Microsoft: MSFT Craig Steward Jr Week 8 Discussion Financial Leverage Debt Ratio 0.21 0.25 0.29 Debt-to Equity 0.54 0.71 0.92 Interest Coverage Ratio 21...35 Table 1. Microsoft’s Financial Leverage Ratios (Microsoft Corp., 2021). Debt Ratio 0.58 0.63 0.64 Debt-to-Equity 0.77 0.74 0.49 Interest Coverage Ratio -2...58 Table 2. Average Software Industry’s Financial Leverage Ratio (Software, n.d.). Debt ratios are lower than the industry averages.

A low debt ratio suggests Microsoft has a small amount of debt, which can pose some risks. Debt-to equity ratios for Microsoft decreased for all three years and is currently below the industry average. However, the debt-to-equity ratios are good values and signifies their assets are financed by equity. Interest coverage ratios are above the industry averages. This indicates Microsoft is in good financial health.

Bond Performance MSFT Bond MSFT Bond Last Price:102.933 Last Price: 1.937 Bond Purchased:1,000 x [102.933/ 100]= 29.33 Bond Purchase: 1,000 x [111.937/100]= 19.37 Coupon Payment:1,000 x [2.125% / 100]= .25 Coupon Payment::1,000 x [3.500%/100]=.00 Current Yield:[1,000 x 2.125%] / 1029.33=2.06% Current Yield:[1,000 x 3.500%]/1119.37=3.13% YTM:0.205 YTM:2.761 Callable: Yes Callable: Yes MSFT Bond is the best option to invested in as the investor would receive the par value with higher interest payment from the company overtime. Microsoft has the ability to recall the bond, which then could be refinanced at a lower rate. (Bond, 2021) Stock Performance Price/Earnings Ratio ...80 Market Book Ratio 13..32 9.08 Earnings Per Share 5.76 5.06 2.13 Dividends Per Share 2.09 1.89 1.72 Price/Cash Flow 25...53 Table 3.

Microsoft’s Market Ratios (Microsoft Corp., 2021). Table 4. Apple’s Market Ratios (Apple, 2021). Price/Earnings Ratio 40...24 Market Book Ratio 34..23 6.96 Earnings Per Share 3.28 2.97 2.98 Dividends Per Share 0.81 0.76 0.71 Price/Cash Flow 28...19 Comparing Microsoft and Apple’s Market Ratios, they both contain fluctuation throughout their ratios. It is important to note, Apple’s market book ratio is doubled compared to Microsoft’s ratio for fiscal year 2020.

According to Morningstar, Microsoft’s return on assets was 15.07 percent for 2020 (Microsoft. Corp.,2021). Based on the presented values and return on assets, we can conclude Microsoft’s common shareholders are receiving an adequate return on their investment. P/E Ratio Microsoft’s 5-year P/E ratio is 36.29. The industry average’s P/E ratio is 28.61.

Microsoft’s P/E ratio is higher than the industry average, thus Microsoft stock is overvalued. Based on all provided ratios and an overvalued stock, it is not reasonable to buy this stock at this time. (Microsoft Corp.,2021) Historical Stock The historical stock price for Microsoft is higher than its competitor, which increases the risk level for Microsoft stock. At this time, it is not reasonable to enter in a long term investment in Microsoft stock as the stock is overvalued, thus overpriced. Stock Closed Price 2020 Microsoft 222.42 Apple 132.69 Final Thoughts Taking in consideration Microsoft’s 2nd current market position, AAA and Aaa credit ratings, and payment of

Microsoft Msftcraig Steward Jrweek 8 Discussionfinancial Leverage2020

Microsoft: MSFT Craig Steward Jr Week 8 Discussion Financial Leverage Debt Ratio 0.21 0.25 0.29 Debt-to Equity 0.54 0.71 0.92 Interest Coverage Ratio 21...35 Table 1. Microsoft’s Financial Leverage Ratios (Microsoft Corp., 2021). Debt Ratio 0.58 0.63 0.64 Debt-to-Equity 0.77 0.74 0.49 Interest Coverage Ratio -2...58 Table 2. Average Software Industry’s Financial Leverage Ratio (Software, n.d.). Debt ratios are lower than the industry averages.

A low debt ratio suggests Microsoft has a small amount of debt, which can pose some risks. Debt-to equity ratios for Microsoft decreased for all three years and is currently below the industry average. However, the debt-to-equity ratios are good values and signifies their assets are financed by equity. Interest coverage ratios are above the industry averages. This indicates Microsoft is in good financial health.

Bond Performance MSFT Bond MSFT Bond Last Price:102.933 Last Price: $111.937 Bond Purchased:1,000 x [102.933/ 100]= $1029.33 Bond Purchase: 1,000 x [111.937/100]= $1119.37 Coupon Payment:1,000 x [2.125% / 100]= $21.25 Coupon Payment::1,000 x [3.500%/100]=$35.00 Current Yield:[1,000 x 2.125%] / 1029.33=2.06% Current Yield:[1,000 x 3.500%]/1119.37=3.13% YTM:0.205 YTM:2.761 Callable: Yes Callable: Yes MSFT Bond is the best option to invested in as the investor would receive the par value with higher interest payment from the company overtime. Microsoft has the ability to recall the bond, which then could be refinanced at a lower rate. (Bond, 2021) Stock Performance Price/Earnings Ratio ...80 Market Book Ratio 13..32 9.08 Earnings Per Share 5.76 5.06 2.13 Dividends Per Share 2.09 1.89 1.72 Price/Cash Flow 25...53 Table 3.

Microsoft’s Market Ratios (Microsoft Corp., 2021). Table 4. Apple’s Market Ratios (Apple, 2021). Price/Earnings Ratio 40...24 Market Book Ratio 34..23 6.96 Earnings Per Share 3.28 2.97 2.98 Dividends Per Share 0.81 0.76 0.71 Price/Cash Flow 28...19 Comparing Microsoft and Apple’s Market Ratios, they both contain fluctuation throughout their ratios. It is important to note, Apple’s market book ratio is doubled compared to Microsoft’s ratio for fiscal year 2020.

According to Morningstar, Microsoft’s return on assets was 15.07 percent for 2020 (Microsoft. Corp.,2021). Based on the presented values and return on assets, we can conclude Microsoft’s common shareholders are receiving an adequate return on their investment. P/E Ratio Microsoft’s 5-year P/E ratio is 36.29. The industry average’s P/E ratio is 28.61.

Microsoft’s P/E ratio is higher than the industry average, thus Microsoft stock is overvalued. Based on all provided ratios and an overvalued stock, it is not reasonable to buy this stock at this time. (Microsoft Corp.,2021) Historical Stock The historical stock price for Microsoft is higher than its competitor, which increases the risk level for Microsoft stock. At this time, it is not reasonable to enter in a long term investment in Microsoft stock as the stock is overvalued, thus overpriced. Stock Closed Price 2020 Microsoft 222.42 Apple 132.69 Final Thoughts Taking in consideration Microsoft’s 2nd current market position, AAA and Aaa credit ratings, and payment of $0.56 in dividend per shares, the following recommendations should be followed: Pay down any debt owed to lenders Use debt to finance growth Continue maintaining awareness of all spending Increase revenue by marketing to the younger generation (i.e., promoting Microsoft Teams).

Reflection This assignment has taught me how to calculate certain concepts to determine a company’s financial stability. I learned to calculate the financial leverages and market ratios and evaluate the bond performance of a corporation. I gained a possible real-life experience that will make me a better financial advisor. (Market Capitalization, 2020) and (FAQ, 2021) References: Apple Inc. (2021). Morning Star. Apple revenue eps.

NASDAQ. Bond. (2021). Finra Markets. jsp FAQ. (2021). Microsoft. Market capitalization. (2020).

Statista. Microsoft Corp. (2021). Stock Analysis on Net. Microsoft Corp. (2021). Morning Star.

MSFT: earning date. (2021). NASDAQ. Prepackaged software: average industry financial ratios for u.s. listed companies. (n.d.). Ready Ratios. .MsftOfcThm_Accent1_Fill { fill:#4472C4; } .MsftOfcThm_Accent1_Stroke { stroke:#4472C4; } .MsftOfcThm_Accent1_Fill { fill:#4472C4; } .MsftOfcThm_Accent1_Stroke { stroke:#4472C4; } Business Finance FINC Victoria Samios-Uy, Joshua Serrano, Craig Steward, Alina Waince MICROSOFT COMPANY Microsoft is one of the best software developing companies in the world. This presentation will provide the following: Analysis of Microsoft’s bons and stocks.

It will analyze Microsoft's financial leverage ratio, bond, and stock performance. It will also provided a professional recommendation based on the ratios. Financial Leverage Ratio: Equation Debt-to-Assets (Debt Ratio) Total Debt Total Assets 0...29 Debt-to-Equity Ratio Current Liabilities + Long Term Debt Common Equity 0...92 Interest Coverage Ratio EBIT Interest Expense 21...35 By reviewing the above table, we can determine that Microsoft’s Debt Ratio is below industry average for software companies. Industry average in fiscal year 2020 was 0.58 for tech companies. Financial Leverage Ratio: Continuation Equation Debt-to-Assets (Debt Ratio) Total Debt Total Assets 0...29 Debt-to-Equity Ratio Current Liabilities + Long Term Debt Common Equity 0...92 Interest Coverage Ratio EBIT Interest Expense 21...35 Microsoft’s current risk is low for investors in relations to the company’s capital structure.

This can be measured by one of the three ratios that were completed above. In order for the company to appeal to investors, they need to maintain their finance structure. Bond Performance: The two bonds: MSFT (refer to as A) is a 10 year maturity bond, and MSFT (refer to as B) is a 30 year maturity bond. Both of these bonds are callable. Bond Performance continuation: The last prices of the bonds are listed in the Last Sale column, with Bond A’s last sale price is $102.933.

Bond B is valued at $111.937. Assuming the par value of the bond is $1000, an investor will have to pay $1029.33, for Bond A if they were to purchase the bond at the listed last sale prices. An investor will pay $1119.37 for purchasing Bond B at the listed last sale price. Below are the mathematics: Stock’s performance In this part of the research assignment, the key market ratios of Microsoft and Apple will be analyzed. Price/Earnings Ratio ...87 Market Book Ratio 9...60 Earnings Per Share 2.13 5.06 5.76 Dividends Per Share 1.72 1.89 2.09 Price/Cash Flow 17...76 Price/Earnings Ratio .45 Market Book Ratio 34.16 Earnings Per Share 3.28 Dividends Per Share 0.81 Price/Cash Flow 28.83 Stock’s performance Continuation Market Ratios Analysis After comparing Microsoft and its biggest competitor Apple, it was revealed that both companies have large fluctuations in their ratios .

For example, in 2018 Microsoft reported a price/earning ratio of 41.80 and in 2019 it when down considerably to 29.75 and in 2020 it when back up to a similar rate as 2018 at 35.87. One big difference between Microsoft to Apple is their market book ratio. Their Dividend ratios were almost at 1.99, which is considered to be a fair amount. Based on all of these ratios, we can suggest that common stockholders are receiving an adequate ROI amount. Analysis of Microsoft’s Historical Stock Prices The table below will show the data about the stock prices for Microsoft’s and one of its biggest competitors, Apple.

Stock Closed Price 2020 Microsoft 222.42 Apple 132.69 Microsoft’s Historical Microsoft’s Historical Historic Stock Analysis The historical stock price for 2020 indicates that Microsoft’s stock price is constantly increasing from 2019 where it was 157.70, to a higher cost of 222.42 in 2020. Based on the findings in previous sections and the data in the historical price for Microsoft, it is not reasonable to buy the stock at this moment. The reason behind this decision is merely based on the ratios given by Morningstar, Nasdaq, and Yahoo finance. The stock is overvalued based on the industry average as we saw that Apple stock is cheaper than Microsoft at this moment. Recommendations Based on all of the analyze data Microsoft has sufficient financial strength to warrant entering in a long-term investment in stocks of the company.

They have demonstrated this by all of the years of solid demonstration of financial strength. They can managed to maintain investors wealth by creating new ways to increase ratio numbers.