FINANCIAL REPORTING & MANAGEMENT ACCOUNTING Case Study

FINANCIAL REPORTING & MANAGEMENT ACCOUNTING - Case believe ExampleFrom there, they gained a contract from IBM and in 1985, they both partnered in the development of the OS/2 operating(a) system. That same year, her first retail version of Microsoft Windows came bulge and in 1986 they went public with an initial price of $21 per share, closing the day in $28. Today, Microsoft Corporation stands as the worldwide leader in software, services and varied ideas and solutions that helps not only businesses but broadens and makes knowledge easier. They have as their registered trademarks today, MS-DOS, .NET, office XP, 2007 office system, windows server, and windows versions like, 3.0, 95, 98, 2000, XP and Vista. As of revered 2007, the corporation had a total real estate portfolio of 24,166,129square feet (in 565 sites) of which 13,918,070 were leased (in 482 sites) and 10,248,059 were owned (in 83 sites).Microsoft had a high profit margin in 2003 which witnessed a sharp drop in 2004. This went up again in 2005 but after that period, it has been dropping yearly. However her return on assets which also dropped in 2004 is increasing from 2005 on a yearly basis. But, the increase on Microsofts return on equity after her drop from 2003/2004 is precise great. Her basic earning power too has improved greatly.The receivable turnover of Microsoft has been somewhat reducing which denotes the fact that she gives out more free ride to its customers. This turnover should increase and thus an increase in physical cash. This low-down receivable turnover is also realized when we take a proper face into the days sales outstanding. Its on the increase which is not good for the corporation. Inventory turnover too is dropping which is bad whereas both placed asset turnover and total asset turnover are slightly increasing. In all, Microsoft is not managing her assets right on and greater care must be placed on this issue.Exhibit A-2 addition Utilization ratiosAsset Management2 0032004200520062007Receivable Turnover6.196.255.544.754.51DSO58.9258.3665.8776.7980.95Inventory Turnover50.2987.4981.0329.9645.36FA Turnover1.561.691.802.152.22TFA Turnover0.400.400.560.640.81 runninessAny companys liquid state position is determined by comparing assets to liabilities current liquidity considers current assets and current liabilities only. The Quick Ratio is similar to Current except that it carves out inventories. Microsoft has a very bad liquidity situation when we look on the two tests and this denotes the fact that, they have a weaker position to handle short-term obligations.Exhibit A-3 Liquidity RatiosLiquidity20032004200520062007Current Ratio4.224.712.892.181.69Acid Test/ Quick ratio4.174.692.862.121.64Debt UtilizationHaving her debt ratio in concert with her times interest earned going up denotes the fact that this corporation is very risky as the years go by. But, as they carry more debt, they have a better coverage of debt as their EBITDA coverage reduces , thus their interest payments are well