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EPS/EBIT Analysis

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EPS/EBIT Analysis

This analysis is based on Microsoft Corporation’s 2022financial statements. From the

financial statements, the company reported earnings before interest and taxes were $83,383, and

its earnings per share were $1.03 (Microsoft Corporation, 2022). This information formed the

basis of the analysis after determining the company's earnings before interest and taxes in a

pessimistic, realistic, and optimistic scenario. The analysis shows that the company's earnings

per share are the highest when it is financed by equity only and the lowest when it is financed by

debt only. This is so because financing from equity increases the number of shares outstanding,

whereas financing by debt capital decreases the company's earnings attributable to the equity

stockholders due to increased interest (CFI, 2022). As such, it is recommended that the company

combine equity financing and debt financing to obtain desirable results on its earnings per share.
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References

CFI (2022). Debt vs. Equity Financing. Corporate Finance Institute.

https://corporatefinanceinstitute.com/resources/commercial-lending/debt-vs-equity/.

Microsoft Corporation (2022). Annual Report 2022.

https://www.microsoft.com/investor/reports/ar22/index.html