Financial statement analysis and common stock valuation

Enterprise Value (EV)

Enterprise value is total company value (the market value of common equity, debt, and preferred equity) minus the value of cash and short-term investments.

• Current EV
• Historical EV

Enterprise Value to EBITDA (EV/EBITDA)

To calculate EBITDA analysts start with net earnings. To that earnings number, interest, taxes, depreciation, and amortization are added. EBITDA as a pre-interest number is a flow to all providers of capital.

• Earnings before Interest, Tax, Depreciation and Amortization (EBITDA)
• EV to EBITDA Ratio, Current
• EV to EBITDA Ratio, Historical

Income Statement

The income statement (statement of earnings) reports on the performance of Microsoft Corp., the result of its operating activities.

Cash Flow Statement

The cash flow statement provides information about Microsoft Corp. cash receipts and cash payments during an accounting period, showing how these cash flows link the ending cash balance to the beginning balance shown on Microsoft Corp. balance sheet.

Statement of Comprehensive Income

Comprehensive income is the change in equity (net assets) of Microsoft Corp. during a period from transactions and other events and circumstances from non-owners sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.

Balance Sheet: Assets

The assets reports major classes and amounts of resources owned or controlled by Microsoft Corp..

Analysis of Reportable Segments

Microsoft Corp. operates in 3 segments: Productivity and Business Processes; Intelligent Cloud; and More Personal Computing.

• Segment Profit Margin
• Revenue
• Operating income

Dividend Discount Model (DDM)

The dividend discount model (DDM) is a technique for estimating the value of a share of Microsoft Corp. common stock issue as the present value of all future dividends.

• Intrinsic Stock Value (Valuation Summary)
• Required Rate of Return (r)
• Dividend Growth Rate (g)

Common-Size Balance Sheet: Assets
Quarterly Data

Assets components shown as percentage of total assets.

Analysis of Short-term (Operating) Activity Ratios
Quarterly Data

Evaluates revenues and output generated by the Microsoft Corp. assets. Operating performance ratios describe the relationship between the Microsoft Corp. level of operations and the assets needed to sustain operating activities.

• Short-term Activity Ratios (Summary)
• Inventory Turnover
• Receivables Turnover
• Payables Turnover
• Working Capital Turnover
• Average Inventory Processing Period
• Average Receivable Collection Period
• Operating Cycle
• Average Payables Payment Period
• Cash Conversion Cycle

Analysis of Solvency Ratios

Examines Microsoft Corp. capital structure in terms of the mix of its financing sources and the ability of the firm to satisfy its longer-term debt and investment obligations.

• Solvency Ratios (Summary)
• Debt to Equity
• Debt to Equity (including Operating Lease Liability)
• Debt to Capital
• Debt to Capital (including Operating Lease Liability)
• Debt to Assets
• Debt to Assets (including Operating Lease Liability)
• Financial Leverage
• Interest Coverage
• Fixed Charge Coverage

Analysis of Short-term (Operating) Activity Ratios

Evaluates revenues and output generated by the Microsoft Corp. assets. Operating performance ratios describe the relationship between the Microsoft Corp. level of operations and the assets needed to sustain operating activities.

• Short-term Activity Ratios (Summary)
• Inventory Turnover
• Receivables Turnover
• Payables Turnover
• Working Capital Turnover
• Average Inventory Processing Period
• Average Receivable Collection Period
• Operating Cycle
• Average Payables Payment Period
• Cash Conversion Cycle