Microsoft Financial Report
2012 Financial Analysis Report
Prepared for Microsoft Corporation
By
Yifei Fu
October 9, 2012
This report provides information about the operating results and performance of the Microsoft Corporation in the fiscal year of 2012. According to their financial statement, there are some concerns listed below that people should pay attention to:
1. Across the entire financial statement, there are some significant changes in income statement.
Compared with the 2011 fiscal year, 2012 net income decreased 26%, which reduced from $23,150 million to $16,978 million; goodwill impairment loss is $6,193 million and it started from the 2012 fiscal year. We can see the other accounts under income statement didn’t change that much at all. Also, one thing is that the impairment loss almost equals the decreased part of net income ($23,150-$16,978=$6193). Since the only big change is goodwill impairment loss, then our conclusion is that the goodwill impairment loss accounts for the decreased net income. 2. In order to measure performance and financial ability, three kinds of abilities should be addressed below: a. Profitability ratios, which measure a company’s performance in the current period, and gives us the company’s ability to generate income. Under profitability ratios, net profit margin, return on equity, earnings per share and quality of income all give us undesired outcomes. Compared with the 2011 fiscal year, all these ratios declined due to a big decrease in net income, because all these measures are tied up with net income. Net income is the direct cause of the undesired outcomes. In other words, the ability of generating income goes down in the 2012 fiscal year. b. Liquidity ratios are related to the company’s short-term survival; it refers to the company’s ability to use current assets to repay liabilities as they become due. Under liquidity ratios analysis, current ratio and quick ratio both give us steady outcomes; it’s a very smooth
Prepared for Microsoft Corporation
By
Yifei Fu
October 9, 2012
This report provides information about the operating results and performance of the Microsoft Corporation in the fiscal year of 2012. According to their financial statement, there are some concerns listed below that people should pay attention to:
1. Across the entire financial statement, there are some significant changes in income statement.
Compared with the 2011 fiscal year, 2012 net income decreased 26%, which reduced from $23,150 million to $16,978 million; goodwill impairment loss is $6,193 million and it started from the 2012 fiscal year. We can see the other accounts under income statement didn’t change that much at all. Also, one thing is that the impairment loss almost equals the decreased part of net income ($23,150-$16,978=$6193). Since the only big change is goodwill impairment loss, then our conclusion is that the goodwill impairment loss accounts for the decreased net income. 2. In order to measure performance and financial ability, three kinds of abilities should be addressed below: a. Profitability ratios, which measure a company’s performance in the current period, and gives us the company’s ability to generate income. Under profitability ratios, net profit margin, return on equity, earnings per share and quality of income all give us undesired outcomes. Compared with the 2011 fiscal year, all these ratios declined due to a big decrease in net income, because all these measures are tied up with net income. Net income is the direct cause of the undesired outcomes. In other words, the ability of generating income goes down in the 2012 fiscal year. b. Liquidity ratios are related to the company’s short-term survival; it refers to the company’s ability to use current assets to repay liabilities as they become due. Under liquidity ratios analysis, current ratio and quick ratio both give us steady outcomes; it’s a very smooth