Financial statement analysis and common stock valuation

Analysis of Liquidity Ratios

Measures the adequacy of Microsoft Corp. cash resources to meet its near-term cash obligations.

• Liquidity Ratios (Summary)
• Current Ratio
• Quick Ratio
• Cash Ratio

DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
Quarterly Data

An approach to decomposing Microsoft Corp. return on equity, return on assets, and net profit margin ratio as the product of other financial ratios.

• Two-Component Disaggregation of ROE
• Three-Component Disaggregation of ROE
• Two-Component Disaggregation of ROA

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

Common-Size Income Statement
Quarterly Data

Income statement components (revenues and expenses) shown as percentage of total sales.

Aggregate Accruals

Financial reporting quality relates to the accuracy with which Microsoft Corp. reported financial statements reflect its operating performance and to their usefulness for forecasting future cash flows.
Aggregate accruals deriving measures of the accrual component of Microsoft Corp. earnings.

• Balance-Sheet-Based Accruals Ratio
• Cash-Flow-Statement-Based Accruals Ratio

Balance Sheet: Liabilities and Stockholders’ Equity
Quarterly Data

The liabilities and stockholders’ equity reports major classes and amounts of external claims on assets and owners’ capital contributions, and other internally generated sources of capital.

Balance Sheet: Assets

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

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

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

DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin

An approach to decomposing Microsoft Corp. return on equity, return on assets, and net profit margin ratio as the product of other financial ratios.

• Two-Component Disaggregation of ROE
• Three-Component Disaggregation of ROE
• Five-Component Disaggregation of ROE
• Two-Component Disaggregation of ROA
• Four-Component Disaggregation of ROA
• Disaggregation of Net Profit Margin

Analysis of Long-term (Investment) Activity Ratios
Quarterly Data

Measures how efficiently Microsoft Corp. generates revenues from its investments in fixed or total assets.

• Long-term Activity Ratios (Summary)
• Net Fixed Asset Turnover
• Total Asset Turnover
• Equity Turnover

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