Here is the link for the financial statements for Oracle Corporation for the fis
ID: 2387031 • Letter: H
Question
Here is the link for the financial statements for Oracle Corporation for the fiscal year ending 2011. First, select 2011 using the drop-down arrow labeled for Year on the right-hand side of the page, and then select Annual Reports using the drop-down arrow labeled Filing Type on the left-hand side of the page.You should select the 10k dated 6/28/2011 and choose to download in PDF, Word, or Excel format.
http://www.oracle.com/us/corporate/investor-relations/sec/index.html
Here is the link for the financial statements for Microsoft Corporation for the fiscal year ending 2011. You should select the 10k dated 7/28/2011 and choose to download in Word or Excel format.
http://www.microsoft.com/investor/SEC/default.aspx?year=2011&filing=annual
Required Ratios for Final Project Submission
1) Earnings per Share
2) Current Ratio
3) Gross Profit Rate
4) Profit Margin Ratio
5) Inventory Turnover Ratio
6) Days in Inventory
7) Receivables Turnover Ratio
8) Average Collection Period
9) Asset Turnover Ratio
10) Return on Assets Ratio
11) Debt to Total Assets Ratio
12) Times Interest Earned Ratio
13) Payout ratio
14) Return on Common Stockholders’ Equity Ratio
15) Free Cash Flow
16) Current Cash Debt Coverage Ratio
17) Cash Debt Coverage Ratio
18) Price/Earnings Ratio [For the purpose of this ratio, for Oracle, use the market price per share on May 30, 2011 and for Microsoft, use the market price per share on June 30, 2011]
Explanation / Answer
Ratios for 2007 Ratios for 2008 Ratios for 2009 Ratios for 2010 Ratios for 2011 Ratios for 2012 Ratios for 2013 Comments 1. Earnings per Share Net income/Shares outstanding 4274/5170 $ 0.83 1.44 $ 1.44 The earnings per share of Microsoft is higher than oracle due to better net income 2. Current Ratio Current assets less current liabilities 12883/9387 1.37 40168/23754 1.69 times Microsoft has more current assets than Oracle to pay its current debts. 3. Gross Profit Rate Gross profit/Sales 1-(3349/17996) 81.39% 1-(10693/51122) 79.08% The gross profit margin of oracle is slightly higher than Microsoft. 4. Profit Margin Ratio Net income/Sales 4276/17996 23.76% 14065/51122 27.51% The net profit margin of Microsoft is higher than oracle, it may be due to better control over operating expenses. 5. Inventory Turnover Ratio Cost of goods sold/Average inventory NA NA 10693/1302.5 8.21 times The inventory turnover of Microsoft is around times in a year 6. Days in Inventory 365/inventory turnover NA NA 365/E7 44 days Microsoft sells its inventory in 44 days. 7. Receivables Turnover Ratio Sales/Account receivable 17996/3548 5.07 51122/10327 4.95 times No big difference in account receivable of two companies 8. Average Collection Period 365/account receivable turnover 365/C9 72 365/E9 73.73 days Both companies are recovering its account receivable almost in same time. 9. Asset Turnover Ratio Sales/Averages total assets 17996/34572 0.52 51122/63171 0.81 times The ratio shows better and effective utilization of Microsoft of its assets as compared to Oracle. 10. Return on Assets Ratio Net income/Average total assets 4276/31800.5 13.45% 14065/63171 22.26% The better utilization of assets resulted in better return for Microsoft as compared to Oracle. 11. Debt to Total Assets Ratio Total liabilities/total assets 17653/34572 51.06% 32074/63171 50.77% Debt financing for total assets is almost same for both companies. 12. Times Interest Earned Ratio EBIT/Interest expense 5974/343 17.42 NA NA times Oracle has good amount of operating income to support its interest expense. 3. Payout ratio Dividend /Net income NA NA 3837/14065 27.28% No dividend has been paid by Oracle. 14. Return on Common Equity Net income/Average stockholders equity 4276/15965.5 26.78% 14065/35600.5 39.51% ROE of Microsoft is far better than Oracle. 15. Free Cash Flow Operating cash flow-capital expenditure-debt payment 5520-319-2418 $ 2,783 17796-2264 $ 15,532 Microsoft has hefty amount of free cash flow as compared to Oracle. 16. Current Cash Debt Coverage Operating cash flow-dividend/average current liabilities 5520/8158.5 67.66% (17796-3837)/23098 60.43% Oracle has more cash available to meet its current liabilities as compared to Microsoft 17. Cash Debt Coverage Ratio Operating cash flow-dividend/total debt 5520/17653 31.27% (17796-3837)/32074 43.52% Microsoft has more cash to pay its all debts. 18. Price/Earnings Ratio Market price /EPS 16.37/0.83 19.723 22.23/1.44 15.44 times The PE ratio of Oracle is showing better than Microsoft Oracle is one of the leading company is software industry. It manufactures, develops and distributes various kinds of software. It was incorporated in 2005 as Delaware corporation. And successor of the operation which was begun in 1977. Its business may be divided into two major areas software and services. Microsoft was founded in 1975 with a mission to help people and business to use their potential at maximum level as possible. It develops, manufactures and provide software for many computing devices. It also develops operating system. One of the popular operating system of the company is Windows. Overall Conclusion Liquidity The Microsoft is showing a good current ratio than Oracle, it means that it has more current assets to pay its current liabilities. But in term of cash the Oracle has more cash available to pay its current liabilities, which is evident from better current cash debt coverage ratio of around 68% as compared to 60% of Microsoft. Solvency Both companies have financed around 51% of its total assets from debt financing and remaining from equity financing. The times interest earned ratio of Oracle suggests that it has enough support of operating income to pay off the interest to lender. However the cash debt coverage ratio of Microsoft is better than oracle which shows that it has more cash to pay its all debts. Profitability The earnings per share of Microsoft is far better than Oracle. It is due to good net income. However the gross profit margin of Oracle is on higher side, but due to better control over operating expenses the net profit margin of Microsoft was better than Oracle, which resulted in higher return on asset and return on equity for Microsoft.