Question

Establish potential short and long term financial weaknesses for Microsoft by looking at this financial analysis.

Annual Data 2019-06-30 2018-06-30 2017-06-30 2016-06-30 2015-06-30 2.5288 2.3529 0.3603 Lul 0.7425 Lahal 2.9008 0.4847 0.989 65.2474 31.7669 31.7669 41.0647 64.0389 Lil Lil 2.9186 0.4815 1.044 64.5225 30.0556 30.0556 39.1453 30.9627 26.3941 0.3858 15.7089 4.3052 28.6087 28.6087 36.5645 28.1271 22.5322 il 2.4734 0.2577 0.4407 64.6955 19.4069 19.4069 33.785 19.7767 13.0295 0.5364 11.3846 5.2256 Lul Current Ratio Long-term Debt / Capital Debt/Equity Ratio Gross Margin Operating Margin EBIT Margin EBITDA Margin Pre-Tax Profit Margin Net Profit Margin Asset Turnover Inventory Turnover Ratio Receiveable Turnover Days Sales In Receivables ROE - Return On Equity Return On Tangible Equity ROA - Return On Assets ROI - Return On Investment Book Value Per Share Operating Cash Flow Per Share Free Cash Flow Per Share 0.4159 0.7658 65.902 34.137 34.137 43.42 34.7163 31.1817 0.4392 20.7998 4.2624 85.6326 38.3465 74.6661 13.6937 22.3998 13.3887 الا 0.4712 33.05 15.0154 0.4264 14.4076 4.1675 87.5822 20.0331 42.5094 LU 84.7803 29.0602 59.9981 14.5624 4.9874 73.185 28.5276 40.7585 10.6162 18.2481 69.8485 15.2255 20.911 LU اور 10.1829 6.9885 Lebil 6.4018 10.3228 10.7748 11.3012 .. 9.2209 15.0683 11.3792 5.0443 4.0064 6.7309 5.6305 4.1589 9.9767 3.5944 2.8742 4.9349 4.1381 3.1177

Answer 1

Analysis ,in the order of ratios given:

Current ratio--Current assets have almost been maintained near about or more than 2.5 times the current liabilities, over all the 5 yrs.

LT debt/capital--But for a small decrease in 2019, Long-term debt had been increasing in all the 4 yrs.

Debt/equity--Out of the last 4 years , debt is almost equal to equity in 2 years & e=nera about 75% in the other 2 yrs.

Gross margin is maintained almost at the same levl, with marginal increase in the last 2 yrs.

Opg. Margin has been steadily increasing over the 5 yrs.

EBIT margin--Same as above

EBITDA margin--Same as above

Pretax profit margin---Same as above

Net profit margin has increased after a slump in 2018 fiscal.

ATO--1 $ of assets generate less than $ 0.50 of sales in almost all the years

ITO--No.of times inventory is turned over to sales , has increased over the years--meaning it takes lesser no.of days to sell.

RTO--Receivables collection take almost 3 months , in the last 3 yrs.

ROE has posted a good increase after a slump in 2018

ROTE also has posted a good increase after a slump in 2018

ROA has posted a good increase after a slump in 2018

ROI increased in 2019 after a slump in yrs. 2017 &2018

BV /share also increased in 2019 after decreasing in 2018

OCF has consistently increased in all the 5 yrs.

FCF has consistently increased in all the 5 yrs.

From the above,it can be seen some potential pitfalls:

In the short-term, receivables collection takes quite a long no.of days, which if expedited may futher improve OCFs & FCFs

In the long-term:

increase of debt , almost to the level of equity , has the inherent risk of interest payments & principal repayments.

Also ,the increase in Net profit in 2019, after the decrease in debt level, from 2018 & before, suggests , some action in this regard.

In general, the company seems to recover from certain slump in 2018.