Financial Situation Assessment of the Selected Company

Ruonan Hu

Bachelor's thesis

Abstract:

Financial analysis is a process that provides effective information for investors and managers by collecting and sorting out the effective data in the financial accounting reports related to enterprises, and then analyzing the financial situation of the company with the financial analysis method. Financial analysis is one of the essential parts of the complex financial management of a company. The goal of this thesis is to analyze the financial situation of selected company with the help of some financial methods, then find out the problems of the company and provide suggestions to promote its future development. Microsoft is the object of this thesis. Microsoft Corporation is founded in 1975 by Bill Gates and Paul Allen, it is an American multinational technology company with headquarters in Redmond, Washington. It is the forerunner of the world’s personal computer software development. This thesis includes 5 chapters, chapter 1 is the introduction, it is the outline of the total text, the definition of financial analysis and framework of the thesis are introduced. Chapter 2 is the description of the financial analysis methods, it is the theoretical part of financial analysis, it includes the introduction of financial statements and financial analysis methods. Financial analysis methods include the common-size analysis, ratio analysis and Dupont analysis. Chapter 3 is the profile of selected company, the basic information of Microsoft is introduced, such as the history of Microsoft, the SWOT analysis are also used to analysis the financial condition of Microsoft. Chapter 4 is the evaluation of the financial situation of the selected company, it is the calculation part. In this part, the financial analysis methods are used to evaluate the financial situation of Microsoft. Common-size analysis includes horizontal analysis and vertical analysis. Financial ratio analysis includes liquidity ratio, solvency ratio, profitability ratio and activity ratio. Dupont analysis refers to divide the formula of ROE into 3 parts, then evaluate which part affects the ROE most. Chapter 5 is the conclusion part, I draw a conclusion on the total thesis and provide some suggestions for the future development of Microsoft. Through the analysis, we could see the financial performance of Microsoft is good from 2015 to 2019, the liquidity, solvency, profitability and operation were reasonable, but it also faced challenges. About the liquidity, though Microsoft could meet its current liabilities easily, it held too much cash, it was not efficient. Then, Microsoft had good solvency ability, but the debts had large proportion in capital. As for the profitability, Microsoft got lots of profit, it also has good potential to earn more money in the future, but the investors should consider it carefully, there are also risks. Last, the activity of Microsoft was not efficient enough, Microsoft should control its cost to increase the profit and improve the efficiency. According to the financial situation of Microsoft, we can see, Microsoft has lots of strengths and opportunities but it is facing lots of challenges, it has many competitors, the suggestion for Microsoft is innovation, Microsoft must update its products quickly, providing more convenient services. In the process of innovation, reduce the cost as much as possible, but also focus on the quality of products, improve the security of products.

Abstract:

Financial analysis is a process that provides effective information for investors and managers by collecting and sorting out the effective data in the financial accounting reports related to enterprises, and then analyzing the financial situation of the company with the financial analysis method. Financial analysis is one of the essential parts of the complex financial management of a company. The goal of this thesis is to analyze the financial situation of selected company with the help of some financial methods, then find out the problems of the company and provide suggestions to promote its future development. Microsoft is the object of this thesis. Microsoft Corporation is founded in 1975 by Bill Gates and Paul Allen, it is an American multinational technology company with headquarters in Redmond, Washington. It is the forerunner of the world’s personal computer software development. This thesis includes 5 chapters, chapter 1 is the introduction, it is the outline of the total text, the definition of financial analysis and framework of the thesis are introduced. Chapter 2 is the description of the financial analysis methods, it is the theoretical part of financial analysis, it includes the introduction of financial statements and financial analysis methods. Financial analysis methods include the common-size analysis, ratio analysis and Dupont analysis. Chapter 3 is the profile of selected company, the basic information of Microsoft is introduced, such as the history of Microsoft, the SWOT analysis are also used to analysis the financial condition of Microsoft. Chapter 4 is the evaluation of the financial situation of the selected company, it is the calculation part. In this part, the financial analysis methods are used to evaluate the financial situation of Microsoft. Common-size analysis includes horizontal analysis and vertical analysis. Financial ratio analysis includes liquidity ratio, solvency ratio, profitability ratio and activity ratio. Dupont analysis refers to divide the formula of ROE into 3 parts, then evaluate which part affects the ROE most. Chapter 5 is the conclusion part, I draw a conclusion on the total thesis and provide some suggestions for the future development of Microsoft. Through the analysis, we could see the financial performance of Microsoft is good from 2015 to 2019, the liquidity, solvency, profitability and operation were reasonable, but it also faced challenges. About the liquidity, though Microsoft could meet its current liabilities easily, it held too much cash, it was not efficient. Then, Microsoft had good solvency ability, but the debts had large proportion in capital. As for the profitability, Microsoft got lots of profit, it also has good potential to earn more money in the future, but the investors should consider it carefully, there are also risks. Last, the activity of Microsoft was not efficient enough, Microsoft should control its cost to increase the profit and improve the efficiency. According to the financial situation of Microsoft, we can see, Microsoft has lots of strengths and opportunities but it is facing lots of challenges, it has many competitors, the suggestion for Microsoft is innovation, Microsoft must update its products quickly, providing more convenient services. In the process of innovation, reduce the cost as much as possible, but also focus on the quality of products, improve the security of products.

Keywords

Financial analysis, Microsoft Corporation, SWOT analysis, Balance sheet, Income statement, Cash flow statement, Horizontal analysis, Vertical analysis, Liquidity ratio, Solvency ratio, Profitability ratio, Activity ratio, Dupont analysis, Financial performance, Investors, Managers, Absolute change, Relative change, Risk, Assets, Debts, Equity

Keywords

Financial analysis, Microsoft Corporation, SWOT analysis, Balance sheet, Income statement, Cash flow statement, Horizontal analysis, Vertical analysis, Liquidity ratio, Solvency ratio, Profitability ratio, Activity ratio, Dupont analysis, Financial performance, Investors, Managers, Absolute change, Relative change, Risk, Assets, Debts, Equity

Language used: English

Date on which the thesis was submitted / produced: 7. 5. 2020

Thesis defence

• Date of defence: 8. 7. 2020
• Supervisor: Haochen Guo
• Reader: Josef Novotný

VSB – Technical University of Ostrava

Ekonomická fakulta

Bachelor programme / field:
Hospodářská politika a správa / Finance