Strategic Management

Financial Plan 1

Financial Plan 2

Financial Plan

Floyd Cooper III

MGT-660

09-17-2014

Microsoft Inc. financial plan

Overview

With the headquarters in Redmond Washington, Microsoft is a multinational company that manufactures, develops, supports licenses and sells computer software, personal computer, consumer electronics and services.

Mission

The organization mission and values is to aid people and businesses through the world recognize their full potential. We exist to maintain and attract customers.  When we observe this maxim, the rest will fall into the right place (Wallace et al, 1993). Our services will surpass our customers’ expectations.

The objectives

The Microsoft objectives for the projected three operational years is to develop a reliable financial management system that produces value for their customers, to increase the revenue by five percent each year and to cut down on the recurrent business expenditure. 

Sources of finance

For the purpose of investment, Microsoft operation will be financed by various sources. The major source of investment finance is loan from banks. This will contribute about 60 percent of cash required. The friends and family will contribute about30 percent and the remaining 10 percent will come from SSBA.

Marketing strategy

The financial information will enable the business develop investor confidence (Keown et al, 2011). The trust between the company and the investor is essential for generating the sufficient cash required to sustain the business strategic investment. The company is strategizing on becoming the technology market leader as evidenced by the recent launch of Windows 8. The investor’s cash injected to support this strategic investment decision is projected to be recovered fully in the 3 years of operation.

Financial performance ratio

To measure the financial performance, the company will apply a number of ratios. Liquidity Ratios will be applied to measure the company’s ability to meet its short-term growing financial obligation as and when they fall due (Brigham et al, 2012). These ratios include the quick ratio, current ratio, net working capital ratio and cash ratio. Turnover ratio will be applied to measure the efficiency with which the company will utilize the asset or the fund it has to generate turnover.an example of such ratios is the inventory turnover ratio and the account receivable turnover ratio.

PRO- FORMA INCOME STATEMENT
Microsoft Inc.3 year Pro-forma income statement
From 2014 through 2016
Year	2014	2015	2016
	$	$	$
Revenues	62482	68960	72560
Operating expenses
cost of revenue	12395	12750	12840
fixed cost	20714	20888	20943
Sales and marketing	13340	13340	13589
General and administrative	2014	4070	4100
Goodwill impaired	400	0	0
Total operating expenses	48863	51048	51472
Operating income	13619	17912	21088
Provision for income taxes	3234.513	4254.1	5008.4
Net income	10384.49	13657.9	16079.6
BREAK-EVEN POINT ANALYSIS
Break-even point = (fixed cost/contribution) for the three years
Where; contribution = selling price per unit-variable expenses (in our case = average revenues -3 year average costs)
average fixed cost =	20848.33
average contribution =	133.74
BEP = $	155.8871

References

Brigham, E., & Daves, P. (2012). Intermediate financial management. Cengage Learning.

Keown, A. J., Martin, J. D., Petty, J. W., & Scott, D. F. (2011). Financial management: Principles and applications. Prentice Hall.

Wallace, J., & Erickson, J. (1993). Hard drive: Bill Gates and the making of the Microsoft empire. Harper Business.