Does microsoft have preferred stock

Accounting Report And PowerPoint

Report Layout

1. Write a 2- to 3-page ( a full-page typically has at least 300 words) report, single-spaced, one-inch margins, 12-point font, with a double space between paragraphs.

2. Please keep your report to no more than 3 pages.

3. Page count does not include a title page, tables and exhibits, table of contents, and reference list.

4. Include a title page (include your name on the title page). Use headings in your reports such as Statement of Owners’ Equity and Statement of Cash Flows (topics from the textbook); other examples would be Balance Sheet and Income Statement.

5. Include a brief introduction of your company as well as a conclusion/summary at the end. The bulk of your report should cover the accounting topics in Weeks 1 and 2 (Owners’ Equity, Financial Ratios, and Statement of Cash Flows) as well as the Balance Sheet and Income Statement. ACCT 221 is not identical to ACCT 220. Discussions continue through week 5.

6. You will also be required to include the Income Statement, Balance Sheet, Statement of Owners’ Equity, and Statement of Cash Flows as attachments to your report. You can cut and paste directly from the SEC 10-K Report. These are considered attachments and are not part of the required page count for the report.

7. APA style is required for citations and a reference list. Include in-text citations. The reference list is the most important.

8. Your report should use one-inch margins on the left, right, top, and bottom of each page and font set at 12 points.

Below are the weeks 1, 2 and 3 with what was written on the topics and the feedback given.

Week 1: SEC 10-K: Request a Corporation

Microsoft; MSFT: NASDAQ

https://www.sec.gov/ix?doc=/Archives/edgar/data/789019/000156459020034944/msft-10k_20200630.htm

Microsoft is a leading developer of software that is used for the operating system of a windows-based computer as well as their office software. Microsoft was established in 1975 on April 4 by Bill Gates and Paul Allen (Reed, 2019). They started this company out of their garage and later moved the business to Bellevue, WA in 1979 where they created the MS-DOS operating system for IBM (Reed, 2019).

To this date, Microsoft still has a leading operating system of Windows and they have expanded their products. They have phones, tablets as well as another very successful product line for gaming. This is the Xbox gaming console and is a contender for top console against Sony and Nintendo (Reed, 2019). Microsoft is sitting at the 21st position on the fortune 500 list with $39 billion in profits.

References:

Reed, E. (2019, September 02). History of Microsoft: Timeline and facts. Retrieved February 17, 2021, from https://www.thestreet.com/technology/history-of-microsoft-15073246

Overall Feedback

Thanks for the info on Microsoft. You have of good background information for this company. One thing I would suggest is including some high-level financial facts, such as annual revenue and growth rates so the reader can get an idea of the success and size of the company. Also, I don't see where you provided the ranking of the company on the Fortune 500 (this was requirement #4). You may want to consider putting that in your intro as well.

Thanks for using in-text citations and reference list.

Thanks - got it. In the future, if you want to revise your posting after I have read it and commented, please do it as a reply to your original post rather than editing. If you edit, I don't get a notification of a new post and don't have a record of the original.

Thanks!

Week 2: SEC 10-K Income Statement

Stockholders’ Equity

Stockholders’ equity which also known as shareholders’ equity, is the number of assets a company has after removing the liabilities such as debts and taxes. A balance sheet is used to know the financial statement of a company by calculating the earnings, debts, and equity of stockholders. The shareholders’ equity can be used to know the financial status of a company. For instance, if the stockholders’ equity is negative, the company has more debts and can be at the edge of bankruptcy.

Microsoft Corporation has one of the profitable shares whose revenue has increased with time. It offers par value stock and has been making profits in the past few years. Due to covid-19, many things were digitalized, and this led to more profits for Microsoft. The company was offering both common and preferred stock some years back, but it does not offer preferred stocks anymore. People who have preferred stock get their dividends before those with common stock because the preferred stock has high priorities. The common stocks for Microsoft are sold at the Nasqad stock market (Shchurina & Mustafina, 2018). Microsoft also has treasury stocks which are stocks that a company keeps as its treasure to be used in the future. This type of stock can also be used during competition with other companies. Over the years, the stocks of Microsoft Corporation have increased attracting many shareholders.

Dividends

Dividends are the profits that the company decides to give the shareholders depending on their shares. Microsoft allows reinvestment of stocks and direct stock purchase. It also pays a quarterly dividend of 0.56 per share. Microsoft has raised its dividends in recent years, returning more money to shareholders. The company paid its first-ever dividend to common stockholders in 2003 and the return was in cash and share reinvestments. In 2010, the corporation agreed to raise $6 billion in debt to fund dividends and share repurchases (Foley et al., 2017). Microsoft paid the debt which meant the dividends rates would be higher and the shareholders were comfortable in investing in the company. However, Microsoft has faced challenges in the market due to the duplication of Software.

The company’s dividend has grown at a high rate over the years since it is stable. The company pays a quarter of its earnings as dividends and the earnings per share have grown by more than 10% in the past five years. This makes more shareholders invest in the company. Investors always look forward to companies whose shares are affordable, have grown, and are stable over the years and a company that can help them make profits through its dividends. While Microsoft does not have the highest dividend rates, it can still attract more investors due to its stability and growth in recent years.

References

Foley, F. C., Mayfield, S. E., & Boland, K. F. (2017). The Transformation of Microsoft. HBS Case No. 9-218, 48.

Microsoft. (2020). Form 10-k. Retrieved February 28, 2021, from https://www.sec.gov/ix?doc=%2FArchives%2Fedgar%2Fdata%2F789019%2F000156459020034944%2Fmsft-10k_20200630.htm

Shchurina, S. V., & Mustafina, E. F. (2018). Dividend Policy and Its Influence on the Cost of Capital. Journal of Reviews on Global Economics, 7, 790-796.

Income statement.docx

(23.38 KB)

Balance sheet.docx

(21.54 KB)

Feedback

WK2: SEC 10-K Income Statement 89.5 / 100 1.22 / 1.36 89.5 % Overall Feedback

Thank you for using topic headers. They will make your paper more organized and easier to follow.

Stockholders' Equity - In the first sentence, rather than indicating this is a "number" you should speak in terms of dollars, as the user my confuse this statement with quantities rather than dollar value. The comments about the balance sheet seem a bit out of place and are probably not necessary. The end of this paragraph should be explained in further detail (and rather than "know", perhaps use "analyze"). One brief example does not really explain the concept.

For your second paragraph, the first couple of sentences don't really serve to introduce the concepts discussed in this paragraph. I suggest leasing off with a discussion of the concepts of common and preferred stocks and par value, then follow with facts about the company and an analysis of the fact presented. For treasury stock, the definition should include the concept of a company repurchasing its own shares and the reasons why they would do that.

Dividends - you should explain the concept of "reinvesting" vs. receiving cash for shares. I am a bit confused by the last couple of sentences in this paragraph. How does Microsoft paying its debts result in higher dividends? Why were the shareholders more comfortable (and what is the source of this information?). The last sentence does not seem connected to the main topic of this paragraph. In your second paragraph - try to avoid speculations without supporting facts and using absolutes (like "always:) and state your sources of your information. For example, you say Microsoft does not have the highest dividends - what was this compared to and what is the source of this information?

When discussing dividends, it would be helpful to include a brief chart showing a history of the dividends over the past several years so that the reader can visualize the changes.

Week 3: Microsoft; MSFT: NASDAQ : Ratio Analysis

Lovie Chaffin posted Mar 6, 2021 9:13 AM Last edited: Wednesday, March 10, 2021 11:48 AM EST

This page automatically marks posts as read as you scroll.Adjust automatic marking as read setting

The current ratio represents a liquidity ratio which analyzes the capability of a company to pay its short-term debts using its assets. A good current ratio mainly ranges between 1.2 to 2 while a liquidity ratio below 1 means that a company cannot be able to cover for its short-term debts (Freshbooks,n.d). According to the analysis, the current ratio of Microsoft is 2.516 which is the same as the current ratio for 2019. However, this notion means that this company is a safer company to invest in as opposed to Apple which has a current ratio of 1.36, an improvement from 2019’s current ratio of 0.16.

Profit Margin

The profit margin on the other hand provides a vivid depiction of the probability of a business to generate revenue by dividing the income with the revenues. Microsoft exhibits a better profit margin as compared to the Apple Inc company mainly because its ration, 31% is better than Apples which has an exaggerated profit margin of 114%. However, this could be an indicator that Apple Inc is doing more investment activities which are to start generating activities after a while or the company has introduced a new product in the market that has given the company a niche over other competing companies.

Equity Ratio

The equity ratio is a financial metric that analyzes the amount of leverage or liabilities incurred by a company during the production process. A good equity ratio ranges between 1 to 1.5 although a ratio above 0.5 is normally considered not bad (CFI, n.d). Thus, Microsoft’s ratio could be considered as being risky to investors since a ratio of 0.4 is an indicator that the company mainly finances its activities from debts. However, this is not as risky as Apple’s mainly because the company has a ratio of 0.2. However, this is an improvement from last year’s ratio of 0.04 which indicates that the company’s risk is reducing.

Return on Assets

Return on assets acts as a measurement of the effectiveness of the company’s management in utilizing the available assets in the company to generate revenue. The general rule of thumb in regard to ROAs is that a percentage of above 5% is usually considered good (Hargrave, 2021). The Microsoft company exhibited an increase in its ROA from 14% in 2019 to 15% which is an indicator of increased efficiency in utilization of the company’s assets. However, this provision doesn’t match Apple’s ROA of 18% which indicates a more efficient management of the company’s assets than Microsoft.

Return on Stockholders equity

The ROSE measures the profitability of a company by dividing the stakeholder’s equity by the net income. Microsoft’s ROSE can be considered as being good since it has a ratio of 20% which can be compared to Apple’s 88% hence indicating that the Microsoft Company is more profitable that Apple.

References:

CFI. (n.d.). Equity ratio - Definition, how to calculate, importance. Corporate Finance Institute. https://corporatefinanceinstitute.com/resources/knowledge/finance/equity-ratio/

FreshBooks. (2020). What is a good liquidity ratio? https://www.freshbooks.com/hub/accounting/good-liquidity-ratio

Hargrave, M. (2021). How to use return on assets when analyzing a company. Investopedia. https://www.investopedia.com/terms/r/returnonassets.asp

MSFT_and_Apple_Income Statements.docx

(31.88 KB)

Feedback

Hi Lovie - please attach the balance sheet and income statements for both companies.

Hi Lovie - your Microsoft statement looks like it is cutoff. There are only 2 years showing and it should be 3.

Overall Feedback

Thank you for using topic headers (although the current ratio section looks like it is missing topic headers).

You may want to have an introductory section that explains ratio analysis as well as introduces the competitor company and why their performance is relevant to that of Microsoft’s.

When discussing ratios, it would be helpful to have a table upfront that shows the various ratios that will be discussed (for the years presented and by company). It is easier to comprehend when the two companies are presented side by side.

Current Ratio – good explanation of this ratio – although you may want to specify that it is the ability to pay current liabilities with current assets (not just assets). You indicate that a good ratio is between 1.2 to 2.0. What is your source for this information? A ratio below 1 is cause for concern, but it does not necessarily indicate that a company will be unable to pay their short term debts – it just indicates that they may not be able to pay them with current assets. It does look like Microsoft’s ratio did change slightly from 2019 (you are using 3 decimal places, so 2019 would be 2.529). I am not getting the same numbers for Apple. When I make the calculations, I am showing 1.364 for 2020 and 1.54 for 2019. The reasons for the decline should be researched, as well as the large differences between the 2 companies. Also, the results of one ratio is not enough to make a determination as to whether or not it is safe to invest in a company.

Profit margin – I am not quite following the explanation for this ratio. The profit margin does not determine or measure the ability to generate revenue. It measures how much of the companies revenue it retains after subtracting all of the expenses. Please explain what you mean by an “exaggerated” profit margin for Apple. Numbers on audited financial statements should not be considered exaggerated. It also does not appear that you have the correct calculations for April. For 2020 their net income was $57,411M and revenue was $274,515, which would yield a profit margin of 20.9%. You should research and explain the difference between the two companies. Your research should focus on profitability (investing activities and new products do not necessarily make a company more profitable).

Equity Ratio – Please explain financial terms such as “leverage” (assume your reader is does not have a financial background). This ratio is not related to the production process, it measures how much of a companies assets are funded by the shareholders’ (versus the creditors), so the number can never be greater than 1.0 (shareholders’ equity/total assets). Please check your 2019 calculations for Apple.

Return on Assets – Good explanation (except change revenue to net income or profit). What was the cause of the increase in Microsoft’s return? Why is Apple’s return higher? Also, I do not see where you have indicated Apple’s 2019 return.

Return on common stockholders’ equity – You indicate the calculation for this, but not what it is measuring. I don’t see where you are showing both years for either company. Also, I am calculating a much different number for Apple, which is higher than Microsoft, but not as high as 88%. Still, am not sure why you would indicate that 20% would indicate more profitability than 88%.

For all of your ratios, the analysis should include researching the year over year differences and the causes, as well as the reason for the difference between companies. Review the notes to the financial statements as well as the other narrative in the 10-K report will provide more insight.