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Apple versus Microsoft

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I need help understanding cash flow analysis. I do not understand how to assess the financial position Apple and compare it to one Microsoft. The emphasis is on cash flow for this analysis.

1.Compute the return on assets, profit margin and asset utilization rate for Apple and Microsoft.
2.Assess your Apple's competitive financial position.
3.Compute the free cash flow for Apple and Microsoft.
4.Assess your Apple's relative cash position and comment on its receipt and use of cash during the year.
I need to accomplish this in 2-3 pages in APA.

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Solution Summary

Compares Apple's financial statements with Microsoft's financial statements.

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In order to compare the performance of Apple versus Microsoft, I will use Wall Street Journal's data found on the following links:

http://quotes.wsj.com/AAPL/financials/Ratios
http://quotes.wsj.com/MSFT/financials/Ratios

Let us first start with Return on Assets ratio. Apple's ROA is 19.34 compared to Microsoft's ROA of 16.47. On the ROE front, Apple's ratio of 30.64 is quite similar to Microsoft's 30.09. On the basis of this data, we can say that Apple's performs little better in terms of providing returns on assets and investor's equity as compared to Microsoft and thus, can be said to performing a little better than Microsoft.

If we see the profit margin, Microsoft scores ahead of Apple with a net margin of 28.15% as compared to Apple 21.68%. Microsoft's ...

Solution provided by:
Sandeep Bardia, MBA
Education
  • BCom, SGTB Khalsa College, University of Delhi
  • MBA, Rochester Institute of Technology
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