Analysis of Microsoft Annual Report
Who is responsible for preparation of financial statements? How is this responsibility fulfilled?
Microsoft Company has the responsibility of preparing its financial statements; it is the duty of the Company’s accounting officers to take care of this responsibility with supervision and involvement of the management teams, such as the C.E.O and C. F O. The management evaluates disclosures and procedures controls to ensure they are effective. The management of internal controls through the Company’s internal body, over its financial reporting creates and maintains sufficient internal control to ensure proper reporting of finances. It ensures financial reporting is as per the Unites States generally accepted accounting principles. Internal controls ensures that fair and accurately detailed records are maintained; proper recording and maintenance of accounting records; proper authorization is obtained for companies capital acquisitions and disposals, receipts, and other revenue expenditures.
What are the responsibilities of the auditors and how do they fulfill their responsibilities? Which audit firm performs the audit of the company?
The audit is conducted by Deloitte & Touche LLP Company in Seattle, Washington.
The auditor’s responsibilities include auditing the internal controls established for the company’s financial reporting in accordance to 2013 Internal Control Integrated Framework. This is to ensure there are strong internal control systems in the Microsoft Company’s maintenance of financial information records as well as proper internal controls in preparation of financial statements
The auditors also conduct audits on the financial statements of Microsoft Company to express their view on them. To fulfill the responsibilities, the auditors are required to conduct the audit according to the United States Public Company Accounting Oversight Board standards that requires planning and carrying out the audits to get reasonable assurance that there are no material misstatements on the financial statements. This includes performing tests and ensuring disclosures and financial information is supported by adequate evidence, assessment of principles of accounting and estimates used by management, and overall evaluation of presentation of financial statements
What is the main business of the company?
The main business operations involve offering an array products and services in form of software to both local and global markets. Microsoft Company designs, manufactures, licenses, sells, and delivers these software products and services to their customers all over the world to earn revenues.
Computation of ratios and amounts
- The rate of return on shareholders’ equity for 2014
= Net Income x 100
= 22,074,000 x 100
= 24.56 %
- The debt to equity ratio at June 30, 2014
= long term debt x 100
= 20,645,000 x 100
- The accounts receivable turnover for 2014
= Credit sales
Where average debtor = opening debtors + closing debtors
Average Debtors = 17,486,000 + 19,544,000
- The net profit margin for 2014.
= Net Income before Interest and Tax x 100
= 27,820,000 x 100
= 32.04 %
- The net change in cash flows for 2014.
As per the cash flow statement, the net change in cash flow is $ 8, 669,000
- The amount of common stock cash dividends paid in 2014.
The amount of common stock dividend paid in 2014 as per the cash flow statement is $ 8,879,000
7. The gross profit ratio for 2014.
= Gross Profit x 100
= 59,899,000 x 100
= 68.98 %