(TCO F) What currency exchange rate would be used to translate the asset and

liability balances of a foreign subsidiary? What is the justification for using this
exchange rate? (Points: 15)
Assets and liabilities are translated using the current exchange rate, the rate in
effect at the balance sheet date. This rate is chosen because assets and liabilities
are expected to affect future cash flows. Therefore, they should be translated using
the most up-to-date exchange rates available.
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Data Case for Chapter 2: Introduction to Financial Statement Analysis
This is your second interview with a prestigious brokerage firm for a job as an equity
analyst. You survived the morning interviews with the department manager and the Vice
President of Equity. Everything has gone so well that they want to test your ability as an
analyst. You are seated in a room with a computer and a list with the names of two
companiesFord (F) and Microsoft (MSFT). You have 90 minutes to complete the
following tasks:
1. Download the annual income statements, balance sheets, and cash flow
statements for the last four fiscal years from MarketWatch
(www.marketwatch.com). Enter each company's stock symbol and then go to
"financials." Export the statements to Excel by right-clicking while the cursor is
inside each statement.
2. Find historical stock prices for each firm from Yahoo! Finance
(http://finance.yahoo.com). Enter your stock symbol, click "Historical Prices" in

the left column, and enter the proper date range to cover the last day of the
month corresponding to the date of each financial statement. Use the closing
stock prices (not the adjusted close). To calculate the firm's market capitalization
at each date, we multiply the number of shares outstanding (see "Basic Weighted
Shares Outstanding" on the income statement) by the firm's historic stock price.
3. For each of the four years of statements, compute the following ratios for each
firm: Valuation Ratios
Price-Earnings Ratio (for EPS use Diluted EPS Total)
Market-to-Book Ratio
Enterprise Value-to-EBITDA
(For debt, include long-term and short-term debt; for cash, include marketable
securities.)Profitability Ratios
Operating Margin (Use Operating Income after Depreciation)
Net Profit Margin
Return on EquityFinancial Strength Ratios
Current Ratio
Book Debt-Equity Ratio
Market Debt-Equity Ratio
Interest Coverage Ratio (EBIT Interest Expense)
4. Obtain industry averages for each firm from Reuters.com
(http://www.reuters.com/finance/stocks). Enter the stock symbol on top of the
page in the "Symbol lookup" and then click the "Ratios" button.
1. Compare each firm's ratios to the available industry ratios for the most
recent year. (Ignore the "Company" column as your calculations will be
different.)
2. Analyze the performance of each firm versus the industry and comment
on any trends in each individual firm's performance. Identify any strengths
or weaknesses you find in each firm.
5. Examine the Market-to-Book ratios you calculated for each firm. Which, if any, of
the two firms can be considered "growth firms" and which, if any, can be
considered "value firms"?

6. Compare the valuation ratios across the two firms. How do you interpret the
difference between them?
7. Consider the enterprise value of each firm for each of the four years. How have
the values of each firm changed over the time period?

First Course Project The purpose of this study is to conduct an analysis for the two
companies of Microsoft and Oracle. The analysis attempts to provide investors with
an inside view from the profit standpoint to determine which company offers the
higher profit. Essentially, this analysis assists investors to determine which
company has the most profitability. Both companies operate within the same
market and the analysis findings hold present values. The information acquired
derives from the June 2015 financial statement from each company. Microsoft and
Oracle remain competitors for many years. Both companies offer consumers a wide
variety of products and services. This is the reason why the selection of these two
companies occurred. Profitability Ratio Analysis The profitability Ratio Analysis
allows investors to determine how well the company profits in the market. This is
an important aspect when making decisions on whether to invest because it
demonstrates one area of success within the market. When the company makes a
profit, the investors also make a profit. Gross Profit Margin Revenue minus cost of
revenue equals the gross margin. Microsoft/Oracle $93,580,000 33,038,000 =
$60,542,000 $38,227,000 7,533,000= $30,694,000 Or (93,580,000
-33,038,000)/ 93,580,000= 64.70% ($38,277,000-7,533,000)/38,227,000=80.42%
The gross profit margin illustrates the amount of revenues, which is the money
incurred from sales minus the cost to produce the product or service. For the
example above, while Microsoft generated more income, the costs to produce the
products and services increased.