Question
Income statements and balance sheets follow for Microsoft Corporation. Refer to these financial statements to answer the requirements. Microsoft Corporation Income Statements Year ended June
Income statements and balance sheets follow for Microsoft Corporation. Refer to these financial statements to answer the requirements.
Microsoft Corporation Income Statements | ||
Year ended June 30, | ||
(in millions) | 2013 | 2012 |
Revenue | $77,849 | $73,723 |
Cost of revenue | 20,249 | 17,530 |
Gross profit | 57,600 | 56,193 |
Research and development | 10,411 | 9,811 |
Sales and marketing | 15,276 | 13,857 |
General and administrative | 5,149 | 4,569 |
Goodwill impairment | 0 | 6,193 |
Total operating expenses | 30,836 | 34,430 |
Operating income | 26,764 | 21,763 |
Other income | 288 | 504 |
Income before income taxes | 27,052 | 22,267 |
Provision for income taxes | 5,189 | 5,289 |
Net income | $21,863 | $16,978 |
Microsoft Corporation Balance Sheets | ||
As of June 30, | ||
($ millions) | 2013 | 2012 |
Cash and cash equivalents | $ 3,804 | $ 6,938 |
Short-term investments | 73,218 | 56,102 |
Accounts receivable, net | 17,486 | 15,780 |
Inventories | 1,938 | 1,137 |
Deferred income taxes | 1,632 | 2,035 |
Other current assets | 3,388 | 3,092 |
Total current assets | 101,466 | 85,084 |
Property plant and equipment, net | 9,991 | 8,269 |
Equity and other investments | 10,844 | 9,776 |
Goodwill | 14,655 | 13,452 |
Intangible assets, net | 3,083 | 3,170 |
Other long-term assets | 2,392 | 1,520 |
Total assets | $142,431 | $121,271 |
Microsoft Corporation Balance Sheets (continued) | ||
As of June 30, | ||
($ millions) | 2013 | 2012 |
Accounts payable | $ 4,828 | $ 4,175 |
Short-term debt | 2,999 | 1,231 |
Accrued compensation | 4,117 | 3,875 |
Income taxes | 592 | 789 |
Short-term unearned revenue | 20,639 | 18,653 |
Securities lending payable | 645 | 814 |
Other | 3,597 | 3,151 |
Current liabilities | 37,417 | 32,688 |
Long-term debt | 12,601 | 10,713 |
Long-term unearned revenue | 1,760 | 1,406 |
Deferred income taxes | 1,709 | 1,893 |
Other long-term liabilities | 10,000 | 8,208 |
Total liabilities | 63,487 | 54,908 |
Common stock and paid-in capital | 67,306 | 65,797 |
Retained earnings/(deficit) | 9,895 | (856) |
Accumulated other comprehensive income | 1,743 | 1,422 |
Total equity | 78,944 | 66,363 |
Total liabilities and equity | $142,431 | $ 121,271 |
Required:
Income statements and balance sheets follow for Microsoft Corporation. Refer to these financial statements to answer the requirements.
Microsoft Corporation Income Statements | ||
Year ended June 30, | ||
(in millions) | 2013 | 2012 |
Revenue | $77,849 | $73,723 |
Cost of revenue | 20,249 | 17,530 |
Gross profit | 57,600 | 56,193 |
Research and development | 10,411 | 9,811 |
Sales and marketing | 15,276 | 13,857 |
General and administrative | 5,149 | 4,569 |
Goodwill impairment | 0 | 6,193 |
Total operating expenses | 30,836 | 34,430 |
Operating income | 26,764 | 21,763 |
Other income | 288 | 504 |
Income before income taxes | 27,052 | 22,267 |
Provision for income taxes | 5,189 | 5,289 |
Net income | $21,863 | $16,978 |
Microsoft Corporation Balance Sheets | ||
As of June 30, | ||
($ millions) | 2013 | 2012 |
Cash and cash equivalents | $ 3,804 | $ 6,938 |
Short-term investments | 73,218 | 56,102 |
Accounts receivable, net | 17,486 | 15,780 |
Inventories | 1,938 | 1,137 |
Deferred income taxes | 1,632 | 2,035 |
Other current assets | 3,388 | 3,092 |
Total current assets | 101,466 | 85,084 |
Property plant and equipment, net | 9,991 | 8,269 |
Equity and other investments | 10,844 | 9,776 |
Goodwill | 14,655 | 13,452 |
Intangible assets, net | 3,083 | 3,170 |
Other long-term assets | 2,392 | 1,520 |
Total assets | $142,431 | $121,271 |
Microsoft Corporation Balance Sheets (continued) | ||
As of June 30, | ||
($ millions) | 2013 | 2012 |
Accounts payable | $ 4,828 | $ 4,175 |
Short-term debt | 2,999 | 1,231 |
Accrued compensation | 4,117 | 3,875 |
Income taxes | 592 | 789 |
Short-term unearned revenue | 20,639 | 18,653 |
Securities lending payable | 645 | 814 |
Other | 3,597 | 3,151 |
Current liabilities | 37,417 | 32,688 |
Long-term debt | 12,601 | 10,713 |
Long-term unearned revenue | 1,760 | 1,406 |
Deferred income taxes | 1,709 | 1,893 |
Other long-term liabilities | 10,000 | 8,208 |
Total liabilities | 63,487 | 54,908 |
Common stock and paid-in capital | 67,306 | 65,797 |
Retained earnings/(deficit) | 9,895 | (856) |
Accumulated other comprehensive income | 1,743 | 1,422 |
Total equity | 78,944 | 66,363 |
Total liabilities and equity | $142,431 | $ 121,271 |
Required:
Compute net operating profit after tax (NOPAT) for 2013 and 2012. Assume that combined federal and state statutory tax rates are 37% for both years.
Compute net operating assets (NOA) for 2013 and 2012. Assume Equity and other investments are operating assets.
Compute return on net operating assets (RNOA) for 2013 and 2012. Net operating assets are $17,440 million in 2011.
Compute return on equity (ROE) for 2013 and 2012. (Stockholders equity in 2011 is $57,083 million.)
What is nonoperating return component of ROE for 2013 and 2012?
Comment on the difference between ROE and RNOA. What inference do you draw from this comparison?
Compute net operating assets (NOA) for 2013 and 2012. Assume Equity and other investments are operating assets.
Compute return on net operating assets (RNOA) for 2013 and 2012. Net operating assets are $17,440 million in 2011.
Compute return on equity (ROE) for 2013 and 2012. (Stockholders equity in 2011 is $57,083 million.)
What is nonoperating return component of ROE for 2013 and 2012?
Comment on the difference between ROE and RNOA. What inference do you draw from this comparison?
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