Microsoft Corporation (MSFT) Finance Paper

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Microsoft Corporation (MSFT) Company Overview Formed in 1975, Microsoft started by selling a BASIC interpreter which quickly established a reputation for excellence. As the popularity of Microsoft BASIC grew, other manufacturers adopted Microsoft BASIC's syntax to maintain compatibility with existing Microsoft BASIC implementations. Because of this feedback loop, Microsoft BASIC became a de facto standard, and the company cornered the market. Later, it tried (unsuccessfully) to extend their grip on the home computer market by designing the MSX home computer standard. In late 1980, International Business Machines needed an operating system for its new home computer, the IBM PC. Microsoft subsequently purchased all rights to QDOS for $10,000, and renamed it MS-DOS (for Microsoft Disk Operating System). It was released as IBM PC-DOS 1.0 with the introduction of the PC in 1981. In contracting with IBM, however, Microsoft had retained the rights to license the software to other computer vendors as MS-DOS. The now highly profitable and cash rich Microsoft diversified into a wide variety of software products including: compilers and interpreters for programming languages and word processors, spreadsheets and other office software some of these products were successful, and some were not. By the turn of the millennium, many of Microsoft's software products dominated the market in their respective categories. Microsoft has devoted huge amounts of effort to marketing in developing their products and services, as well as to the integration of their software products with one another in an attempt to create a seamless and consistent computing environment for the user. Analysis I. Trend Analysis Liquidity Ratios: Current Ratio – For the last three years was growing from 3.56 in 2001 to 3.81 in 2002 to 4.22 in 2003. The reason of grow is increased in Assets. Even though Liability was growing, Asset grow was more significant. Quick Ratio – Constant grow for the last three years. From 3.56 in 2001 to 3.76 in 2002 to 4.17 in 2003. The reason of grow is constant increase in Current Assets. Cash ratio – Big drop (from .35 to .087) in year 2002. In 2003 the rate grew from .087 to .460. The reason of drop in 2002 is decreased in Cash and big increase in Liabilities. The increase in 2003 occurs because of big increase in Cash and slight increase in Liabilities. Asset Management Ratios Total Asset Turnover – Dropped from .64 in 2001 to .58 in 2002 to .55 in 2003. The reason is big increase in Total Assets.

In this essay, the author

  • Explains that book value per share increased for 3 years from 4.49 to 4.87 to 5.66 — the reason for increase was common equity grow.
  • Explains that the market-to-book ratio decreased from 7.55 in 2001 to 5.30 on 2002 to 4.84 in 2003. the reason for decrease was proce per share decrease in 2002 and big book value
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