As noted in Wikipedia Oracle is headquartered in Redwood. California. It was founded in 1977 and is the world’s 3rd largest soft wear developer in gross revenues. Harmonizing to Yahoo Finance Oracle is a multi-faceted operation. Oracle provides a huge sum of services for the cyberspace and computing machine. It provides cloud applications. IT confer withing services. licences middleware package which includes database and database direction. It has 115. 000 full clip employees and is run by co-founder. CEO Larry Ellison who has been the lone CEO of the company since it’s origin. Besides noted in Wikipedia he is the top paid CEO in the universe. In 2013 Oracle presently has an operating hard currency flow of 13. 72B with grosss of 37. 15B which can be found in Yahoo Finance.
Microsoft is a taking package company started by Bill Gates and Paul Allen in 1975. The company’s central office is located in Redmond. Washington where like Oracle it develops. licences. industries and back up a broad scope of calculating beginnings. as documented in Wikipedia. Yahoo finance studies that in add-on to licensing and fabrication package over the Earth it besides designs hardware and has late entered into the hardware industry with it’s new tablet. It besides has a amusement division which is responsible for the fabrication of Xbox360 gambling and consoles. Kinect for Xbox and video games among other merchandises. It has a sum of 94. 000 full clip employees and can be credited for making 3 billionaires and 12 millionaires from the company’s operations. Microsoft presently has a hard currency flow of 73. 79B with grosss of 76. 01B for 2013.
Interpretation and Comparison between the two companies’ ratios ( Reading the Appendix of Chapter 13 will assist you fix the commentary ) Oracle Corporation Microsoft Corporation
Net incomes per portion
As given in the income statement
$ 1. 69
$ 2. 73
Microsoft has shown to hold a higher EPS than Oracle.
Current assets Current liabilities
$ 39. 174 $ 14. 192
$ 74. 918 $ 28. 774
Prophet is demoing more favourable current ratio than Microsoft. This ratio depicts for every dollar of current liabilites it has the several sum in current assets.
Gross Profit Ratio
Gross net income Internet Gross saless Gross Profit = net gross revenues – COGS Oracle: 35. 622 – 8. 398 = 27. 224 Microsoft: 69. 943 15. 577 = 54. 366
$ 27. 224 $ 35. 622
76. 4 %
$ 54. 366 $ 69. 943
77. 7 %
Microsoft’s Gross Profit Ratio is somewhat better than Oracle.
Net income border ratio
Net Income Internet Gross saless
$ 8. 547 $ 35. 622
24. 0 %
$ 23. 150 $ 69. 943
33. 1 %
Microsoft has a better Net income Margin Ratio than Oracle.
Inventory Employee turnover
Cost of Goods Sold Average Inventory Average Inventory: 2011 + 2010/2 Oracle: 303 + 259/2 = 281 Microsoft: 1. 372 + 740/2 = 1056
$ 8. 398 $ 281
29. 9 times
$ 15. 577 $ 1. 056
14. 8 times
Prophet shows a significantly higher turnover than Microsoft.
Dayss in Inventory
365 yearss Inventory turnover
365 29. 9
365 14. 8
Prophet has better consequence than Microsoft
Receivable Turnover Ratio
Net recognition gross revenues Average Net Receivables Average Net Receivables: 2011 +2010/2 Prophet: 6628 + 5585/2 = 6107 Avg NR Microsoft:14987 + 13014/2 = 14001 Avg N
$ 35. 622 $ 6. 107
$ 69. 943 $ 14. 001
Microsofts Receivable Turnover is faster than Oracle.
Average Collection Period
365 Receivable Turnover Ratio
365 5. 8
62. 6 yearss
365 5. 0
Oracle has a better consequence on the aggregation period.
Assetss Turnover Ratio
Net Gross saless Average Entire Assets Average Total Assets = 2011+2010/2 Prophet: 73535 + 61578/2 = 67557 Microsoft: 108704 + 86113 = 97409
$ 35. 622 $ 67. 557
$ 69. 943 $ 97. 409
Microsoft shows a better ratio.
Tax return on Assetss Ratio
Net Income Average Total Assets
$ 8. 547 $ 67. 557
12. 7 %
$ 23. 150 $ 97. 409
23. 8 %
Microsoft has a better return on their assets.
Debt to Total Assets Ratio
Entire Liabilities Total Assetss
$ 33. 290 $ 73. 535
45. 3 %
$ 51. 621 $ 108. 704
47. 5 %
Microsoft is somewhat higher so Oracle has a better ratio.
Timess Interest Earned Ratio
Net Income + Int Expense + Tax Expense Interest Expense
$ 12. 219 $ 808
28. 366 295
Microsoft has a much healthier ratio than Oracle.
Cash dividend declared on common stock Net income
$ 1. 061 $ 8. 547
12. 4 %
$ 5. 180 $ 23. 150
22. 4 %
Microsoft has a higher rate of dividend wage outs
Tax return on Common Stockholders’ Equity
Net income – Preferred stock dividend Average common stockholders’ equity Oracle Avg SE: 40245 + 31199/2 Microsoft Avg SE: 57083 + 46175/2
8. 547 35. 722. 00
23. 9 %
$ 23. 150 $ 51. 629
44. 8 %
Microsoft earned more on the dollar of their net income for each dollar of the stockholder’s equity.
Free hard currency flow
Cash provided by operations minus capital outgos minus hard currency dividends paid
$ 9. 703
$ 9. 703
$ 19. 459
Microsoft has a considerable sum more Free hard currency 19. 459 flow than Prophet
Current hard currency debt coverage ratio
Cash provided by operations Average current liabilities
$ 11. 214 $ 14. 442
$ 26. 994 $ 27. 461
Microsoft has a better ratio of paying debt within the twelvemonth.
Cash debt coverage ratio
Cash provided by operations Average entire liabilities
$ 11. 214 $ 31. 835
$ 26. 994 $ 45. 780
Microsoft has a better ratio.
Market monetary value as of 06/30/2011 EPS as of 06/30/2011
$ 34. 22 $ 1. 69
$ 26. 87 $ 2. 73
Oracle fairs better than Microsoft with the investor’s projection of the strength of future net incomes
Liquid: Overall Oracle has shown to a better liquidness ratio than Microsoft. Some countries the two companies are comparatively close in liquidness public presentation as depicted in the current ratio. In other countries Oracle proves to hold much better public presentation than Microsoft as depicted in the stock list and yearss in stock list ratios nevertheless and current ratio. Oracle besides has a faster aggregation period than Microsoft as reflected in the mean aggregation period ratio. I would declare Oracle as holding a better liquidness standing than Microsoft.
Solvency: Microsoft is superior to Oracle in this ratio class. Although Microsoft has a little more hazard than Oracle in the debt to current assest ratio which means that if necessary Oracle has a better chance to change over assets in to hard currency with a 45. 3 % while Microsoft is at 47. 5 % nevertheless ; this is the lone ratio that Oracle is more favourable than Microsoft. With Microsoft’s free hard currency flow of $ 19. 459 billion versus Oracle’s $ 9. 703. Microsoft is least likely to hold the demand to neutralize their assets.
Free hard currency flow ratio gives insight to a company’s acquisition power. ability to extinguish or minimise debt and allows for a higher dividend payout. Microsoft has a better current hard currency debt to current liability ratio every bit good. For evey $ 1 in liability Microsoft as. 98 hard currency from runing activities while Oracle has. 78 from operating activities for every $ 1 of current liability. Given these analysis Microsoft has a better overall solvency position than Oracle.
Profitableness: This class of ratios is the more focussed one by investors because it gives the most accurate forecast of a company’s most derive out of investmens from investors. Get downing with Gross Profit ratio the two companies are really near with Microsoft demoing a 77. 7 % and Oracle demoing a 76. 4 % they both fair reasonably good in gross net incomes. Microsoft has an advantage over Oracle in all ratios in this class except for Price gaining sharing ratio. The payout ratio and the return on common stockholder’s equity ratio are significantly higher than Oracle’s but Oracle has a higer monetary value net incomes per portion ratio as stated earlier which signifies that investors believe that Oracle’s stock is traveling to increase over a period of clip.
Decision: Although based on the ratios Oracle seems to be a safer investing and deemed by investors for the financial twelvemonth of 2011 to hold higher potency in the market and as noted by Eddie Beverage in an on-line article on Five Capital web site Oracle has shown consistence over the past decennary than Microsoft with swerving additions. However ; given that Microsoft has a well higher payout and higher return on stockholder’s equity I would take the hazard and travel with Microsoft.
Beverage. E. ( 2011. Oct 21 ) . Microsoft V Oracle: You know you want one. Retrieved from Seeking Alpha. Oracle Corporation. ( n. d. ) . Retrieved from Wikipedia: hypertext transfer protocol: //en. wikipedia. org/wiki/Oracle_Corporation Weygandt. J. . Kimmel. & A ; Kleso. D. ( 2011 ) . Fiscal Accounting. Hoboken: John Wiley & A ; Sons. Inc. Yahoo Finance. ( n. d. ) . Retrieved June 22. 2013. from Yokel: hypertext transfer protocol: //finance. yokel. com/q? s=ORCL Yahoo Finance. ( n. d. ) . Retrieved June 22. 2013. from Yokel: hypertext transfer protocol: //finance. yokel. com/q? s=MSFT Wikipedia. ( n. d. ) . Retrieved June 22. 2013. from Microsoft: hypertext transfer protocol: //en. wikipedia. org/wiki/Microsoft Wikipedia Oracle Corporation. ( n. d. ) . Retrieved June 22. 2013. from Wikipedia: