Microsoft Finance - 1077 Words

. *Microsoft’s Financial Reporting Strategy 1. What are the factors that likely explain the difference between Microsoft’s market value of equity and its reported book value of equity? The most obvious reason for the difference between the market value of equity and the book value of equity is the inability to record certain intangible assets such as brand value, customer loyalty, and perhaps most importantly, human capital. These intangible assets are likely to provide tremendous earnings growth in the future which determines the company’s market value. Notice also that the company’s choice of conservative accounting policies has the effect of depressing the company’s book value of equity. 2. What effect did Microsoft’s software†¦show more content†¦Even as reported the first quarter of 1997 represented the lowest quarterly revenue growth in the company’s history. While the timing of the company’s decision to defer rev enues appears particularly opportune, the introduction of Windows 95 to the market provides a legitimate reason for the decision. As described in the case, the company expected to integrate its Internet technologies into both Windows 95 and Office 97 â€Å"at no additional cost to customers.† Arguably, then, sales of these products were improved by these implicit promises and a portion of these revenues should be deferred into the future. However, to the extent the development costs of providing these enhancements have already been incurred and expensed under the company’s current treatment of software development costs, the company’s deferral of revenues exaggerates the mismatching of expenses with revenues. Still, the company’s policy on revenue recognition is more consistent with accrual accounting than is the company’s policy on software development expenses. 4. Describe Microsoft’s overall financial reporting strategy in 1997-99. Why di d the company adopt this strategy and why was the SEC concerned about it? 1. Hiding profits—Microsoft’s phenomenal success may have provided them with an incentive to hide their success from regulators and competitors. Given the company’s history with regulatoryShow MoreRelatedMicrosoft Econmic Down Turn 20091506 Words   |  7 PagesMicrosoft cuts jobs as profits fall US software giant Microsoft is to cut up to 5,000 jobs over the next 18 months - including 1,400 immediately - due to a slowing economy and weak spending on technology. Microsoft employs 1,200 people at Sandyford in Dublin, but a spokesperson said the cuts would have only a very minor impact in Ireland. It is believed fewer than 20 jobs will go. Microsoft said net profit fell by 11% in the second quarter of its financial year compared with a year earlierRead MoreEssay on Microsoft Case Study943 Words   |  4 Pages1. INTRODUCTION Microsoft founded in 1975 by Bill Gates. It is the largest information technology (IT) company. For the year 2005, its revenue was US$39,788 million and net income after taxes US$12,254. Nevertheless, since the early 2000s, a string of bad news had seriously undermined the future growth of Microsoft. Personal Computer (PC) operating system and basic office are the near-monopoly software in the category. Purchase of QDOS (quick and dirty operating system) from Seattle programmerRead MoreFinancial Analysis Of Microsoft Corporation971 Words   |  4 PagesFinancial Analysis of Microsoft Corporation The student learner was to pick a publicly traded company and perform a financial analysis based on the company’s financial statements. The student learner chose Microsoft Corporation. The student learner will obtain, analyze, and determine Microsoft’s financial well-being. Microsoft has better return on assets, but they can improve in other areas. 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TheRead MoreProject Deliverable 1: Project Plan Inception Essay1192 Words   |  5 PagesGB hard drive b) Hardware Client - PII (minimum) 500 MHz c) Operating System Server - Windows 2000 Server or Windows 2003 Server d) Operating System Client - Windows 2000 or Windows XP e) Database Server - Sybase or Microsoft SQL Server 2000 f) Database : Sybase/Microsoft SQL Server Additional Modules a) Process Values (500 – 15.000 Values/min) b) Messages c) Redundant Coupling d) Data Backup e) Backup Server f) Batch Archiving, Batch Reports (incl. electronic signature) g) ManualRead MoreStrategic Initiative1018 Words   |  5 Pagesï » ¿ Strategic Initiative UOPX Finance for Business FIN/370 Davidson Jensen November 13, 2013 In this paper the team will be discussing the relationship between strategic planning and financial planning for Microsoft. The paper will discuss strategic planning initiative and identify a strategic initiative discussed in the Microsoft annual report. 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