Financial Accounting 504 Final Project Essay

As observe in Wikipedia prophesier is headquartered in Redwood, California. It was planted in 1977 and is the worlds third largest soft stand developer in sales. According to yokel Finance visionary is a multi-faceted ope dimensionn. Oracle provides a vast issue forth of services for the inter ut or so and computer. It provides cloud applications, IT consulting services, licenses middlew ar bundle which includes database and database management. It has 115,000 rich time employees and is run by co-founder, chief in ope symmetryn(p) officer Larry Ellison who has been the entirely CEO of the company since its inception. Also illustrious in Wikipedia he is the top salaried CEO in the world. In 2013 Oracle menstruati entirely has an operate hard currency flow of 13.72B with revenues of 37.15B which can be found in Yahoo Finance.Microsoft is a leading softw be company started by Bill Gates and capital of Minnesota Allen in 1975. The companys headquarters is fit(p) in Redmo nd, Washington where like Oracle it develops, licenses, manufactures and digest a wide range of computing sources, as documented in Wikipedia. Yahoo finance reports that in addition to licensing and manufacturing software everywhere the globe it overly designs hardware and has recently entered into the hardware industry with its new tablet. It also has a entertainment socio-economic class which is responsible for the manufacturing of Xbox360 gaming and consoles, Kinect for Xbox and video games among other products. It has a number of 94,000 full time employees and can be credited for creating 3 billionaires and 12 millionaires from the companys ope proportionns. Microsoft watercoursely has a specie flow of 73.79B with revenues of 76.01B for 2013. interpreting and Comparison between the two companies balances (Reading the Appendix of Chapter 13 will help you prepare the commentary) Oracle potty Microsoft CorporationEarnings per fateAs given over in the income statement$1.6 9Basic Common$2.73Microsoft has shown to collapse a higher(prenominal) EPS than Oracle. contemporary ratioCurrent assets Current liabilities$39,174 $14,192=2.76$74,918 $28,7742.60Oracle is showing more than neighborly new ratio than Microsoft. This ratio depicts for every horse of current liabilites it has the respective amount in current assets.Gross do good symmetryGross scratch shekels Sales Gross proceeds = meshing sales COGS Oracle 35,622 8,398 = 27,224 Microsoft 69,943 15,577 = 54,366$27,224 $35,622=76.4%$54,366 $69,94377.7%Microsofts Gross Profit Ratio is jolly dis taut than Oracle.Profit brim ratio remuneration Income clams Sales$8,547 $35,622=24.0%$23,150 $69,94333.1%Microsoft has a check Profit Margin Ratio than Oracle. archive TurnoverCost of Goods Sold comely caudex honest Inventory 2011 + 2010/2 Oracle 303 + 259/2 = 281 Microsoft 1,372 + 740/2 = 1056$8,398 $28129.9 times$15,577 $1,05614.8 timesOracle shows a significantly higher turnover than Micro soft.Days in Inventory365 days Inventory turnover365 29.9=12 days365 14.825 daysOracle has kick downstairs conduct than MicrosoftReceivable Turnover Ratio web credit sales norm Net Receivables Average Net Receivables 2011 +2010/2 Oracle 6628 + 5585/2 = 6107 Avg NR Microsoft14987 + 13014/2 = 14001 Avg N$35,622 $6,107=5.8$69,943 $14,0015.0Microsofts Receivable Turnover is faster than Oracle.Average Collection Period365 Receivable Turnover Ratio365 5.8=62.6 days365 5.073.1Oracle has a die result on the compendium period.Assets Turnover RatioNet Sales Average tote up Assets Average Total Assets = 2011+2010/2 Oracle 73535 + 61578/2 = 67557 Microsoft 108704 + 86113 = 97409$35,622 $67,557=0.53$69,943 $97,4090.72Microsoft shows a infract ratio.Return on Assets RatioNet Income Average Total Assets$8,547 $67,557=12.7%$23,150 $97,40923.8%Microsoft has a break down return on their assets.Debt to Total Assets RatioTotal Liabilities Total Assets$33,290 $73,535=45.3%$51,621 $108,70447.5%Mi crosoft is slightly higher so Oracle has a unwrap ratio.Times Interest Earned RatioNet Income + Int write down + Tax Expense Interest Expense$12,219 $808=15.128,366 29596.2Microsoft has a much healthier ratio than Oracle.Payout ratioCash dividend declared on mutual timeworn Net income$1,061 $8,547=12.4%$5,180 $23,15022.4%Microsoft has a higher rate of dividend pay outsReturn on Common Stockholders EquityNet income Preferred stock dividend Average common stockholders impartiality Oracle Avg SE 40245 + 31199/2 Microsoft Avg SE 57083 + 46175/28,547 35,722.00=23.9%$23,150 $51,62944.8%Microsoft earned more on the dollar of their net income for each dollar of the stockholders equity. shift property flowCash provided by operations minus capital expenditures minus cash dividends paid$9,703=$9,703$19,459$Microsoft has a considerable amount more bighearted cash 19,459 flow than OracleCurrent cash debt coverage ratioCash provided by operations Average current liabilities$11,214 $14,442 =0.78$26,994 $27,4610.98Microsoft has a better ratio of paying debt within the year.Cash debt coverage ratioCash provided by operations Average total liabilities$11,214 $31,835=0.35$26,994 $45,7800.59Microsoft has a better ratio. equipment casualty/Earnings ratioMarket price as of 06/30/2011 EPS as of 06/30/2011$34.22 $1.69=20$26.87 $2.7310Oracle fairs better than Microsoft with the investors projection of the strength of future lollyLiquidity Overall Oracle has shown to a better liquidity ratio than Microsoft. Some areas the two companies are relatively close in liquidity cognitive operation as depicted in the current ratio. In other areas Oracle proves to have much better performance than Microsoft as depicted in the muniment and days in inventory ratios however and current ratio. Oracle also has a faster arrangement period than Microsoft as reflected in the average collection period ratio. I would declare Oracle as having a better liquidity standing than Microsoft.Solvency Mic rosoft is well-made to Oracle in this ratio category. Although Microsoft has a micro more risk than Oracle in the debt to current assest ratio which means that if necessary Oracle has a better opportunity to convert assets in to cash with a 45.3% while Microsoft is at 47.5% however this is the only ratio that Oracle is more favorable than Microsoft. With Microsofts free cash flow of $19,459 billion versus Oracles $9,703, Microsoft is least likely to have the get hold of to liquidate their assets.Free cash flow ratio gives insight to a companys learning power, ability to eliminate or minimize debt and allows for a higher dividend payout. Microsoft has a better current cash debt to current liability ratio as well. For evey $1 in liability Microsoft as .98 cash from operating activities while Oracle has .78 from operating activities for every $1 of current liability. Given these analysis Microsoft has a better overall solvency status than Oracle.Profitability This category of ratio s is the more focused one by investorsbecause it gives the most holy prognosis of a companys most gain out of investmens from investors. Beginning with Gross Profit ratio the two companies are very close with Microsoft showing a 77.7% and Oracle showing a 76.4% they both fair pretty well in gross profits. Microsoft has an advantage over Oracle in all ratios in this category except for Price earning sharing ratio. The payout ratio and the return on common stockholders equity ratio are significantly higher than Oracles nevertheless Oracle has a higer price earnings per share ratio as stated earlier which signifies that investors intrust that Oracles stock is going to accession over a period of time.Conclusion Although ground on the ratios Oracle seems to be a safer enthronization and deemed by investors for the fiscal year of 2011 to have higher potential in the market and as noted by Eddie Beverage in an online article on Five Capital website Oracle has shown consistency over t he past decade than Microsoft with trending increases. However given that Microsoft has a substantially higher payout and higher return on stockholders equity I would feign the risk and go with Microsoft.Beverage, E. (2011, Oct 21). Microsoft V Oracle You make do you want one. Retrieved from Seeking Alpha. Oracle Corporation. (n.d.). Retrieved from Wikipedia http//en.wikipedia.org/wiki/Oracle_Corporation Weygandt, J., Kimmel, & Kleso, D. (2011). Financial Accounting. Hoboken nates Wiley & Sons, Inc. Yahoo Finance. (n.d.). Retrieved June 22, 2013, from Yahoo http//finance.yahoo.com/q?s=ORCL Yahoo Finance. (n.d.). Retrieved June 22, 2013, from Yahoo http//finance.yahoo.com/q?s=MSFT Wikipedia. (n.d.). Retrieved June 22, 2013, from Microsoft http//en.wikipedia.org/wiki/Microsoft Wikipedia Oracle Corporation. (n.d.). Retrieved June 22, 2013, from Wikipedia