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MEMO

To: Gregory Thompson

From: Mohammed Alsharif

Date: January 25, 2016

Subject: Analyzing Microsoft financial statements

Microsoft and Oracle DuPont analysis

Microsoft Company known as one of the most successful tech company in the world and it has reported $75 billion as total revenues on 2011. Oracle Company it is a competitor for Microsoft, and it had reached $ 40 billion on 2011. We will use the DuPont analysis to analyze the companies’ ability to increase its return on equity. In other words, we will break down the return on equity ratio to explain how companies increased their performance, and compared companies result with each other. The DuPont analysis looks at three main components of the ROE ratio.

* Profit Margin

* Total Asset Turnover

* Financial Leverage

DuPont Formula = Profit Margin X Total Asset Turnover X Financial Leverage.

| Microsoft  | Oracle  |

Profit Margin  | 33.1% | 24%  |

Total Asset Turnover  | .718 | .527  |

Financial Leverage  | 1.904 | 1.827  |

DuPont 45.25% 23.1%

The results show that Microsoft has greater profit margin, better turnover on asset and a better financial leverage.

Microsoft common size analysis

A common size income statement is simply each account is express as a percentage of the value of the revenue.

| 2011 | 2010 | 2011 | 2010 |

Revenue | 69,943 | 62,484 | 100% | 100% |

Cost of revenue | 15,577 | 12,395 | 22% | 20% |

Research and development | 9,043 | 8,714 | 13% | 14% |

Sales and marketing | 13,940 | 13,214 | 20% | 21% |

General and administrative | 4,222 | 4,063 | 6% | 7% |

Operating income | 27,161 | 24,098 | 39% | 39% |

Interest Expense | 295 | 191 | .421% | ,304% |

Income before income taxes | 28,071 | 25,013 | 40% | 40% |

Provision for income taxes | 4,921 | 6,253 | 7% | 10% |

Net income | 23,150 | 18,760 | 33%...