Microsoft annual report

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Write a research paper on the following:
Select a publicly-traded company that is traded on U.S. exchange. Locate the annual report for at least the last three fiscal years. (I’ve picked Microsoft)
Analyze the financial statements for the company and review for large movements in specific accounts from one year to the next. In addition, review the
notes to the financial statements as these are an integral part of the financial reporting package. Evaluate the balance sheet to determine if there are large
changes in the company’s assets, liabilities, or equity accounts. In addition, analyze the income statement and statement of cash flows.
At a minimum, calculate the following ratios for two years, the debt-to-equity ratio, current ratio, quick ratio, return on equity, and net profit margin. For each
ratio, explain what the ratio tells you about the company.
The research paper must have a minimum of 2-3 pages (excluding the title and reference page) and be formatted in APA 7th edition.

 

 

 

Sample Solution

Microsoft is a publicly traded company that is traded on the U.S. exchange and has been consistently reporting financial performance since 1999 (Microsoft, 2020). In this analysis of Microsoft’s annual reports from the last three fiscal years (2017 through 2019), one can observe large movements in specific accounts.

The most significant movement was observed in the “Income Taxes” account, which increased by $24 billion between 2017 and 2018 due to a $39 billion charge related to the Tax Cuts and Jobs Act of 2017 (Microsoft, 2018). This decrease was partially offset by income tax benefits associated with stock-based awards; however, total income taxes still decreased significantly from year to year.

Another notable movement occurred in goodwill -a type of intangible asset- which increased by $14 billion between 2017 and 2018 as a result of Microsoft’s acquisition of LinkedIn Corporation for approximately $26 billion (Microsoft, 2018). This increase was partially offset by an impairment charge taken against goodwill associated with phone hardware business acquired from Nokia Corporation amounting to approximately $7.6 billion (Microsoft, 2017).

Finally, cash flow from operations decreased substantially in 2019 compared to previous years due largely to higher costs associated with cloud computing services such as Azure as well as increases in employee compensation expenses (Microsoft, 2019). These were partially offset by higher revenue recognition amounts resulting from deferred revenues being recognized upon adoption of ASC 606 accounting standards.

To summarize, large movements were observed across several key accounts within Microsoft\’s financial statements over the past three fiscal years. It is important for investors to take note of these changes when assessing companies before investing their funds.

 

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