Google and Microsoft:
Google, Inc. and Microsoft Corporation design and distribute consumer and enterprise software, including overlaps in search, business productivity, and mobile operating systems. Google’s primary source of revenue is from advertising, while Microsoft’s is from software subscription and support fees. The following year-end data (in millions) were taken from recent balance sheets for both companies:
Microsoft | ||||
Year 2 | Year 1 | Year 2 | Year 1 | |
Current assets | $114,246 | $101,466 | $72,886 | $80,685 |
Current liabilities | 45,625 | 37,417 | 15,908 | 16,805 |
A. Compute the
B. Which company has the larger working capital at the end of Year 2?
C. Is working capital a good measure of relative liquidity in comparing the two companies? Explain.
D. Compute the current ratio for both companies. (Round to one decimal place.)
E. Which company has the larger relative liquidity based on the current ratio?
F. Based on your analysis, comment on the short-term debt-paying ability of these two companies.
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Corporate Financial Accounting
- Microsoft Corporation (Microsoft) and Oracle Corporation (Oracle) engage in the design, manufacture, and sale of computer software. Microsoft sells and licenses a wide range of systems and application software to businesses, computer hardware manufacturers, and consumer retailers. Oracle sells software for information management almost exclusively to businesses. Exhibit 4.23 presents selected data for the two firms for three recent years. Exhibit 4.23 REQUIRED a. Calculate the accounts receivable turnover ratio for Microsoft and Oracle for Year 1, Year 2, and Year 3. b. Suggest possible reasons for the differences in the accounts receivable turnovers of Microsoft and Oracle during the three-year period. c. Suggest possible reasons for the changes in the accounts receivable turnover for the two firms over the three-year period.arrow_forwardContinuing Company Analysis-Amazon: Asset turnover ratio Amazon.com, Inc. is one of the largest Internet retailers in the world. Netflix, Inc. provides digital streaming and DVD rentals in the United States. Amazon and Netflix compete in streaming and digital services, however Amazon also sells many other products through the Internet. The sales and total assets (in millions) from recent financial statements were reported as follows for both companies: Amazon Netflix Total revenues (sales) 88,988 5,505 Total assets: Beginning of year 40,159 5,413 End of year 54,505 7,057 A. Based on your knowledge of each company, identify three major assets used by each company in generating revenue. B. Compute the asset turnover ratio for each company. (Round to two decimal places). C. Which company generates sales from total assets more efficiently?arrow_forwardContinuing Company AnalysisAmazon: Horizontal analysis Amazon.com, Inc. is the largest Internet retailer in the United States. Amazon's income statements through income from operations for two recent years follow: Amazon.com, Inc Operating Income Statements For the Years Ended December 31 (in millions) Year 2 Year 1 Product sales 70,080 60,903 Service sales 18,908 13,549 Total sales 88,988 574,452 Cost of sales 62,752 54,181 Fulfillment 10,766 8,585 Marketing 4,332 3,133 Technology and content 9,275 6,565 General and administrative 1,552 1,129 Other operating expense (income), net 133 114 Total operating expenses 88,810 73,707 Income from operations 178 745 A. Prepare a horizontal analysis of the operating income statements. (Round percentages to one decimal place.) B. Interpret the results of the horizontal analysis.arrow_forward
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