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Acct 504 Final Project Essay

1504 words - 7 pages

Financial Accounting 504 23-Jun-13 Professor Chung Oracle v Microsoft Final Course Project

As noted in Wikipedia Oracle is headquartered in Redwood, California. It was founded in 1977 and is the world's third largest soft wear developer in sales. According to Yahoo Finance Oracle is a multi-faceted operation. Oracle provides a vast amount of services for the internet and computer. It provides cloud applications, IT consulting services, licenses middleware software which includes database and database management. It has 115,000 full time employees and is run by co-founder, CEO Larry Ellison who has been the only CEO of the company since it's inception. Also noted in Wikipedia he is the ...view middle of the document...

69

Basic Common

$2.73

Microsoft has shown to have a higher EPS than Oracle.

Current ratio

Current assets Current liabilities

$39,174 $14,192

=

2.76

$74,918 $28,774

2.60

Oracle is showing more favorable current ratio than Microsoft. This ratio depicts for every dollar of current liabilites it has the respective amount in current assets.

Gross Profit Ratio

Gross profit Net Sales Gross Profit = net sales - COGS Oracle: 35,622 - 8,398 = 27,224 Microsoft: 69,943 15,577 = 54,366

$27,224 $35,622

=

76.4%

$54,366 $69,943

77.7%

Microsoft's Gross Profit Ratio is slightly better than Oracle.

Profit margin ratio

Net Income Net Sales

$8,547 $35,622

=

24.0%

$23,150 $69,943

33.1%

Microsoft has a better Profit Margin Ratio than Oracle.

Inventory Turnover

Cost of Goods Sold Average Inventory Average Inventory: 2011 + 2010/2 Oracle: 303 + 259/2 = 281 Microsoft: 1,372 + 740/2 = 1056

$8,398 $281

29.9 times

$15,577 $1,056

14.8 times

Oracle shows a significantly higher turnover than Microsoft.

Days in Inventory

365 days Inventory turnover

365 29.9

=

12 days

365 14.8

25 days

Oracle has better result than Microsoft

Receivable Turnover Ratio

Net credit sales Average Net Receivables Average Net Receivables: 2011 +2010/2 Oracle: 6628 + 5585/2 = 6107 Avg NR Microsoft:14987 + 13014/2 = 14001 Avg N

$35,622 $6,107

=

5.8

$69,943 $14,001

5.0

Microsofts Receivable Turnover is faster than Oracle.

Average Collection Period

365 Receivable Turnover Ratio

365 5.8

=

62.6 days

365 5.0

73.1

Oracle has a better result on the collection period.

Assets Turnover Ratio

Net Sales Average Total Assets Average Total Assets = 2011+2010/2 Oracle: 73535 + 61578/2 = 67557 Microsoft: 108704 + 86113 = 97409

$35,622 $67,557

=

0.53

$69,943 $97,409

0.72

Microsoft shows a better ratio.

Return on Assets Ratio

Net Income Average Total Assets

$8,547 $67,557

=

12.7%

$23,150 $97,409

23.8%

Microsoft has a better return on their assets.

Debt to Total Assets Ratio

Total Liabilities Total Assets

$33,290 $73,535

=

45.3%

$51,621 $108,704

47.5%

Microsoft is slightly higher so Oracle has a better ratio.

Times Interest Earned Ratio

Net Income + Int Expense + Tax Expense Interest Expense

$12,219 $808

=

15.1

28,366 295

96.2

Microsoft has a much healthier ratio than Oracle.

Payout ratio

Cash dividend declared on common stock Net income

$1,061 $8,547

=

12.4%

$5,180 $23,150

22.4%

Microsoft has a higher rate of dividend pay outs

Return on Common Stockholders' Equity

Net income - Preferred stock dividend Average common stockholders' equity Oracle Avg SE: 40245 + 31199/2 Microsoft Avg SE: 57083 + 46175/2

8,547 35,722.00

=

23.9%

$23,150 $51,629

44.8%

Microsoft earned more on the dollar of their net income for each...

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