assets are managed in enhancing shareholders wealth, it would be appropriate to find return on current assets. f. Return on Current Assets It can be given as net profit/current assets = 21,863/101,466 = 21.55% positiveness There are several measures of profitability and in this paper we calculate net profit margin and profitability against shareholders equity. g. Net Profit Ma rgin is given as Net profit/ revenue = 21,863/77,849 = 28% h. Profitability on shareholders fund It can be given as net profit/ total equity = 21,863/78,944 = 27.7% Market Value The market value of the theatre can be given by its market capitalization. i. Market Capitalization of Microsoft = No. of shares ? price/share = 8,328 ? 35.52 = $295.8 Billions j. Market Multiples (P/E) It will be interesting to understand P/E ratio in details. It is important to note that the closing price of any stock keeps fluctuating on daily