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Financial Management (Google and Microsoft) (Essay Sample)

Google, a leader in Internet information searching, is being challenged by other big names in Internet technology. Compare and contrast Google's business model and financial management with Microsoft's, which launched Bing. Access Google and Microsoft's annual reports and financial statements at their Websites. In addition to the text, you may access some other sites and or sources to understand the how to analyze an income statement and a balance sheet. For example, the following sites can provide guidance: Understanding the Income Statement at: http://www(dot)investopedia(dot)com/articles/04/022504.asp Reading the Balance Sheet at: http://www(dot)investopedia(dot)com/articles/04/031004.asp However, if these sites are not available, there are other sites that can be accessed that will provide sufficient information and guidance. Write a 7-8 page paper in which you: Calculate or identify from each company's most recent annual report the six (6) specific financial ratios listed and provide as an appendix to the paper. Liquidity measurement ratio: Current ratio Profitability indicator ratios: Return on assets Return on equity Debt ratio: Debt ratio Operating performance ratio: Fixed asset turnover ratio Cash flow indicator ratio: Dividend payout ratio Investment valuation ratio: Price / Earnings ratio (If you need help with ratios you could access Web sites that provide guidance such as: http://www(dot)investopedia(dot)com/university/ratios/ However, if this site is not available, other sites can be accessed that offer similar information.) Compare and contrast each company's business model: (1) core business, (2) leading products and/or services, (3) management/leadership style, and (4) innovation track record. Use the financial ratio analysis and explain which company is better able to withstand a major recession. Explain what the profitability ratios can tell about Google and Microsoft's performance and how that information would influence investing decisions. Identify and explain three (3) primary financial-based guidelines that should be used when selecting which of these two companies to invest in. Use a minimum of three (3) quality external resources from the last three (3) years to support the content of the paper. (Note: Do not use Wiki sites.) Your assignment must: Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; references must follow APA or school-specific format. Check with your professor for any additional instructions. Include a cover page containing the title of the assignment, the student's name, the professor's name, the course title, and the date. The cover page and the reference page are not included in the required page length. The specific course learning outcomes associated with this assignment are: Analyze the components of the basic financial statements, and conduct trend and ratio analysis to assess a firm's financial performance. Evaluate the sources of short-term and long-term financing to identify the effective use and associated risks of these sources in managing working capital and in capital budgeting. Use technology and information resources to research issues in contemporary business. Write clearly and concisely about contemporary business using proper writing mechanics Grading for this assignment will be based on answer quality, logic/organization of the paper, and language and writing skills, using the following rubric. source..
Financial Management (Google and Microsoft)
Professor Name:
(June 9, 2012)
Financial Management
Google and Microsoft
Google Inc. is a multinational corporation founded in America to provide internet related services. The company also provides internet related products such as smart-phones. They are mainly dominant in the advertising and marketing services, where they offer search engines and some marketing productivity tools which enable individuals and firms to effectively advertise and sell their products and services online.
Microsoft on the other hand is a multinational corporation based in Washington, which develops, licenses and support wind range products and services related to computing. In order to increase its market share, the company launched Bing to offer internet related services to its consumers across the globe. The launch significantly threatened Google and made its greatest rival.
Analyzed below are the financial ratios of the two companies.
Liquidity measurement ratio
This is a basic tool used to analyze firm`s financial statements. Its calculation significantly assists firms in their strategic planning. Through this ratio the company is able to fully analyze its strengths, weaknesses, opportunities and threats. As a matter of fact the tool can therefore be categorized as a quantitative analysis tool. However, in order to effectively analyze the performance of a firm, one is required to compare the calculated ratio of the current and the previous years. And in order to boost its effectiveness, some firm compare their ratios with other companies in the same industry. That way a firm is able to gauge itself in the market. In most cases, the liquidity measurement ratio is mainly calculated using the firm`s most liquid assets. And for efficiency purposes, firms are advised to use short term current assets and liabilities (Lloyds TSB, 2012).
Current ratio= current assets/current liabilities
Google Inc. (Google Inc., 2011).Microsoft Corporation (Microsoft Corporation, 2011).
Current ratioDec 201041,562/9,996=4.2June 201055,676/26,147=2.1
Dec 201152,758/8,913=5.9June 201174,918/28,774=2.6
Current ratio is an example of liquidity measurement ratio, which is used to measure the company`s ability to meet its short term obligations (Lloyds TSB, 2012). Current ratios with a value grater or equal to one signify that the firm is able to satisfy its short term obligations. However, if the current ratio of a firm is less than one, then it means that the company is experiencing some liquidity problems, and that it cannot fully or exhaustively satisfy its short term financial obligations. The above calculations show that both Google and Microsoft have sufficient current assets to meet their short term financial obligations. From our values, we can also observe that the liquidity preference of the two companies is gradually improving over the years. That is why the two companies regis...
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