Using the financial statements for Oracle Corporation and Microsoft Corporation, respectively, you will calculate and compare the financial ratios listed further down this document for the fiscal year ending 2011 and prepare your comments about the two companies? performance based on your ratio calculations. (Please use the attached Excel Template "Course_Project_1_Assignment_Comparing_Oracle_and_Microsoft-13-1" , and proceed by plugging in your Numbers in the Red boxes, ratios should automatically be calculated)

• A completed worksheet profiles tab that contains a one-paragraph description regarding each company with information about their histories, what products they sell, where they are located, and so on.
• All 16 ratios for each company, with the supporting calculations and commentary on your worksheet ratio tab. Supporting calculations must be shown either as a formula or as text typed into a different cell. The ratios are listed further down this document. Your comments for each ratio should include more than just a definition of the ratio. You should focus on interpreting each ratio number for each company and support your comments with the numbers found in the ratios.
• TheSummaryandConclusionsworksheettabisanoverallcomparisonofhoweachcompanycomparesintermsofthemajorcategoryofratiosdescribed.Anicewaytoconcludeistostatewhichcompanyyouthinkisthebetterinvestmentandwhy.
• The Bibliography worksheet tab must containany other information you use to profile the companies should also be cited as a reference.

Here is the link for the financial statements for Oracle Corporation for the fiscal year ending 2011. First, select 2011 using the drop-down arrow labeled Year on the right-hand side of the page, and then select Annual Reports using the drop-down arrow labeled Filing Type on the left-hand side of the page.

You should select the 10k dated 6/28/2011 and choose to download in PDF, Word, or Excel format.

http://www.oracle.com/us/corporate/investor-relations/sec/index.html

Here is the link for the financial statements for Microsoft Corporation for the fiscal year ending 2011. You need to press the word Go on the left-hand side of the page. Then you should select the 10k dated 7/28/2011 and choose to download in Word or Excel format.

http://www.microsoft.com/investor/SEC/default.aspx?&

Required Ratios for the Project

• Earnings per Share of Common Stock

1. Current Ratio
2. Gross Profit Margin
3. Rate of Return on Sales (Net Profit Margin)
4. Inventory Turnover
5. Days? Inventory Outstanding (DIO)

• Accounts Receivable Turnover
• Days? Sales Outstanding (DSO)

1. Asset Turnover
2. Rate of Return on Total Assets (ROA)
3. Debt Ratio
4. Times Interest Earned Ratio
5. Dividend Yield (For the purposes of this ratio, use Yahoo Finance to look up current dividend yield and stock price; just note the date that you looked up this information.)
6. Rate of Return on Common Stockholders? Equity (ROE)
7. Free Cash Flow
8. Price/Earnings Ratio (Multiple) (For the purpose of this ratio, for Oracle, use the market price per share on May 30, 2011 and for Microsoft, use the market price per share on June 30, 2011.)

Complete one paragraph profiling each company's business including information, such as a brief history, where they are located, number of employees, the products they sell, etc. Please reference any websites you used for the Profiles on the Bibliography tab. Use this Excel spreadsheet to compute ratios; show your computations for all ratios on this tab and also include your commentary. The financial statements used to calculate these ratios are available in Appendix A and Appendix B of your textbook. Oracle Corporation Interpretation and comparison between the two companies' ratios (reading the Appendix of Chapter 13 will help you prepare the commentary). Microsoft Corporation The comparison of the ratios is an important part of the project. A good approach is to briefly explain what the ratio tells us. Indicate whether a higher or lower ratio is better. Then compare the two companies on this basis. Remembereach ratio below requires a comparison. Earnings per Share of Common Stock (basic - common) Current Ratio As given in the income statement $ 0.89 $ 3.01 Current assets Current liabilities $197,241 $60,765 = 3.25 $2,113,485 $1,471,110 = 1.44 Gross Profit Margin Gross profit Net Sales $183,321 $549,870 = 33.3% $2,859,882 $6,644,252 = 43.0% Rate of Return (Net Profit Margin) on Sales Net Income Net Sales $52,004 $549,870 = 9.5% $660,931 $6,644,252 = 9.9% Cost of Goods Sold Average Inventory $365,573 $67,072 5.5 times $3,784,370 $641,108 365 days Inventory turnover 365 5.5 = 67 days 365 5.9 = 62 days Accounts Receivable Turnover Net credit sales Average Net Accounts Receivable $549,870 $42,002 = 13.1 $6,644,252 $430,441 = 15.4 Days' sales outstanding (DSO) 365 Receivable Turnover Ratio 365 13.1 27.9 days 365 15.4 = 23.6 days Net Sales Average Total Assets $549,870 $852,297 = 0.65 $6,644,252 $4,580,967 = 1.45 Rate of return on sales times Asset Turnover $52,004 $852,297 = 6.1% $660,931 $4,580,967 = 14.4% Total Liabilities Total Assets $196,922 $846,737 = 23.3% $3,706,466 $4,412,199 = 84.0% Net Income + Int Expense + Tax Expense Interest Expense $74,301 $137 = 542.3 1,111,148 95,569 = 11.6 Dividend per share of common stock (Yahoo Finance 11/1/2013) Market price per share of common stock (Yahoo Finance 11/1/2013) $0.32 $31.72 = 1.0% $1.94 $98.85 = 2.0% Net income - Preferred dividends Average common stockholders' equity $52,431 $657,875 8.0% $660,931 $964,658 = 68.5% Inventory Turnover Days' inventory outstanding (DIO) Asset turnover Rate of Return on Total Assets (ROA) Debt Ratio Times-Interest-Earned Ratio Dividend Yield Rate of Return on Common Stockholders' Equity (ROE) Free cash flow Price/Earnings Ratio (Multiple) (please see the instructions for the dates to use for this ratio) Net cash provided by operating activities minus cash payments earmarked for investments in plant assets 12/31/2012 EPS as of 12/31/2012 $93,033 $25.92 $0.89 = = = = $93,033 29 5.9 times $836,100 $ 836,100 = $72.22 $3.01 = 24 You all get the chance to play the role of financial analyst below. The summary should be a comparison of each company's performance for each major category of ratios (liquidity, solvency, and profitability) listed below. Focus on major differences as you compare each company's performance. A nice way to conclude is to state which company you feel is the better investment and why. Measuring Ability to Pay Current Liabilities: Tootsie Roll has the advantage for the current ratio. Tootsie Roll has $3.25 in current assets for every dollar in current liabilities while Hershey has only $1.44 in current assets for every dollar in current liabilities. Measuring Turnover: Hershey has the advantage for the inventory turnover and accounts receivable turnover ratios. Hershey turns over their inventory 5.9 times to Tootsie Roll's 5.5 times and Hershey turns over their accounts receivable 15.4 times to Tootsie Roll's 13.1 times. Measuring Leverage- Overall Ability to Pay Debts: Tootsie Roll has significantly less debt than Hershey as evidenced by Tootsie Roll's 23% debt to asset ratio as compared to Hershey's 84% debt to asset ratio. Tootsie Roll can cover their interest expense 504 times with income before interest and taxes while Hershey can only cover their interest expense 11 times with their income before interest and taxes. Tootsie Roll has the advantage for each of these ratios. Measuring Profitability: Hershey has the advantage for each of the profitability ratios. Hershey has a significant edge in return on common stockholders' equity with a 68.5% return on common stockholders' equity as compared to Tootsie Roll's 8.0% return on common stockholders' equity. Hershey also has a higher gross profit rate (43.0% to 33.3%) and higher profit margin ratio (9.9% to 9.5%). Analyzing Stock as an Investment: Hershey returns a 2% dividend yield to their investors while Tootsie Roll's yield is 1%. Hershey has positive free cash flow of $836.1 million while Tootsie Roll has positive free cash flow of $93 million. Free cash flow can be used to undertake acquisitions, pay additional dividends, pay down debt, or buy back stock. Conclusion: Tootsie Roll is the safer investment when you examine their ability to pay current liabilities and overall liabilities; however, Hershey has the edge for all of the profitability ratios. For the conservative investor, Tootsie Roll looks like the way to go because of their strong current and times-interest-earned ratios. For the growth-oriented investor, Hershey is the way to go because of their stronger profitability ratios and large amount of free cash flow. The Appendices of your textbook and any information you use to profile the companies should be cited as a reference below. Big Charts for Hershey (2013). Retrieved October 29, 2013 from http://bigcharts.marketwatch.com/historical/default.asp? symb=HSY&closeDate=12%2F31%2F2012&x=0&y=0 Big Charts for Tootsie Roll (2013). Retrieved October 29, 2013 from http://bigcharts.marketwatch.com/historical/default.asp? symb=TR&closeDate=12%2F31%2F12&x=12&y=19 Harrison, W.T., Horngrenm C.T. & Thomas, C.W. (2013). Financial Accounting, 9th ed. Upper Saddle River, NJ: Pearson Education, Inc. Hershey's 2012 Annual Report (2013). Retrieved October 29, 2013 from http://www.thehersheycompany.com/assets/pdfs/hersheycompany/TheHersheyCompany_10K_20130222.pdf HSY Profile (2013). Retrieved October 31, 2013 from http://finance.yahoo.com/q/pr?s=HSY+Profile HSY Stock Price (2013). Retrieved November 1, 2013 from http://finance.yahoo.com/q?s=hsy&ql=1 Tootsie Roll Industries 2012 Annual Report (2013). Retrieved October 29, 2013 from http://www.tootsie.com/financial/fin_247.pdf TR Profile (2013). Retrieved October 31, 2013 from http://finance.yahoo.com/q/pr?s=TR+Profile TR Stock Price (2013). Retrieved November 1, 2013 from http://finance.yahoo.com/q?s=TR&ql=1