Acct 504 Week Course Project

Acct 504

8-Jun-14

2011 Ratio Comparasions

Oracle is the world’s top enterprise databases. Databases are critical tools in the implementation of cloud computing environments, helping ensure that enterprise information is always available and secure. Oracle employs more than 100,000 employees worldwide.

Microsoft is one of the leading software companies used today. Microsoft was founded in 1975, Microsoft produces software products for both home and business use. Microsoft has more than 95, 000 employees worldwide.

Oracle

Microsoft

Earnings per share

As given in the income statement

$1.69

Basic Common

$2.73

Current ratio

Current assets

$39,174

=

2.76

$74,918

=

2.60

Current liabilities

$14,192

$28,774

Gross Profit Ratio

Gross profit

$35,622

=

154.8%

$28,071

=

40.1%

Net Sales

$23,011

$69,943

Profit margin ratio

Net Income

$8,547

=

37.1%

$23,150

=

33.1%

Net Sales

$23,011

$69,943

Inventory Turnover

Cost of Goods Sold

$23,589

83.9

$15,577

14.8

Average Inventory

$281

times

$1,056

times

Days in Inventory

365 days

365

=

4

365

=

25

Inventory turnover

83.9

days

14.8

days

Receivable Turnover Ratio

Net credit sales

$16,383

=

2.7

$42,949

=

2.6

Average Net Receivables

$6,107

$16,326

Average Collection Period

365

365

=

136.0

365

=

138.7

Receivable Turnover Ratio

2.7

days

2.6

Assets Turnover Ratio

Net Sales

$23,011

=

0.34

$23,150

=

0.24

Average Total Assets

$67,557

$97,409

Return on Assets Ratio

Net Income

$8,547

=

12.7%

$435,994

=

11.9%

Average Total Assets

$67,557

$3,654,875

Debt to Total Assets Ratio

Total Liabilities

$14,192

=

36.2%

$51,621

=

47.5%

Total Assets

$39,174

$108,704

Times Interest Earned Ratio

Net Income + Int Expense + Tax Expense

$12,019

=

14.9

25,450

=

96.4

Interest Expense

$808

264

Payout ratio

Cash dividend declared on common stock

$17,825

=

208.6%

$1

=

0.0%

Net income

$8,547

$23,150

Return on Common

Net income - Preferred stock dividend

8,547

=

24.2%

$17,756

=

34.4%

Stockholders' Equity

Average common stockholders' equity

35,287.00

$51,629

Free cash flow

Cash from oper - cap ex - cash dividends paid

$10,764

=

$36,625

$19,459

$676,022

=

Current cash debt

Cash provided by operations

$11,214

=

0.78

$26,994

=

0.98

coverage ratio

Average current liabilities

$14,442

$27,461

Cash debt coverage ratio

Cash provided by operations

$11,214

=

0.35

$26,994

=

0.59

Average total liabilities

$31,835

$45,780

Price/Earnings ratio

Market price as 2011

$32.91

=

19

$26.00

=

10

EPS as of 2011

$1.69

$2.73

Liquidity: Microsoft and Oracle both are collecting at approximately the same rate, however Microsoft collects at a slighly faster rate. Microsoft and Oracle both are taking over 90 days to collect on accounts receivables. This may rasie a red flag from some investors, as they are concerned with the slow rate of turn over with credit accounts.

Solvency: Microsoft is sporting the better debt to asset ration, if creditors chose to collect on debts owed Microsoft would still boast assets to continuing operating. Microsoft also has more free cash flow at hand, another sign of stability and security in the market.

Profitability: Oracle has the advantage in the area of profitability according to the profit margin ratio and gross profit, but has before mentioned Microsoft has less debt to asset and more free cash flow at their disposal.

Conclusion: Despite the Oracle having the better profit margin ratio, Microsoft would be the better investment, as they have less debt to assets and more free cash flow. Microsoft also collects faster on debts owed, and gives a bigger return on investments.

The Appendixes of your textbook and any information you use to profile the companies should be cited as a reference below.

Microsoft(2011) Retreived June 6, 2014 http://www.microsoft.com/investor/SEC/default.aspx?year=2011&filing=annual

Oracle(2011) Retreived June 6, 2014 http://www.oracle.com/us/corporate/investor-relations/sec/index.html