CASE 7.2 Oracle Corporation: Share-Based Compensation Effects/Statement of Shareholders' Equity A sales-based ranking of software companies provided by Yahoo! Finance on November 5, Year 8, places Oracle Corporation third behind sales leaders Microsoft Corporation and IBM Software. Typical of high-tech companies in the software industry, Oracle Corporation uses share-based com- pensation plans extensively to motivate its employees. In Note 11 of its May 31, Year 8, annual report, Oracle states that it settles employee stock option exercises primarily with newly issued common shares As indicated by the selected data from Oracle's May 31, Year 8, consolidated balance sheet in Exhibit 7.17, Oracle finances operations using substantially more common shareholder's equity than it does long-term debt. However, as of the balance sheet date, Oracle's long-term debt to shareholders' equity ratio of 44.5% was substantially larger than that of major U.S. competitor Microsoft Corporation and major foreign competitor SAP AG, both of which reported almost no long-term financial debt. Exhibit 7.18 presents the consolidated statement of shareholders' equity for Year 8. Exhibit 7.19 presents portions of financial statement Notes 10 and 11. LO 7-1, LO 7-2