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Ratio Analysis for Microsoft Corp

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Submitted By liseagnant
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Individual research Project on Microsoft Corp. Lise Agnant 3144417

Microsoft Trend and Comparative Financial Analysis

Liquidity
Microsoft’s liquidity ratios depict that the company’s performance is aligned to meet its current obligations. The company has a Current Ratio of 2.50 which is on par with the industry average. This measure signifies that the company is operating at the same level as its competitors at maintaining short-term solvency. With regards to its Quick Ratio, Microsoft is currently showing a lower ratio than the industry average of 3.35. This lower ratio (2.45) is due to the increase in the company’s inventory during Q4. This increase can be attributed to the company anticipating a rise in sales for the Q1 and Q2 holiday season. Looking at Microsoft’s Q2 and Q3 quick ratio (3.17 and 3.22 respectively), it is evident that the company is performing at a level equivalent to its competitors in the industry.

Asset Utilization
Microsoft’s Asset Management Ratio’s predict that the company is not effectively and efficiently utilizing its assets. There is a large variance between the Fixed Asset Turnover ratio between Microsoft and the industry average. Microsoft Corp.'s inventory turnover deteriorated from Q2 2014 to Q3 2014 and from Q3 2014 to Q4 2014. The company is currently holding more in Fixed Assets than other competitors driving its ratio down to 3.12 (industry at 6.13). Holding a larger number of Fixed Assets can become detrimental to Microsoft because this will in turn drive its interest expenses up and decrease its annual profits. In addition, although not as large a variance, Microsoft’s Total Assets ratio is below that of the industry average. By reducing the amount of Fixed Assets that the

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