accounting

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Finance is the heart of business

Finance is the heart of business. Every corporation has a financial statement that summarizes its profit/loss for a period of time. Microsoft Corp. hires accountants to keep track of the company’s finances. The accounting system generates two types of financial report: managerial accounting report for internal use and financial accounting reports for external use. The financial department creates an annual report where it should include three financial statements: income statement, cash flow and balance sheet.

Peter Klein is currently the Chief Financial Officer (CFO) of Microsoft. His responsibility is financial management which includes analyzing, accounting, and reporting the financial status of the company. Financial managers need to consider money use in the company, where does money come and go; thus, a statement of cash flow is needed to keep record of how the company uses money. There are three main areas where the money goes into, financing, investing and operating activities. This year, Microsoft uses -$13.29 billion on financing, $11.31 billion on investing and $24.07 billion on operating activities.

Balance sheet is another financial statement that the financial department is responsible for analyzing and reporting to the board of directors. Balance sheet shows the company’s assets, liabilities and equity. Compared to last year, Microsoft Corp. has shown growth in all three components. The total assets changed from $77.61 billion to $86.11 billion. The company’s total liabilities are $39.94 billion. Its shareholder’s equity is $46.18 billion.

Microsoft has improved its income this year (2010) compared to last year’s (2009). From the financial overview below, Microsoft’s net sales/revenue is approximately $61.99 billion. It has increased 5.73% from 2009. The gross profit also shows growth of 6.68% which is $49.59 billion. Its net income is $18.76 billion compared to 2009’s income, which is $14.57 billion. This indicates that Microsoft has been gaining more profits and becoming more successful.

(Source: Daily Finance)

Income Statement

Annual Data

All numbers in thousands

Period Ending

Jun 30, 2010

Jun 30, 2009

Jun 30, 2008

Total Revenue

62,484,000  

58,437,000  

60,420,000  

Cost of Revenue

12,395,000  

12,155,000  

11,598,000  

Gross Profit

50,089,000  

46,282,000  

48,822,000  

Operating Expenses

Research Development

8,714,000  

9,010,000  

8,164,000  

Selling General and Administrative

17,277,000  

16,909,000  

18,166,000  

Non Recurring

-  

330,000  

-  

Others

-  

-  

-  

Total Operating Expenses

-  

-  

-  

Operating Income or Loss

24,098,000  

20,363,000  

22,492,000  

Income from Continuing Operations

Total Other Income/Expenses Net

915,000  

(542,000)

1,322,000  

Earnings Before Interest And Taxes

25,013,000  

19,821,000  

23,814,000  

Interest Expense

-  

-  

-  

Income Before Tax

25,013,000  

19,821,000  

23,814,000  

Income Tax Expense

6,253,000  

5,252,000  

6,133,000  

Minority Interest

-  

-  

-  

Net Income From Continuing Ops

18,760,000  

14,569,000  

17,681,000  

Non-recurring Events

Discontinued Operations

-  

-  

-  

Extraordinary Items

-  

-  

-  

Effect Of Accounting Changes

-  

-  

-  

Other Items

-  

-  

-  

Net Income

18,760,000  

14,569,000  

17,681,000  

Preferred Stock And Other Adjustments

-  

-  

-  

Net Income Applicable To Common Shares

$18,760,000  

$14,569,000  

$17,681,000 

Balance Sheet

Annual Data

All numbers in thousands

Period Ending

Jun 30, 2010

Jun 30, 2009

Jun 30, 2008

Assets

Current Assets

Cash And Cash Equivalents

5,505,000  

6,076,000  

10,339,000  

Short Term Investments

31,283,000  

25,371,000  

13,323,000  

Net Receivables

15,198,000  

13,405,000  

15,606,000  

Inventory

740,000  

717,000  

985,000  

Other Current Assets

2,950,000  

3,711,000  

2,989,000  

Total Current Assets

55,676,000  

49,280,000  

43,242,000  

Long Term Investments

7,754,000  

4,933,000  

6,588,000  

Property Plant and Equipment

7,630,000  

7,535,000  

6,242,000  

Goodwill

12,394,000  

12,503,000  

12,108,000  

Intangible Assets

1,158,000  

1,759,000  

1,973,000  

Accumulated Amortization

-  

-  

-  

Other Assets

1,501,000  

1,599,000  

1,691,000  

Deferred Long Term Asset Charges

-  

279,000  

949,000  

Total Assets

86,113,000  

77,888,000  

72,793,000  

Liabilities

Current Liabilities

Accounts Payable

8,564,000  

8,889,000  

12,830,000  

Short/Current Long Term Debt

1,000,000  

2,000,000  

-  

Other Current Liabilities

16,583,000  

16,145,000  

17,056,000  

Total Current Liabilities

26,147,000  

27,034,000  

29,886,000  

Long Term Debt

4,939,000  

3,746,000  

-  

Other Liabilities

7,445,000  

6,269,000  

6,621,000  

Deferred Long Term Liability Charges

1,407,000  

1,281,000  

-  

Minority Interest

-  

-  

-  

Negative Goodwill

-  

-  

-  

Total Liabilities

39,938,000  

38,330,000  

36,507,000  

Stockholders' Equity

Misc Stocks Options Warrants

-  

-  

-  

Redeemable Preferred Stock

-  

-  

-  

Preferred Stock

-  

-  

-  

Common Stock

62,856,000  

62,382,000  

62,849,000  

Retained Earnings

(16,681,000)

(22,824,000)

(26,563,000)

Treasury Stock

-  

-  

-  

Capital Surplus

-  

-  

-  

Other Stockholder Equity

-  

-  

-  

Total Stockholder Equity

46,175,000  

39,558,000  

36,286,000  

Net Tangible Assets

$32,623,000  

$25,296,000  

$22,205,000  

Cash Flow

Annual Data

All numbers in thousands

Period Ending

Jun 30, 2010

Jun 30, 2009

Jun 30, 2008

Net Income

18,760,000  

14,569,000  

17,681,000  

Operating Activities, Cash Flows Provided By or Used In

Depreciation

2,673,000  

2,562,000  

2,056,000  

Adjustments To Net Income

1,979,000  

2,084,000  

1,722,000  

Changes In Accounts Receivables

(2,238,000)

2,215,000  

(1,569,000)

Changes In Liabilities

2,702,000  

(1,698,000)

1,667,000  

Changes In Inventories

-  

-  

-  

Changes In Other Operating Activities

197,000  

(695,000)

55,000  

Total Cash Flow From Operating Activities

24,073,000  

19,037,000  

21,612,000  

Investing Activities, Cash Flows Provided By or Used In

Capital Expenditures

(1,977,000)

(3,119,000)

(3,182,000)

Investments

(7,590,000)

(10,853,000)

6,648,000  

Other Cash flows from Investing Activities

(1,747,000)

(1,798,000)

(8,053,000)

Total Cash Flows From Investing Activities

(11,314,000)

(15,770,000)

(4,587,000)

Financing Activities, Cash Flows Provided By or Used In

Dividends Paid

(4,578,000)

(4,468,000)

(4,015,000)

Sale Purchase of Stock

(8,958,000)

(8,774,000)

(9,039,000)

Net Borrowings

190,000  

5,746,000  

-  

Other Cash Flows from Financing Activities

10,000  

(19,000)

120,000  

Total Cash Flows From Financing Activities

(13,291,000)

(7,463,000)

(12,934,000)

Effect Of Exchange Rate Changes

(39,000)

(67,000)

137,000  

Change In Cash and Cash Equivalents

($571,000)

($4,263,000)

$4,228,000  

(Source: Yahoo Finance)


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