Financial Ratios Analysis Of Microsoft Corporation

Liquidity ratios measure the capability of a business to cover expenses and meet its current and long-term responsibility. These ratios are imperative in order to keep the business alive. Lending institutions are typically unwilling to loan money to a business that finds itself in a cash flow jam, because that is often a sign of poor management. The liquidity is measured with 3 different ratios; current ratio, turnover – of – cash ratio and debt- to equity ratio.

Liquidity is important for any firm as it is an assessment of the ability to pay its' liabilities in the short term. There are two main liquidity ratios: the current and the quick ratio. The current ratios divides the current assets by the current liabilities to assess how many times the current assets can pay the current liabilities (Elliott and Elliott, 2011). Traditional ratios are usually in the region of 1.5, but this may vary depending on the industry and nature of the business (Elliott and Elliott, 2011). The current ratio is shown in table 1.

Liquidity ratios "measure short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash" (Kimmel Weygandt, & Kieso, 2007, p. 74). The

Liquidity ratios measures a company`s ability to provide enough cash to cover its short-term obligations. The most common liquidity ratios include; the current ratio and the quick ratio.

Liquidity ratio lets us know whether the company is able to pay their short-term and long-term obligations. It measures how well the company can raise cash or convert assets into cash. Companies like to use this ratio to compare it against its competitors or industry average. Liquidity ratios include current ratio, quick ratio, and working capital.

Microsoft is in an industry that makes it more difficult to apply DuPont analysis averages to determine its financial health. Microsoft obviously operates

Each company must prepare financial statements to provide a comprehensive picture about its past performance and situation for the owners, the managers, the state and other stakeholders as well. In the case of enormous, international public limited companies like Ford and Microsoft these statements and data are public, so anybody can reach them through the internet. Moreover, we can also compute a lot of financial ratios based on these data. If we want to get an authentic frame about the firms, we have to know what these statement and ratios mean. In addition, it’s difficult for the companies that they want to give other picture about their financial status to

Liquidity ratios refer to the company's assets in comparison to their financial obligations and its ability to sustain sufficient capital for the near future. Overall, the higher the liquidity ratio is, the better. However, a company would not want a very high ratio since that would mean they are not using their resources to maximize their fullest potential.

Liquidity represents a company’s ability to pay its short-term obligations. In the following schedule is the calculation of the ratios that are indicators of the liquidity position of a company.

Liquidity ratios measure the short term ability of a company to pay its obligations and meet their needs for maintaining cash. According to Cagle, Campbell & Jones (2013), “A good assessment of a company’s liquidity is important because a decline in liquidity leads to a greater risk of bankruptcy” (p. 44). Creditors, investors and analysts alike are all interested in a company’s liquidity. After computing liquidity

Liquidity In analyzing liquidity of the company, the current ratio is not very telling of a falling company. The company increased its ratio throughout the period of the income statement thus building upon its company assets and allowing for a 6-1 ratio of assets over its liabilities. This implies the company is still able to operate sufficiently even though it did not make its optimum current ratio of about 8-1. However, when one takes the inventory out of the equation with the quick ratio, the numbers show the true strength of short term liquidity. The numbers are still good, and do not indicate failure – but are

This report is issued in order to inform the public about Microsoft Corporation. We analyzed the profitability and liquidity of this company. In addition, we were able to provide recommendations for investments or credits in Microsoft for the best interest of the public.

The liquidity ratios are a group of ratios that show the relationship of a firm’s cash and other current assets to its current liabilities. This basically means that the ratios measure how well the company is able to pay its short-term obligations and how well they can confront unexpected needs for cash.

We feel it important to compare Microsoft’s ratios not only to other companies and industry norms,

Microsoft became the global leader of software services and internet technologies for the computing industry in the early 90’s. It provides wide range of products & services and is involved in developing manufacturing, licensing and supporting software support. Microsoft’s software product includes operating system, business solution aps, computer and server applications as well as software development tools. Microsoft offers different range of services from its five