Income statements and balance sheets follow for Microsoft Corporation. Refer to
ID: 2416560 • Letter: I
Question
Income statements and balance sheets follow for Microsoft Corporation. Refer to these financial statements to answer the requirements.
Microsoft Corporation
Income Statements
Year ended June 30,
(in millions)
2013
2012
Revenue
$77,849
$73,723
Cost of revenue
20,249
17,530
Gross profit
57,600
56,193
Research and development
10,411
9,811
Sales and marketing
15,276
13,857
General and administrative
5,149
4,569
Goodwill impairment
0
6,193
Total operating expenses
30,836
34,430
Operating income
26,764
21,763
Other income
288
504
Income before income taxes
27,052
22,267
Provision for income taxes
5,189
5,289
Net income
$21,863
$16,978
Microsoft Corporation
Balance Sheets
As of June 30,
($ millions)
2013
2012
Cash and cash equivalents
$ 3,804
$ 6,938
Short-term investments
73,218
56,102
Accounts receivable, net
17,486
15,780
Inventories
1,938
1,137
Deferred income taxes
1,632
2,035
Other current assets
3,388
3,092
Total current assets
101,466
85,084
Property plant and equipment, net
9,991
8,269
Equity and other investments
10,844
9,776
Goodwill
14,655
13,452
Intangible assets, net
3,083
3,170
Other long-term assets
2,392
1,520
Total assets
$142,431
$121,271
Microsoft Corporation
Balance Sheets (continued)
As of June 30,
($ millions)
2013
2012
Accounts payable
$ 4,828
$ 4,175
Short-term debt
2,999
1,231
Accrued compensation
4,117
3,875
Income taxes
592
789
Short-term unearned revenue
20,639
18,653
Securities lending payable
645
814
Other
3,597
3,151
Current liabilities
37,417
32,688
Long-term debt
12,601
10,713
Long-term unearned revenue
1,760
1,406
Deferred income taxes
1,709
1,893
Other long-term liabilities
10,000
8,208
Total liabilities
63,487
54,908
Common stock and paid-in capital
67,306
65,797
Retained earnings/(deficit)
9,895
(856)
Accumulated other comprehensive income
1,743
1,422
Total equity
78,944
66,363
Total liabilities and equity
$142,431
$ 121,271
Required:
Compute net operating profit after tax (NOPAT) for 2013 and 2012. Assume that combined federal and state statutory tax rates are 37% for both years.
Compute net operating assets (NOA) for 2013 and 2012. Assume Equity and other investments are operating assets.
Compute return on net operating assets (RNOA) for 2013 and 2012. Net operating assets are $17,440 million in 2011.
Compute return on equity (ROE) for 2013 and 2012. (Stockholders’ equity in 2011 is $57,083 million.)
What is nonoperating return component of ROE for 2013 and 2012?
Comment on the difference between ROE and RNOA. What inference do you draw from this comparison?
Microsoft Corporation
Income Statements
Year ended June 30,
(in millions)
2013
2012
Revenue
$77,849
$73,723
Cost of revenue
20,249
17,530
Gross profit
57,600
56,193
Research and development
10,411
9,811
Sales and marketing
15,276
13,857
General and administrative
5,149
4,569
Goodwill impairment
0
6,193
Total operating expenses
30,836
34,430
Operating income
26,764
21,763
Other income
288
504
Income before income taxes
27,052
22,267
Provision for income taxes
5,189
5,289
Net income
$21,863
$16,978
Explanation / Answer
1
Calculation of net operating profit after tax (NOPAT):
Year ended June 30,
(in millions)
2,013
2,012
Operating income before tax
$ 26,764.00
$ 21,763.00
Less : Tax @ 37%
$ (9,902.68)
$ (8,052.31)
Net operating profit after tax (NOPAT)
$ 16,861.32
$ 13,710.69
1
Calculation of net operating profit after tax (NOPAT):
Year ended June 30,
(in millions)
2,013
2,012
Operating income before tax
$ 26,764.00
$ 21,763.00
Less : Tax @ 37%
$ (9,902.68)
$ (8,052.31)
Net operating profit after tax (NOPAT)
$ 16,861.32
$ 13,710.69