Financial Ratios Analysis Of Microsoft Corporation

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Over the years, Microsoft Corporation has been developing and supporting numerous software products for various computing devices worldwide. As stated by Liquori (2011), “[This] enables business innovation and helps builds the company’s competitive advantage” (n.d). Microsoft’s technical innovations and leadership in consumer and corporate markets has made it a formidable competitor in this information age (liquor, 2011). Throughout this paper, I will provide financial ratios analysis of Microsoft Corporation based on the available financial data for the last five years. According to Brigham and Houston (2004) the liquidity ratio shows how a firm meet its short-term obligations using assets that could be converted into cash in a short period of time. These liquid assets are listed in the balance sheet as current assets. They are used to meet current liabilities. Now, the question is how much liquidity a firm must have? Well, this all depends on the role of the operating cycle. This is the time it takes to invest in firm’s products and services to the time when investment generates cash. The net operating cycle is the duration of time it takes to convert an investment of cash in inventory and back into cash. So, the number of days a firm holds its fund in inventory is calculated by the following formula: The inventory turnover ratio of the Microsoft Corporation for the last five years is shown in the table below. Inventory Turnover 2009 2010 2011 2012 2013 Number of day
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