- Based on the information you acquired, which firm is healthier? Why? If you are an investor, which company would you invest in?
Current Ratio Current Assets Current Liabilities Microsoft's Current Ratio (2017) = 162,696 / 55,745 = 2.92 Microsoft's Current Ratio (2018) = 169,662 / 58,488 = 2.90 Google's Current Ratio (2017) = 124,308 / 24,183 = 5.14 Google's Current Ratio (2018) = 135,676/34,620 = 3.92 Debt to Equity Ratio Total Liabilities Total Stockholders' Equity Microsoft's Debt to Equity Ratio (2017) = 162,601 / 87,711 = 1.9 Microsoft's Debt to Equity Ratio (2018) = 176,130 / 82,718 = 2.1 Google's Debt to Equity Ratio (2017) = 44,793 / 152,502 = 0.29 Google's Debt to Equity Ratio (2018) = 55,164 / 177,628 = 0.31 Asset turnover ratio Sales Revenue Total (or net)Assets Microsoft's Asset Turnover Ratio (2017) = 96,571 / 250,312 = 0.39 Microsoft's Asset Turnover Ratio (2018) = 110,360 / 258,848 = 0.43 Google's Asset Turnover Ratio (2017) = 110,855 / 197,295 = 0.56 Google's Asset Turnover Ratio (2018) = 136,819 / 232,792 = 0.59 e) Profit Margin - The net profit margin is equal to how much net income or profit is generated as a percentage of revenue. Net profit margin is the ratio of net profits to revenues for a company or business segment. Net profit margin is typically expressed as a percentage but can also be represented in decimal form. Profit Margin Ratio = Net Profit Revenue x 100 Microsoft's Profit Margin Ratio (2017) = (25,489 / 96,571) x 100 = 26% Microsoft's Profit Margin Ratio (2018) = (16,571 / 82,718) x 100 = 15% Google's Profit Margin Ratio (2017) = (12,662 / 110,855) x 100 = 11% Google's Profit Margin Ratio (2018) = (30,736 / 136,819) x 100 = 22% ROE = Net Income x 100 Shareholders' Equity Microsoft's ROE (2017) = (25,489 / 87,711) x 100 = 29% Microsoft's ROE (2018) = (16,571 / 82,718) x 100 = 20% Google's ROE (2017) = (12,662 / 152,502) x 100 = 8.3% Google's ROE (2018) = (30,736 / 177,628) x 100 = 17% Net Income ROA = x 100 Total Assets Microsoft's ROA (2017) = (25,489 / 250,312) x 100 = 10% Microsoft's ROA (2018) = (16,571 / 258,848) x 100 = 6.4% Google's ROA (2017)= (12,662 / 197,295) x 100 = 6.4% Google's ROA (2018)= (30,736 / 232,792) x 100 = 13% DuPont Analysis = Net Profit Margin x AT EM Microsoft Year = Profit Margin x Total Asset Turnover x Equity Multiplier 2.9 2017 29% 26% X 0.39 X 2018 20% 15% X 0.43 X 3.1 Year = Google Profit Margin x Total Asset Turnover 11% X 0.56 x Equity Multiplier 2017 8.0% X 1.3 2018 17% 22% X 0.59 X 1.3