Go to Doc Sharing for the detailed Course Project instructions and grading rubric.

Complete your Title page on this tab. Please include your name, the course, the date, your instructor's name, and the title for the Project.

Latoya Brown Acoounting 504 15-Feb-13 Professor Malinda Marsh Oracles and Micsoft project

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 used for the Profiles on the Bibliography tab.

The history of Oracle: It all began when Larry Ellison saw an opportunity other companies missed: a description of a working prototype for a relational database. No company had committed to commercializing the technology, but Ellison and co-founders Bob Miner and Ed Oates realized the tremendous business potential of the relational database model. None of them realized at the time that the company they formed would change the face of business computing.Throughout its history Oracle has proved it can build for the future on the foundation of its innovations and its knowledge of customer challenges and successes analyzed by the best technical and business minds in the world.

History of Microsoft Microsoft is the largest multinational computer software corporation in the world. It was founded by Bill Gates and Paul Allen in 1975. Their main business is designing, producing, and licensing software. However, the xbox and gaming is now becoming a significant part of their business. We repair Xbox, by the way. The core business comprises of operating systems, business applications, programming languages, and internet tools. Microsoft is the leader in software technology as evidenced by their huge number of customers worldwide. There is some Microsoft software installed on almost every personal computer in existence, and as a result they are able to set software standards and create new markets along the way.Microsoft finally launched the first Windows operating system in November 1985 after spending thousands of hours developing it. But it ran very slowly on the primitive hardware and so it failed to capture the market. Not to be discouraged, Microsoft continued to improve the Windows OS, releasing new versions over the years and it eventually became the most successful and dominant microcomputer operating system the world has ever known. Today, with over 50,000 employees working around the world and estimated revenue of about $40 billion per year, Microsoft Inc. is still going strong and continues to be the leader in software technology.

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. Interpretation and Comparison between the two companies' ratios (Reading the Appendix of Chapter 13 will help you prepare the commentary)
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 2 companies on this basis. Remember - each ratio below requires a comparison.

Oracle Corpations Ratios

Microsoft Corporation Ratios

Microsoft offers a higer earning per share to their stockholder then Oracle. Investors who own or decide to purchase shares in Microsoft will see an higher return on investment. Earnings per share As given in the income statement 1.69 2.73

Current ratio

Current assets Current liabilities

39,174 = $14,192

2.76

$74,918 $28,774

2.60

Gross Profit Ratio

Gross profit Net Sales

$27,224 $35,622

76.4%

$54,366 $69,943

77.7%

Profit margin ratio

Net Income Net Sales

$8,547 $35,622

24.0%

$23,150 $69,943

33.1%

Inventory Turnover

Cost of Goods Sold Average Inventory

$8,398 $281

29.9

$15,577 $1,056

14.8 times

Days in Inventory

365 days Inventory turnover

365 39.2

9 days

365 9.8

37 days

Receivable Turnover Ratio

Net credit sales Average Net Receivables 365 Receivable Turnover Ratio

$35,622 $6,107 365 8.4

5.8

$69,643 $14,987 365 5.2

4.6

Average Collection Period

43.5 days

70.2

Assets Turnover Ratio

Net Sales Average Total Assets

$35,622 $67,557

0.53

$69,943 $97,409

0.72

Return on Assets Ratio

Net Income Average Total Assets

$8,547 $67,557

12.7%

$23,150 $97,409

23.8%

Debt to Total Assets Ratio

Total Liabilities Total Assets

$33,290 $73,535

45.3%

$51,621 $108,704

47.5%

Times Interest Earned Ratio

Net Income + Int Expense + Tax Expense Interest Expense

$10,603 -$808

-13.1

28,366 -295

-96.2

Payout ratio

Cash dividend declared on common stock Net income Net income - Preferred stock dividend Average common stockholders' equity

-$1,061 $8,547 8,547 35,722.00

-12.4%

-$5,180 $23,150 $23,150 $51,629

-22.4%

Return on Common Stockholders' Equity

23.9%

44.8%

Free cash flow

Cash provided by operations minus capital expenditures minus cash dividends paid

$9,703

$9,703

$21,814 =

$21,814

Current cash debt coverage ratio

Cash provided by operations Average current liabilities

$11,214 $14,442

0.78

$26,994 $27,161

0.99

Cash debt coverage ratio

Cash provided by operations Average total liabilities

$11,214 $31,835

0.35

$26,994 $45,780

0.59

Price/Earnings ratio

Market price as of 12/31/2009 EPS as of 12/31/2009

#DIV/0!

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.

Solvency: Tootsie Roll has the advantage for each of the solvency ratios with the exception of free cash flow. Tootsie Roll can cover their interest expense 265 times with income before interest and taxes while Hershey can only cover their interest expense 8 times with their income before interest and taxes. Hershey has $676 million in free cash flow while Tootsie Roll has approximately $37 million in free cash flow. Free cash flow can be used to undertake acquisitions, pay additional dividends, pay down debt, or by back stock.

Profitability: Hershey has the advantage for each of the profitability ratios with the exception of the PriceEarnings and profit margin ratios. Hershey has a significant edge in asset turnover and return on common stockholders' equity. Hershey has $1.45 in sales for every dollar in assets while Tootsie Roll has 60 cents in sales for every dollar in assets. Hershey has a return on common stockholders' equity ratio of 78% compared to 8% for Tootsie Roll. Hershey also has a much larger payout ratio (60% to 33%).

Conclusion: Tootsie Roll is the safer investment when you examine the liquidity and solvency ratios; however, Hershey has the edge for two significant profitability ratios. These ratios are return on common stockholders' equity and the payout ratio. That said, since I believe in the importance of fiscal strength, I would invest in Tootsie Roll; however, if I was looking for more growth potential, I would invest in Hershey because of their stronger profitability ratios.

The Appendixes of your textbook and any information you use to profile the companies should be cited as a reference Oracle(2013) Oracle's historty innvovaton leadership, prevents. Retrieved February 4, 2013 from online website http://www.oracle.com/us/corporate/history/index.html Service Team (2011): A brief history of Microsoft. Retrieved February 4, 2013 from online website http://www.serviceteam.co.uk/diy_articles/a_brief_history_of_microsoft.html

e cited as a reference below.