Microsoft Excel LibreOffice Calc

salesforce.com inc. (CRM)

Analysis of Investments

Difficulty: Advanced

Investment Accounting Policy

Salesforce considers all of its marketable debt securities as available for use in current operations, including those with maturity dates beyond one year, and therefore classifies these securities within current assets on the consolidated balance sheets. Securities are classified as available for sale and are carried at fair value, with the change in unrealized gains and losses, net of tax, reported as a separate component on the consolidated statements of comprehensive income until realized. Fair value is determined based on quoted market rates when observable or utilizing data points that are observable, such as quoted prices, interest rates and yield curves. Declines in fair value judged to be other-than-temporary on securities available for sale are included as a reduction to investment income. To determine whether a decline in value is other-than-temporary, Salesforce evaluates, among other factors: the duration and extent to which the fair value has been less than the carrying value and its intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value. For the purposes of computing realized and unrealized gains and losses, the cost of securities sold is based on the specific-identification method. Interest on securities classified as available for sale is included as a component of investment income.

Source: 10-K (filing date: 2019-03-08).

Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities

salesforce.com inc., adjustment to Net Income (loss)

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Jan 31, 2019 Jan 31, 2018 Jan 31, 2017 Jan 31, 2016 Jan 31, 2015 Jan 31, 2014
Net income (loss) (as reported) 1,110  127  180  (47) (263) (232)
Add: Unrealized gains (losses) on marketable securities and strategic investments (12) (4) 15  (9) 1  8 
Net income (loss) (adjusted) 1,098  123  194  (57) (261) (224)

Based on: 10-K (filing date: 2019-03-08), 10-K (filing date: 2018-03-09), 10-K (filing date: 2017-03-06), 10-K (filing date: 2016-03-07), 10-K (filing date: 2015-03-06), 10-K (filing date: 2014-03-05).

Adjusted Ratios: Mark to Market Available-for-sale Securities (Summary)

salesforce.com inc., adjusted ratios

Microsoft Excel LibreOffice Calc
Jan 31, 2019 Jan 31, 2018 Jan 31, 2017 Jan 31, 2016 Jan 31, 2015 Jan 31, 2014
Net Profit Margin
Reported net profit margin 8.36% 1.22% 2.14% -0.71% -4.89% -5.70%
Adjusted net profit margin 8.27% 1.17% 2.31% -0.85% -4.86% -5.50%
Return on Equity (ROE)
Reported ROE 7.11% 1.36% 2.40% -0.95% -6.61% -7.64%
Adjusted ROE 7.04% 1.31% 2.59% -1.13% -6.57% -7.37%
Return on Assets (ROA)
Reported ROA 3.61% 0.61% 1.02% -0.37% -2.46% -2.54%
Adjusted ROA 3.57% 0.59% 1.10% -0.44% -2.44% -2.45%

Based on: 10-K (filing date: 2019-03-08), 10-K (filing date: 2018-03-09), 10-K (filing date: 2017-03-06), 10-K (filing date: 2016-03-07), 10-K (filing date: 2015-03-06), 10-K (filing date: 2014-03-05).

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. salesforce.com inc.’s adjusted net profit margin deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by shareholders’ equity. salesforce.com inc.’s adjusted ROE deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by total assets. salesforce.com inc.’s adjusted ROA deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.

salesforce.com inc., Ratios: Reported vs. Adjusted

Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Jan 31, 2019 Jan 31, 2018 Jan 31, 2017 Jan 31, 2016 Jan 31, 2015 Jan 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Net income (loss) 1,110  127  180  (47) (263) (232)
Revenues 13,282  10,480  8,392  6,667  5,374  4,071 
Ratio
Net profit margin1 8.36% 1.22% 2.14% -0.71% -4.89% -5.70%
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (USD $ in millions)
Adjusted net income (loss) 1,098  123  194  (57) (261) (224)
Revenues 13,282  10,480  8,392  6,667  5,374  4,071 
Ratio
Adjusted net profit margin2 8.27% 1.17% 2.31% -0.85% -4.86% -5.50%

Based on: 10-K (filing date: 2019-03-08), 10-K (filing date: 2018-03-09), 10-K (filing date: 2017-03-06), 10-K (filing date: 2016-03-07), 10-K (filing date: 2015-03-06), 10-K (filing date: 2014-03-05).

2019 Calculations

1 Net profit margin = 100 × Net income (loss) ÷ Revenues
= 100 × 1,110 ÷ 13,282 = 8.36%

2 Adjusted net profit margin = 100 × Adjusted net income (loss) ÷ Revenues
= 100 × 1,098 ÷ 13,282 = 8.27%

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. salesforce.com inc.’s adjusted net profit margin deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Jan 31, 2019 Jan 31, 2018 Jan 31, 2017 Jan 31, 2016 Jan 31, 2015 Jan 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Net income (loss) 1,110  127  180  (47) (263) (232)
Stockholders’ equity 15,605  9,388  7,500  5,003  3,975  3,039 
Ratio
ROE1 7.11% 1.36% 2.40% -0.95% -6.61% -7.64%
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (USD $ in millions)
Adjusted net income (loss) 1,098  123  194  (57) (261) (224)
Stockholders’ equity 15,605  9,388  7,500  5,003  3,975  3,039 
Ratio
Adjusted ROE2 7.04% 1.31% 2.59% -1.13% -6.57% -7.37%

Based on: 10-K (filing date: 2019-03-08), 10-K (filing date: 2018-03-09), 10-K (filing date: 2017-03-06), 10-K (filing date: 2016-03-07), 10-K (filing date: 2015-03-06), 10-K (filing date: 2014-03-05).

2019 Calculations

1 ROE = 100 × Net income (loss) ÷ Stockholders’ equity
= 100 × 1,110 ÷ 15,605 = 7.11%

2 Adjusted ROE = 100 × Adjusted net income (loss) ÷ Stockholders’ equity
= 100 × 1,098 ÷ 15,605 = 7.04%

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by shareholders’ equity. salesforce.com inc.’s adjusted ROE deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Jan 31, 2019 Jan 31, 2018 Jan 31, 2017 Jan 31, 2016 Jan 31, 2015 Jan 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Net income (loss) 1,110  127  180  (47) (263) (232)
Total assets 30,737  21,010  17,585  12,771  10,693  9,153 
Ratio
ROA1 3.61% 0.61% 1.02% -0.37% -2.46% -2.54%
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (USD $ in millions)
Adjusted net income (loss) 1,098  123  194  (57) (261) (224)
Total assets 30,737  21,010  17,585  12,771  10,693  9,153 
Ratio
Adjusted ROA2 3.57% 0.59% 1.10% -0.44% -2.44% -2.45%

Based on: 10-K (filing date: 2019-03-08), 10-K (filing date: 2018-03-09), 10-K (filing date: 2017-03-06), 10-K (filing date: 2016-03-07), 10-K (filing date: 2015-03-06), 10-K (filing date: 2014-03-05).

2019 Calculations

1 ROA = 100 × Net income (loss) ÷ Total assets
= 100 × 1,110 ÷ 30,737 = 3.61%

2 Adjusted ROA = 100 × Adjusted net income (loss) ÷ Total assets
= 100 × 1,098 ÷ 30,737 = 3.57%

Ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by total assets. salesforce.com inc.’s adjusted ROA deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.