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Microsoft's Financial Strategy
Member rating: No Rating | Words: | Submitted: Mon Jun 21 2004
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Microsoft's Financial Strategy: 1 Difference between Market and Book value of equity * Falling current ratio (current assets / current liabilities) * High ROE From Exhibit 1 (Financial performance since initial public offering) in the article, it can be inferred that Microsoft achieved consistently increasing growth in revenues from $140M to around $20B and net income from $24M to around $8B, from years 1985 to1999. This tremendous growth may be one of the reasons for the difference in market value and book value of its equity. Secondly, it can be seen from the company's financial statements that the current ratio - window dressing Thirdly, for the year 1999, the market value of each share was around $85, which grew from around $25 in 1986. But the book value of equity is based on the amount of money raised from issuing stocks over the period from 1986 to 1999. This is a likely cause for the difference...
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