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Case Study 1 "Microsoft's Financial Reporting Strategy" Harvard case number 9-100-027, Professors Dawn Matsumoto and Robert Bowen 1 1 Difference between Market and Book value of equity 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. Next, it can be seen from the company's financial statements that the ratio of the current assets to the non-current assets has always been greater than 1, implying a good liquidity of the firm. More specifically, the ratio of around 1.2 indicates that a major portion of its assets is liquid. This might also be a reason for investors' valuation of the share at $85 compared...

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