Balance Sheet For Microsoft Corporation Accounting Essay

Published:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

Microsoft is the most prominent technology corporation in the world that deals with computers, '' With annual revenues of more than $32 billion, Microsoft Corporation is more than the largest software company in the world: it is a cultural phenomenon. The company's core business is based on developing, manufacturing, and licensing software products, including operating systems, server applications, business and consumer applications, and software development tools, as well as Internet software, technologies, and services''. (http://www.fundinguniverse.com/company-histories/Microsoft-Corporation-Company-History.html) http://www.referenceforbusiness.com/history2/14/Microsoft-Corporation.html    

http://www.redciencia.cu/empres/Intempres2000/Sitio/Principal/Conferencias/CUBA_Inteligencia%20Empresarial/victor/bcrc6.htm

''The name of the famous person - Bill Gates comes in one's mind with mention of the name of Microsoft. He is the founder of the company and is believed to be the smartest programmers ever.''( http://www.bighistory.net/microsoft-a-short-history/). Led by him, Microsoft had witnessed its heydays and has been able to have its product on almost every personal computer in the world, and in the process creating standards in the technology industry as well as market re-definition.

''Gates was first exposed to computers at school in the late 60's with his friend Paul Allen. At 14; Gates and he's friend were writing and testing computer programs. In 1972 they established their first company, Traf-O-Data, which sold a rudimentary computer that, recorded and analyzed traffic data. He's friend went on to study computer science at the University of Washington and then dropped out to work at Honeywell, while Gates enrolled at Harvard. In 1975, Gates and Allen wrote a version of BASIC for the new Altair microcomputer kit just released by MITS Computer. Later that year Gates left college to work full time developing programming languages for the Altair, and he and Allen relocated to Albuquerque, New Mexico, to be near MITS Computer, where Allen took a position as director of software development. Gates and Allen named their partnership Micro-soft''. (http://www.fundinguniverse.com/company-histories/Microsoft-Corporation-Company-History.html).

The word Microsoft was developed from two different words, micro from microcomputer and soft from software. The name was registered in New Mexico in November 1976. On November 1978, the first international office of Microsoft was established in Japan and its name was ASCII (American Standard Code for Information Interchange). It is now known as Microsoft Japan. In January 1979 the company's headquarters was moved to Bellevue Washington. (http://www.bighistory.net/microsoft-a-short-history/). In the early 80's, Microsoft witnessed a period of great success when IBM contracted the company to develop an operating system for its personal computers (PC), which was underway. In the late 80's Microsoft issued IPOs (initial public offering) of over two million shares and in the space of one year the price or the shares tripled and in the process making Gates a billionaire at about thirty years of age.

According to Richard b, McKenzie (2000) ''Microsoft stands accused of trying to extend its market dominance by charging the lowest of all prices for its browser Internet Explorer''. Nonetheless; the company had lots of other critics and legal cases against it from competitors and the likes. Microsoft success was further heightened by the tech bubble of the 2000 following the release of the windows XP, windows 2000,the acquisition of Visio corporation which stood as the largest acquisition in the life of Microsoft so far with transaction value of about One and half a billion dollars. The company also spread its tentacles into the world of gaming with their popularly known X-BOX which has remained a success till date. (http://www.fundinguniverse.com/company-histories/Microsoft-Corporation-Company-History.html).

DESCRIPTION AND ANALYSIS OF MICROSOFT PERFORMANCE OVERTIME

Key Dates:

1975: Microsoft is founded by Bill Gates and Paul Allen; they sell BASIC, the first PC computer language program to MITS Computer, Microsoft's first customer.

1981: Microsoft, Inc. is incorporated; IBM uses Microsoft's 16-bit operating system for its first personal computer.

1982: Microsoft, U.K., Ltd. is incorporated.

1983: Paul Allen resigns as executive vice-president but remains on the board; Jon Shirley is made president of Microsoft (he later becomes CEO); Microsoft introduces the Microsoft Mouse and Word for MS-DOS 1.00.

1985: Microsoft and IBM forge a joint development agreement.

1986: Microsoft stock goes public at $21 per share.

1987: The Company's first CD-ROM application, Microsoft Bookshelf, is released.

1990: Jon Shirley retires as president and CEO; Michael R. Hallman is promoted in Shirley's place; the company becomes the first PC software firm to surpass $1 billion of sales in a single year.

1992: Bill Gates is awarded the National Medal of Technology for Technological Achievement.

1993: The Company introduces Windows NT.

1995: Bill Gates publishes his first book, The Road Ahead.

1996: The Company acquires Vermeer Technologies and its software application, FrontPage.

1997: The Justice Department alleges that Microsoft violated a 1994 consent decree concerning licensing the Windows operating system to computer manufacturers.

1998: The U.S. Department of Justice files two antitrust cases against Microsoft, alleging the company had violated the Sherman Act.

2000: The Company acquires Visio Corporation, its largest acquisition to date.

2001: Microsoft Windows XP is released internationally.

2003: Microsoft launches Windows Server 2003.

2007: Microsoft launches Windows vista

2009: Microsoft launches windows 7

Source: http://www.fundinguniverse.com/company-histories/Microsoft-Corporation-Company-History.html

Balance sheet for Microsoft Corporation as at 30th June 2010. (Annually)

Assets [+]

in Millions of Dollars

06/2010

06/2009

06/2008

06/2007

06/2006

Cash and Equivalents

5,505

6,076

10,339

6,111

6,714

Restrictable Cash

-

-

-

-

-

Marketable Securities

31,283

25,371

13,323

17,300

27,447

Accounts Receivable

13,014

11,192

13,589

11,338

9,316

Loans Receivable

-

-

-

-

-

Other Receivables

-

-

-

-

-

Receivables

13,014

11,192

13,589

11,338

9,316

Inventories, Raw Materials

172

170

417

435

465

Inventories, Work in Progress

16

45

31

148

-

Inventories, Purchased Components

-

-

-

-

-

Inventories, Finished Goods

552

502

537

544

1,013

Inventories, Other

-

-

-

-

-

Inventories, Adjustments & Allowances

-

-

-

-

-

Inventories

740

717

985

1,127

1,478

Prepaid Expenses

-

-

-

-

-

Current Deferred Income Taxes

2,184

2,213

2,017

1,899

1,940

Other Current Assets

2,950

3,711

2,989

2,393

2,115

Total Current Assets

55,676

49,280

43,242

40,168

49,010

Land and Improvements

526

526

518

428

362

Buildings and Improvement

8,187

7,824

6,030

4,247

3,146

Machinery, Furniture and Equipment

7,546

6,732

5,996

4,691

3,715

Construction in Progress

-

-

-

-

-

Fixed Assets, Other

-

-

-

-

-

Fixed Assets, Total

16,259

15,082

12,544

9,366

7,223

Gross Fixed Assets

16,259

15,082

12,544

9,366

7,223

Accumulated Depreciation

(8,629)

(7,547)

(6,302)

(5,016)

(4,179)

Net Fixed Assets

7,630

7,535

6,242

4,350

3,044

Intangibles

1,158

1,759

1,973

878

539

Cost in Excess

12,394

12,503

12,108

4,760

3,866

Non-Current Deferred Income Taxes

-

279

949

1,389

2,611

Other Non-Current Assets

9,255

6,532

8,279

11,626

10,527

Total Non-Current Assets

30,437

28,608

29,551

23,003

20,587

Total Assets

86,113

77,888

72,793

63,171

69,597

Liabilities [+]

in Millions of Dollars

06/2010

06/2009

06/2008

06/2007

06/2006

Accounts Payable

4,207

5,008

4,034

3,247

2,909

Short Term Debt

1,000

2,000

-

-

-

Notes Payable

-

-

-

-

-

Accrued Expenses

-

-

-

-

-

Accrued Liabilities

3,283

3,156

2,934

2,325

1,938

Deferred Revenues

13,652

13,003

13,397

10,779

9,138

Current Deferred Income Taxes

-

-

-

-

1,557

Other Current Liabilities

4,005

3,867

9,521

7,403

6,900

Total Current Liabilities

26,147

27,034

29,886

23,754

22,442

Long Term Debt

4,939

3,746

-

-

-

Deferred Income Tax

229

-

-

-

-

Other Non-Current Liabilities

8,623

7,550

6,621

8,320

7,051

Minority Interest

-

-

-

-

-

Capital Lease Obligations

-

-

-

-

-

Preferred Securities of Subsidiary Trust

-

-

-

-

-

Preferred Equity Outside Shareholders' Equity

-

-

-

-

-

Total Non-Current Liabilities

13,791

11,296

6,621

8,320

7,051

Total Liabilities

39,938

38,330

36,507

32,074

29,493

Preferred Shareholder's Equity

-

-

-

-

-

Common Shareholder's Equity

46,175

39,558

36,286

31,097

40,104

Common Par

62,856

62,382

62,849

-

-

Additional Paid in Capital

-

-

-

60,557

59,005

Cumulative Translation Adjustments

-

-

-

149

-

Retained Earnings

(16,681)

(22,824)

(26,563)

(31,114)

(20,130)

Treasury Stock

-

-

-

-

-

Other Equity Adjustments

-

-

-

1,505

1,229

Total Capitalization

51,114

43,304

36,286

31,097

40,104

Total Equity

46,175

39,558

36,286

31,097

40,104

Total Liabilities & Shareholder's Equity

86,113

77,888

72,793

63,171

69

Closing price =$25.51

Volume sold =25.16m

Source:http://www.answers.com/main/dsdata?dsid=2940&templateid=0&cid=27590212&qm_page=30703. [Accessed, 4 April 2011].

The balance sheet above gives a brief summary of the asset and liabilities of Microsoft at a glance, it is apparent that Microsoft has been able to hold asset at a greater proportion than liabilities overtime. The company has a good mix of debt and equity, for every $1 owned it is borrowing less than 90 cents. This shows that the company is not too leveraged and less risky while also enjoying some level of tax shield from the leverage. Microsoft has a good chance of continuing into a going concern in the nearest foreseeable future because its capital structure shows more of a residual ownership.

With more descriptive statistics, we can also examine the performance of Microsoft on a monthly basis from the year 1988- 2009 using returns (unit %)

See excel for descriptive statistics.

Microsoft return (unit %)

Market return (unit %)

Mean

0.021622876

Mean

0.857870722

Standard Error

0.00618845

Standard Error

0.269942879

Median

0.022084196

Median

1.41

Mode

0.064221396

Mode

1.78

Standard Deviation

0.100359793

Standard Deviation

4.377737838

Sample Variance

0.010072088

Sample Variance

19.16458858

Kurtosis

1.421423202

Kurtosis

1.709578314

Skewness

0.366537791

Skewness

-0.812673531

Range

0.751310392

Range

29.51

Minimum

-0.343529412

Minimum

-18.46

Maximum

0.40778098

Maximum

11.05

Sum

5.686816298

Sum

225.62

Count

263

Count

263

From the descriptive statistics above, Microsoft has a positive skewness unlike the market whose skewness is negative, this indicates that Microsoft has a better flow or return than the market.

It could also be noted that Microsoft is (1) standard deviation away from its mean whereas the market is (4) standard deviation away from its mean, this means that the returns of Microsoft had not been too volatile over the years and return on stocks are less risky.

COMPARISON OF MOCROSOFT PERFORMANCE WITH S&P 500 (MARKET) USING T-TEST

See t-test on Excel

H0: Microsoft did not outperform the market

H1: Microsoft outperformed the market

t-Test: Paired Two Sample for Means

 

Variable 1

Variable 2

Mean

0.021622876

0.857870722

Variance

0.010072088

19.16458858

Observations

263

263

Pearson Correlation

0.539530773

Hypothesized Mean Difference

0

df

262

t Stat

-3.136067434

P(T<=t) one-tail

0.000953757

t Critical one-tail

1.650690284

P(T<=t) two-tail

0.001907515

t Critical two-tail

1.969059657

 

Conclusion: From the t-Test above, since the t-stats is greater in value than the t -critical (irrespective of the -ve sign), we need to accept the alternative hypothesis (H1) which says that Microsoft outperformed the market and reject the Null hypothesis (H0) which says that Microsoft did not outperform the market.

We can also infer this conclusion by looking at the P- value, here we can see that the p- value is less than the significance level of .05, therefore we need to accept the alternative hypothesis (H1).

ANALYSIS OF MICROSOFT PERFORMANCE WITH CAPM

Regression Statistics

Multiple R

0.258985259

R Square

0.067073365

Adjusted R Square

0.063498933

Standard Error

0.185690508

Observations

263

ANOVA

 

df

SS

MS

F

Significance F

Regression

1

0.647027164

0.647027164

18.764764

2.11102E-05

Residual

261

8.999531777

0.034480965

Total

262

9.646558942

 

 

 

 

Coefficients

Standard Error

t Stat

P-value

Lower 95%

Upper 95%

Lower 95.0%

Upper 95.0%

Intercept

-0.32415329

0.011530623

-28.1123831

6.17385E-81

-0.346858177

-0.30145

-0.34686

-0.30145

X Variable 1

0.011371441

0.002625088

4.331831484

2.11102E-05

0.006202393

0.01654

0.006202

0.01654

CAPM :- E(R)=RF+β[RM-RF]

By substituting the CAPM formula into the regression, we have Y= α+βx+e

Y = dependent variable

α = intercept

β = co-efficient of independent variable

e =error

When x=0, α is an estimate of Y, then excess return of Microsoft would be given as: Excess return= -0.32415329+0.011371441+0.185690508

Adjusted R Square = 0.063498933

The adjusted R Square indicates that 6.3% of the variability in the excess return of Microsoft is explained by the market. I.e. for every percentage change of return in the market, Microsoft's return changes by 6.3%.

CONCLUSION

Microsoft

Writing Services

Essay Writing
Service

Find out how the very best essay writing service can help you accomplish more and achieve higher marks today.

Assignment Writing Service

From complicated assignments to tricky tasks, our experts can tackle virtually any question thrown at them.

Dissertation Writing Service

A dissertation (also known as a thesis or research project) is probably the most important piece of work for any student! From full dissertations to individual chapters, we’re on hand to support you.

Coursework Writing Service

Our expert qualified writers can help you get your coursework right first time, every time.

Dissertation Proposal Service

The first step to completing a dissertation is to create a proposal that talks about what you wish to do. Our experts can design suitable methodologies - perfect to help you get started with a dissertation.

Report Writing
Service

Reports for any audience. Perfectly structured, professionally written, and tailored to suit your exact requirements.

Essay Skeleton Answer Service

If you’re just looking for some help to get started on an essay, our outline service provides you with a perfect essay plan.

Marking & Proofreading Service

Not sure if your work is hitting the mark? Struggling to get feedback from your lecturer? Our premium marking service was created just for you - get the feedback you deserve now.

Exam Revision
Service

Exams can be one of the most stressful experiences you’ll ever have! Revision is key, and we’re here to help. With custom created revision notes and exam answers, you’ll never feel underprepared again.