Course Project Essay

815 Words Mar 21st, 2012 4 Pages
Oracle is one of the leading companies in the software and hardware industry. Oracle develops, manufactures and distributes various kinds of software and hardware systems worldwide. The company was founded in 1977 and is headquartered in Redwood City, California. Oracle currently has about 108,000 full-time employees worldwide.

Microsoft Corporation develops, manufactures and distributes a range of software products and services for various computing devices worldwide. Microsoft also manufactures gaming systems such as Xbox 360 and related entertainments systems. Microsoft was founded in 1975 and is headquartered in Redmond, Washington. Microsoft currently employs about 90,000 full-time employees worldwide.

Liquidity: Tootsie
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Free cash flow can be used to undertake acquisitions, pay additional dividends, pay down debt, or by back stock.

Solvency: Microsoft has a clear advantage for each of the solvency ratios. Microsoft has not interest expense as they do not have any long-term loans whereas Oracle can cover their interest expense 18.5 times with their income before interest and taxes. Microsoft has $11,727 in free cash flow while Oracle has $5,201 in free cash flow. Free cash flow can be used to undertake acquisitions, pay additional dividends, pay down debt, or buy back stock. Also, Microsoft has $0.58 of cash provided by operating activities for every $1 in average total liabilities whereas Oracle has $0.35.

Profitability: The results are mixed for the profitability ratios. Tootsie Roll has an edge in gross profit, profit margin, and return on assets. Tootsie Roll has a 10% profit margin versus 4% for Hershey. Hershey has a significant edge in asset turnover and return on common stockholders' equity. Hershey has a return on common stockholders' equity ratio of 34% compared to 8% for Tootsie Roll. Hershey also has a much larger payout (118% to 34%) and has a higher P/E ratio meaning the stock market is more optimistic about Hershey's future prospects.

Profitability: Microsoft again has the clear advantage over Oracle for all of the profitability ratios. Microsoft’s Gross Profit Ratio of 36.2% is better than Oracle’s 33.2%. Microsoft’s Profit Margin Ratio of 27.5%

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