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Zoom And Microsoft Managerial Accounting Coursework

Managerial Accounting Part 4 Individual Analysis

To a large extent, the financial statements of both companies indicate that there has been sustained increase in both income and shareholders equity. However, Zoom registered greater revenue growth than Microsoft within the two years under consideration, i.e. between the years 2019 and 2020. More specifically, while Zoom had an 88.3% increase in revenue within the said period, Microsoft registered a 13.6% increase in the same. There was also significant growth in total asset value within the said period in the case of Zoom. While the company had total assets of $1.2 billion in the year 2019, the total asset figure for the year 2020 has been captured as $5.2 billion. This essentially represents a 310% increase in asset value over the two years under consideration. Microsofts total assets increased from $286 billion to $301 billion. It is clear from the financial statements of both companies that Microsoft also has more assets in its

However, being a manufacturing entity, a huge chunk of its asset category happens to be inventory. In seeking to determine which company happens to be in better financial health, there would also be need to take into consideration their long-term solvency. Financial leverage ratios, as Franklin, Graybeal, and Cooper (2019) observe, could come in handy in this endeavor. One such ratio would be the debt ratio. The said ratio is computed by dividing the total debt figure with the total assets figure. In the case of Microsoft, we have a total debt ratio of 0.19. On the other hand, in the case of Zoom, we have a debt ratio of 0.07. This is an indication that both companies have more assets than debt. As Sittle and Wearing (2008) point out, a debt ratio less than 100% indicates that a company has more assets than debt. (p. 311). However, the lower ratio in the case of Zoom demonstrates that equity funds a…

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References


Franklin, M., Graybeal, P. & Cooper, D. (2019). Principles of Accounting. 12th Media Services.


Sittle, J. & Wearing, R. (2008). Financial Accounting. SAGE.


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