Project part 1 2 and 3 - Part-1 Earning Per Share Oracle...

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Part-1 Ratios Oracle Microsoft Ratios Ratio Earning Per Share 0.83 1.44 Net Income 4,274,000,000 14,065,000,000 No. of Common Shares 5,170,000,000 9,742,000,000 Current Ratio 1.37 1.69 Current Assets 12,883,000,000 40,168,000,000 Current Liabilities 9,387,000,000 23,754,000,000 Gross Profit Rate(%) 33.20 36.23 Gross Profit 5,974,000,000 18,524,000,000 Net Sales 17,996,000,000 51,122,000,000 Profit Margin Ratio(%) 23.75 27.51 Net Profit 4,274,000,000 14,065,000,000 Net Sales 17,996,000,000 51,122,000,000
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Inventory Turnover Ratio 0.83 8.21 Cost of Goods Sold 4,331,000,000 10,693,000,000 Average Inventory 5,246,000,000 1,302,500,000 Days in Inventory 442 44 Days in a year 365 365
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Interpretation and comparison between the Earnings per share is a measure of profitability of a firm from owners' poin of view. The earnings per share is a good measure of profitability and when compared with EPS of similar companies, it gives a view of the comparative earnings or earnings power of the firm. EPS pf Microsoft Industries of $1.44 is higher than the EPS of The ORacle Company that is $0.83. This ratio is a general and quick measure of liquidity of a firm. It represents the margin of safety or cushion available to the creditors. The current ratio measures the ability of the company to meet its short-term obligations and reflect the short-term financial strength/solvency of the company. it is analyzed that "Microsoft" has much strong liquidity than "Oracle" as its current ratio is 1.69 as compare to 1.37 of Oracle. It is important to note that a very high ratio of current assets to current liabilities may be indicative of slack management practices, as it might signal excessive inventories for the current requirements and poor credit management in terms of overextended accounts receivables. At the same time, the company may not be making full use of its current borrowing capacity. Therefore a company should have a reasonable current ratio. Gross profit ratio may be indicated to what extent the selling prices of goods per unit may be reduced without incurring losses on operations. It reflects efficiency with which a firm produces its products. As the gross profit is found by deducting cost of goods sold from net sales, higher the gross profit better it is. Gross profit ratio of Microsoft is 36.23% while the gross profit ratio of Oracle is 33.20%. Gross profit ratio of Oracle is slightly better. The net profit margin is indicative of management’s ability to operate the business with sufficient success not only to recover from revenues of the period, the cost of merchandise or services, the expenses of operating the business (including depreciation) and the cost of the borrowed funds, but also to leave a margin of reasonable compensation to the owners for providing their capital at risk. The ratio of net profit (after interest and tax) to sales essentially expresses the cost price effectiveness of the operation. Profit margin of Microsoft is much better than Oracle as it has profit margin of
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This note was uploaded on 08/20/2011 for the course ACCT 504 taught by Professor Hulme during the Spring '11 term at Keller Graduate School of Management.

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Project part 1 2 and 3 - Part-1 Earning Per Share Oracle...

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