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Case on Microsoft Corporation

Even more amazing is the fact that Microsoft's current debt to total debt ratio is 1. This eliminates the possibility that Microsoft chose to use mostly long term liabilities in order to make this ratio look better. Microsoft has absolutely zero in long term liabilities. When they owe another company some money, it gets paid within one year.
             Capital Structure.
             Microsoft's debt to equity ratio is 63% below that of the industry (FY 91: Microsoft .22 vs. industry .60). A low ratio means that Microsoft has greater long-term financial safety and also has greater flexibility to borrow money if needed. This low ratio is also due to the fact that Microsoft's total debts consist only of current debt (FY 91: 293.4 MM) and their total assets (FY 91: 1645 MM) are much greater than their total liabilities (FY 91: 293.4 MM). Microsoft has managed to keep this ratio low over the past five years (FY 87-91: .20, .31, .28, .20, .22, respectively). .
             Microsoft's debt to asset ratio is 60% below the industry (FY 91: Microsoft .18 vs. industry .45). This ratio measures the proportion of total assets financed by the firm's creditors. A low ratio means that Microsoft is using less of other people's money to generate profits. This again is due to Microsoft having high assets (FY 91: 1645 MM) and low debt (FY 91: 293.4 MM). .
             Microsoft's current debt to total debt is 37% higher than the industry average (FY 91: Microsoft 1.0 vs. industry .73). This is because the only debt that Microsoft has is current debt. Microsoft has the unique ability to pay off all its debt within one year because of all the cash and assets that the company has at its disposal. .
             Performance .
             Microsoft's gross profit margin is 41% better than the industry (FY 91: Microsoft 80.3% vs. industry 57.0%). This ratio measures the percentage of sales remaining after the firm has paid for its goods. This means that Microsoft has more ability than the industries to cover expenses other than cost of goods sold and still make a profit.


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