Question
Microsoft Corporation has provided the following comparative financial statements for the years ended June 30, 2023, 2022, and 2021. Microsoft Corporation Comparative Income Statements 2023
Microsoft Corporation has provided the following comparative financial statements for the years ended June 30, 2023, 2022, and 2021.
Microsoft Corporation Comparative Income Statements | 2023 | 2022 | 2021 |
Sales | $150,000,000 | $140,000,000 | $130,000,000 |
Cost of goods sold | $90,000,000 | $84,000,000 | $78,000,000 |
Gross profit | $60,000,000 | $56,000,000 | $52,000,000 |
Operating expenses | $30,000,000 | $28,000,000 | $26,000,000 |
Income from operations | $30,000,000 | $28,000,000 | $26,000,000 |
Interest expense | $2,000,000 | $1,800,000 | $1,600,000 |
Income before taxes | $28,000,000 | $26,200,000 | $24,400,000 |
Income tax expense | $8,400,000 | $7,860,000 | $7,320,000 |
Net income | $19,600,000 | $18,340,000 | $17,080,000 |
Microsoft Corporation Comparative Balance Sheets | 2023 | 2022 | 2021 |
Assets | |||
Current assets | $30,000,000 | $28,000,000 | $26,000,000 |
Long-term investments | $40,000,000 | $38,000,000 | $36,000,000 |
Property and equipment, net | $80,000,000 | $75,000,000 | $70,000,000 |
Total assets | $150,000,000 | $141,000,000 | $132,000,000 |
Liabilities and Equity | |||
Current liabilities | $20,000,000 | $19,000,000 | $18,000,000 |
Long-term debt | $50,000,000 | $48,000,000 | $46,000,000 |
Common stock | $30,000,000 | $30,000,000 | $30,000,000 |
Retained earnings | $50,000,000 | $44,000,000 | $38,000,000 |
Total liabilities and equity | $150,000,000 | $141,000,000 | $132,000,000 |
Requirements:
- Prepare common-size income statements for 2023, 2022, and 2021.
- Prepare common-size balance sheets for 2023, 2022, and 2021.
- Analyze Microsoft’s operating margin over the three years.
- Calculate and discuss the trend in Microsoft’s return on equity (ROE) over the three years.
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