Use this Excel spreadsheet to compute ratios; show your computations for all ratios on this tab and also include your commentary.
The financial statements used to calculate these ratios are available in Appendix A and Appendix B of your textbook. Oracle Microsoft Interpretation and Comparison between the two companies' ratios (Reading the Appendix of Chapter 13 will help you) Earnings per share As given in the income statement $1.69 Basic Common $2.73 "Comparing these numbers is not meaningful since the number of shares outstanding differs.
Working capital Current assets minus current liabilities $24,982 $24,982 $46,144 $46,144 Microsoft has a little more than $20 mil. advantage over Oracle in working capital
Current ratio Current assets $39,174 = 2.76 $74,918 = 2.60 Oracle has $2.76 in current assets for every $1 dollar in current liabilities while Microsoft only has $2.60 in current assets per $1 in current liabilities. Oracle does not have too much more liquidity based on this ratio. Current liabilities $14,192 $28,774
Gross Profit Ratio Gross profit $27,224 = 76.4% $54,366 = 77.7% Only product sales was used for the gross profit rate calculation. This ratio indicates that Microsoft has a 1.3% advantage in gross profit margin. Net Sales $35,622 $69,943
Profit margin ratio Net Income $8,547 = 24.0% $23,150 = 33.1% Total revenue was used for the base's of Oracle's and Microsoft's profit margin calculation .Microsoft earns almost 33 cents for every $1 dollar in sales whereas Oracle earns over 24cents so the advantage goes to Microsoft for this profitabiility ratio. Net Sales $35,622 $69,943
Inventory Turnover Cost of Goods Sold $8,398 29.9 $15,577 14.8 Oracle doubles in liquidity