Israel Garcia
Professor Neil Librock
Finance 3300
21 October 2014
Oracle Corporation Most widely known for their Java software, the #1 development platform, Oracle is the so called leader in database software. Their business expands, however, from software to hardware with products such as storage equipment, servers, operating systems, virtualization software, middleware, and many more. It was founded in 1977 and today it is headquartered in our very own Golden state in Redwood City. We look first at measures of financial leverage, which is important because debt can increase or decrease returns to shareholders. Financial leverage is usually measured by the ratio of long-term debt to total long-term capital. Oracles long-term debt ratio for 2014 is 33%, an increase from 29% in 2013. This number tells us that for every dollar in the form of long-term capital, 33 cents is in the form of debt. This measure, however, ignores Oracle’s short-term debt. To take short-term debt into account we measure its total debt ratio, in this case Oracle’s total debt ratio is 47%. Ultimately, these numbers tell us that Oracle is financed 47% with long-term and short-term debt and 53% with equity. We want equity here to be higher than debt since the less money the company borrows, the less interest it pays. Next, we take a look at Oracle’s liquidity ratios. Liquid assets can be converted into cash quickly, which is why it is important to measure to see how quickly a company can bring money together. The current ratio is simply the ratio of current assets to current liabilities. For Oracle, the current ratio is 3.35. This tells us that Oracle has $3.35 in current assets for every dollar in current liabilities. In order to account only for Oracle’s most liquid assets, we use the cash ratio which uses only cash and marketable securities. Oracle’s cash ratio is 1.23. One might