Microsoft Corporation Finance

Students should obtain the most recent balance sheet and income statement for Microsoft Corporation (MSFT) from finance.yahoo.com.  (Enter the ticker symbol and go to the company page.  The financial statements are available at the bottom of the page.)  Calculate the following ratios for June 30, 2014 and June 30, 2015:  Current ratio, Days sales outstanding, total asset turnover, debt ratio, profit margin, ROA, and ROE.

Problems 4-3, 4-5, 4-8, 4-24, 4-25 from the back of chapter 4.

1. What is a trend analysis regarding ratios and what information does it provide?

A trend analysis is conducted based on a ratio over time. The trend will help provide support that will determine if a firm’s financial condition is likely to improve or deteriorate.

2. Explain benchmarking.

A company can compare the company’s ratios with other firm in the same industry. Benchmarking is where a company compares their ratios with the leading companies in the industry.  These companies are Benchmark Companies.

3. What is compounding?  What is discounting?

Compounding is the process of going forward from Present Values to Future Values. It’s the same thing as investing money, earning interest on the amount invested, and receiving more than initially invested. Discounting is the reverse of compounding. It’s the process of knowing the Future Value, and calculating the Present Value.