Submitted by: AZHRA FATIMA Roll no:-09K31E0006 Under the Guidance of Prof, MD.ABDUL.

HADI Lecturer in FINANCE RITS College, CHEVELLA GUIDE & H.O.D

CERTIFICATE

This is to certify that Ms.AZHRA FATIMA of MBA from ROYAL INSTITUTE OF TECHNOLOGY AND SCIENCE was working under my supervision and guidance for her project work entitled FINANCIAL STATEMENT ANALYSIS OF MICROSOFT with reference to CASH FLOW STATEMENT is submitted with her genuine and original work.

Signature of H.O.D Place: CHEVELLA Date: MBA

Signature of Guide Prof.

Senior Faculty Dept of

ACKNOWLEDGEMENT

At the prime outset, I am privileged to acknowledge encouragement and guidance provided to me by Prof MD.ABDUL.HADI, Lecturer of finance RITS college(chevella),which enable me to finish this study properly, I am greatly indebted to him for permitting to undertake this study. My sincere thanks to all my friends, whose thoughts and insights help me in furnishing my knowledge and understanding of this project. At last my sincere thanks to my parents to have backing support me on my way.

AZHRA FATIMA MBA-IIYEAR ROLL NO: 09K31E0006

DECLARATION

I do hereby solemnly declare that the project work entitled FINANCIAL STATEMENT ANALYSIS OF MICROSOFT is submitted by me is partial fulfillment of the MBA in RITS College, CHEVELLA is my own original work and has not been submitted earlier to RITS College,CHEVELLA or any other Institution for the fulfillment of the requirement for any course of study. I also declare that no chapter of this manuscript in whole or part is lifted and incorporated in this report form my any earlier work done by me for others.

Place: - CHEVELLA Date: -

Signature of Candidate Azhra Fatima MBA - Final year Roll no:-09K31E0006

CONTENTS CHAPTER I 1.1. INTRODUCTION 1.2 .LITERATURE REVIEW (Objective of study) 1.3 .NEED FOR STUDY 1.4 .SCOPE FOR STUDY 1.5 .RESEARCH METHODOLOGY 1.6 .LIMITATIONS CHAPTER II 2.1. COMPANY PROFILE 2.2 . INDUSTRY PROFILE. CHAPTER III 3.1. THEORITICAL REVIEW/FRAME WORK CHAPTER IV 4.1. DATA ANALYSIS & INTERPRETATION CHAPTER V 5.1. FINDINGS 5.2. OBSERVATIONS 5.3. SUGGESSTIONS 5.4. CONCLUSIONS 5.3. SUGGESTIONS

BIBLIOGRAPHY: 6. WEBSITES 7. JOURNALS 8. BOOKS 9. MAGZINES 10. NEWSPAPERS

CHAPTER-I

INTRODUCTION

Microsoft provides software and services that help people communicate, do their work, be entertained, and manage their personal lives. Over the past 30 years, innovative technology has transformed how we access and share information, changed the way of businesses and institutions operate, and made the world smaller by giving us instant access to people and resources everywhere. Microsoft was founded in 1975 and remains a leader in the wave of innovation that has created so much new opportunity, convenience, and value over the past three decades. During that time, Microsoft has created many new products, added new lines of business, and expanded their operations worldwide. Along the way, Microsoft was guided by their corporate mission and the six core values it reflects-and will continue to guide us in the future. Microsoft is committed to being a responsible industry partner, working with businesses, communities, and governments to help advance social and economic well-being and to enable people around the world to realize their full potential. Microsofts commitment and responsibilities as a global corporate citizen are grounded in their company mission and values, manifested through their business practices and operations, and carried out by thousands of Microsoft employees and suppliers worldwide. Microsofts Global Citizenship Initiative is organized around three themes, or strategic concepts, which form the foundation of their citizenship activities worldwide:

1Responsible Business Practices, 2Security and Internet Safety, 3Building a Knowledge Economy. Each of these themes is fundamental to Microsoft`s business. Microsoft organize their Global Citizenship Initiative this way to help ensure its business owned and global

LITERATURE REVIEW: 1.cash flow statement is the report showing sources and uses of cash. 2.Cash flow statement explain the inflow and outflow of cash during the particular period. 3.The main objective of the cashflow statement is to show the causes of changes in cash between to balance sheet dates. 4.In a cash flow statement only cash receipts and payments are recorded. 5.Cash flow statement indicates the factors contributing to the reduction of cash balance inspite of increase in profit. 6.cash flow statement starts with opening cash balance and ends with closing cash balance.

OBJECTIVES 1. To analyse the financial application and sources of cash by the company. 2. To analyse the financial i.e., profit & loss account and balance sheet of Microsoft. 3. To evaluate the financial soundness , stability and liquidity of Microsoft. 4. To analyze the statement of cashflow and help investors , creditors to know about the financial strength of the business. 5. To find out the total Investment of the organization. 6. To find out the rate of progress. 7. To find out the utili zation of cash.

8. To know the sources of cash acted. 9. To know the utilization of excess cash.

SCOPE: The scope of the project Financial Statement Analysis of Microsoft is to carryout the minimum analysis over its present progress. At the same time this project also contains the profit analysis as well as some part of financial aspect of the organization. The Microsoft will give more importance over its structural progress. Now, some analysis charts of Microsoft are as under. 1Selected financial data, stock price information and issuer purchases of equity securities. 2Income Statement. 3Balance Sheet. 4Cash flow Statement. 5Stock Holders Equity Statement.

RESEARCH METHODOLOGY

The information and data have been collected mainly from secondary sources.

Primary data is collected from the unstructured interview from accounting department. Secondary data have been collected from various magazines, newspaper, catalogue, companies brochure, advertisement outlay, friends from chartrooms and different links. Most information has been collected from Microsoft websites, Microsoft agents and Shareholders.

LIMITATIONS:

At the last instance, I try my best to collect adequate data for completing all the aspect of Financial Condition of MICROSOFT in a collective manner. Though, it is a time consuming process, which will carry more result-oriented information to the organization. But to some extent I tried my all effort to make it best inspite of my following limitation.

1.Due to final exam there is no sufficient time provided for preparation of project work

2.Lack of sufficient magazines and publication.

3.Lack of co-operation of office staff.

4.Inadequacy financial condition

5.Unable to have Authorization, required for log in to Microsoft

Chapter: 1 Company Profile

Microsoft Corporation is an American public multinational corporation headquartered in Redmond, Washington, USA that develops, manufactures, licenses, and supports a wide range of products and services predominantly related to computing through its various product divisions. Established on April 4, 1975 to develop and sell BASIC interpreters for the Altair 8800, Microsoft rose to dominate the home computer operating system market with MS-DOS in the mid-1980s, followed by the Microsoft Windows line of operating systems. Microsoft would also come to dominate the office suite market with Microsoft Office. The company has diversified in recent years into the video game industry with the Xbox and its successor, the Xbox 360 as well as into the consumer electronics and digital services market with Zune, MSN and the Windows Phone OS. The ensuing rise of stock in the company's 1986 initial public offering (IPO) made an estimated three billionaires and 12,000 millionaires from Microsoft employees (Forbes 400 list revealed that in March 2011 both Jon Shipley and Nathan Myhrvold lost their billionaire status). In May 2011, Microsoft Corporation acquired Skype Communications for $8.5 billion dollars. Paul Allen and Bill Gates, childhood friends with a passion in computer programming, were seeking to make a successful business utilizing their shared skills. The January 1975 issue of Popular Electronics featured Micro Instrumentation and Telemetry Systems's (MITS) Altair 8800microcomputer. Allen noticed that they could program a BASIC interpreter for the device; after a call from Gates claiming to have a working interpreter, MITS requested a demonstration. Since they didn't actually have one, Allen worked on a simulator for the Altair while Gates developed the interpreter. Although they developed the interpreter on a simulator and not the actual device, the interpreter worked flawlessly when they demonstrated the interpreter to MITS in Albuquerque, New Mexico in March 1975; MITS agreed to distribute it, marketing it as Altair BASIC. They officially established Microsoft on April 4, 1975, with Gates as the CEO. Allen came up with the original name of "Micro-

Soft," as recounted in a 1995 Fortune magazine article. In August 1977 the company formed an agreement with ASCII Magazine in Japan, resulting in its first international office, "ASCII Microsoft". The company moved to a new home in Bellevue, Washington in January 1979. Microsoft entered the OS business in 1980 with its own version of Unix, called Xenix. However, it was DOS (Disk Operating System) that solidified the company's dominance. After negotiations with Digital Research failed, IBM awarded a contract to Microsoft in November 1980 to provide a version of the CP/M OS, which was set to be used in the upcoming IBM Personal Computer (IBM PC). For this deal, Microsoft purchased a CP/M clone called 86-DOS from Seattle Computer Products, branding it as MS-DOS, which IBM rebranded to PC-DOS. Following the release of the IBM PC in August 1981, Microsoft retained ownership of MS-DOS. Since IBM copyrighted the IBM PC BIOS, other companies had to reverse engineer it in order for non-IBM hardware to run as IBM PC compatibles, but no such restriction applied to the operating systems. Due to various factors, such as MS-DOS's available software selection Microsoft eventually became the leading PC OS vendor. The company expanded into new markets with the release of the Microsoft Mouse in 1983, as well as a publishing division named Microsoft Press. Paul Allen resigned from Microsoft in February after developing Hodgkin's disease 19841994: Windows and Office While jointly developing a new OS with IBM in 1984, OS/2, Microsoft released Microsoft Windows, a graphical extension for MS-DOS, on November 20. Microsoft moved its headquarters to Redmond on February 26, 1986, and on March 13 the company went public; the ensuing rise in the stock would make an estimated four billionaires and 12,000 millionaires from Microsoft employees. Due to the partnership with IBM, in 1990 the Federal Trade Commission set its eye on Microsoft for possible collusion; it marked the beginning of over a decade of legal clashes with the U.S. Government. Microsoft announced the release of its version of OS/2 to original equipment manufacturers (OEMs) on April 2, 1987; meanwhile, the company was at work on a 32-bit OS, Microsoft Windows NT, using ideas from OS/2; it shipped on July 21, 1993 with a new modular kernel and the Win32 application programming interface (API), making porting from 16bit (MS-DOS-based) Windows easier. Once Microsoft informed IBM of NT, the OS/2 partnership deteriorated. Microsoft introduced its office suite, Microsoft Office, in 1990. The software bundled separate office productivity applications, such as Microsoft

Word and Microsoft Excel. On May 22 Microsoft launched Windows 3.0 with a streamlined user interface graphics and improved protected mode capability for the Intel 386 processor. Both Office and Windows became dominant in their respective areas. Novell, a Word competitor from 19841986, filed a lawsuit years later claiming that Microsoft left part of its APIs undocumented in order to gain a competitive advantage. On July 27, 1994, the U.S. Department of Justice, Antitrust Division filed a Competitive Impact Statement that said, in part: "Beginning in 1988, and continuing until July 15, 1994, Microsoft induced many OEMs to execute anticompetitive "per processor" licenses. Under a per processor license, an OEM pays Microsoft a royalty for each computer it sells containing a particular microprocessor, whether the OEM sells the computer with a Microsoft operating system or a non-Microsoft operating system. In effect, the royalty payment to Microsoft when no Microsoft product is being used acts as a penalty, or tax, on the OEM's use of a competing PC operating system. Since 1988, Microsoft's use of per processor licenses has increased." 19952005: Internet and the 32-bit era Following Bill Gates's internal "Internet Tidal Wave memo" on May 26, 1995 Microsoft began to redefine its offerings and expand its product line into computer networking and the World Wide Web. The company released Windows 95 on August 24, 1995, featuring pre-emptive multitasking, a completely new user interface with a novel start button, and 32-bit compatibility; similar to NT, it provided the Win32 API. Windows 95 came bundled with the online service MSN, and for OEMs Internet Explorer, a web browser. Internet Explorer was not bundled with the retail Windows 95 boxes because the boxes were printed before the team finished the web browser, and instead was included in the Windows 95 Plus! pack. Branching out into new markets in 1996, Microsoft and NBC Universal created a new 24/7 cable news station, MSNBC. Microsoft created Windows CE 1.0, a new OS designed for devices with low memory and other constraints, such as personal digital assistants. In October 1997, the Justice Department filed a motion in the Federal District Court, stating that Microsoft violated an agreement signed in 1994 and asked the court to stop the bundling of Internet Explorer with Windows. Bill Gates handed over the CEO position on January 13, 2000 to Steve Ballmer, an old college friend of Gates and employee of the company since 1980, creating a new position for himself as Chief Software Architect. Various companies including Microsoft formed the Trusted Computing Platform Alliance in October

1999 to, among other things, increase security and protect intellectual property through identifying changes in hardware and software. Critics decry the alliance as a way to enforce indiscriminate restrictions over how consumers use software, and over how computers behave, a form of digital rights management; for example the scenario where a computer is not only secured for its owner, but also secured against its owner as well. On April 3, 2000, a judgment was handed down in the case of United States v. Microsoft, calling the company an "abusive monopoly";it settled with the U.S. Department of Justice in 2004. On October 25, 2001 Microsoft released Windows XP, unifying the mainstream and NT lines under the NT codebase. The company released the Xbox later that year, entering the game console market dominated by Sony and Nintendo. In March 2004 the European Union brought antitrust legal action against the company, citing it abused its dominance with the Windows OS, resulting in a judgment of 497 million ($613 million) and to produce new versions of Windows XP without Windows Media Player, Windows XP Home Edition N and Windows XP Professional N. 2006present: Vista and Cloud computing Released in January 2007, the next version of Windows, Windows Vista, focused on features, security, and a redesigned user interface dubbed Aero. Microsoft Office 2007, released at the same time, featured a "Ribbon" user interface which was a significant departure from its predecessors. Relatively strong sales of both titles helped to produce a record profit in 2007. The European Union imposed another fine of 899 million ($1.4 billion) for Microsoft's lack of compliance with the March 2004 judgment on February 27, 2008, saying that the company charged rivals unreasonable prices for key information about its workgroup and back office servers. Microsoft stated that it was in compliance and that "these fines are about the past issues that have been resolved". Bill Gates retired from his role as Chief Software Architect on June 27, 2008 while retaining other positions related to the company in addition to being an advisor for the company on key projects. Azure Services Platform, the company's entry into the cloud computing market for Windows, launched on October 27, 2008. On February 12, 2009, Microsoft announced its intent to open a chain of Microsoft-branded retail stores, and on October 22, 2009 the first retail Microsoft Store opened in Scottsdale, Arizona; the same day the first store opened Windows 7was officially released to the public. Windows 7's focus was on refining Vista with ease of use features and performance enhancements, rather than a large reworking of Windows.

As the smart phone industry boomed beginning in 2007, Microsoft struggled to keep up with it's rivals Apple and Google in the mobile sector. In 2010, Microsoft revamped their flagship mobile operating system, Windows Mobile, practically replacing with the new Windows Phone. Microsoft is a founding member of the Open Networking Foundation started on March 23, 2011. Other founding companies include Google, HP Networking, Yahoo, Verizon, Deutsche Telekom and 17 other companies. The nonprofit organization is focused on providing support for a new cloud initiative called Software-Defined Networking. The initiative is meant to speed innovation through simple software changes in telecommunications networks, wireless networks, data centers and other networking areas. Product divisions For the 2010 fiscal year, Microsoft had five product divisions: Windows & Windows Live Division, Server and Tools, Online Services Division, Microsoft Business Division, and Entertainment and Devices Division. Windows & Windows Live Division, Server and Tools, Online Services Division The company's Client division produces the flagship Windows OS line such as Windows 7; it also produces the Windows Live family of products and services. Server and Tools produces the server versions of Windows, such as Windows Server 2008 R2 as well as a set of development tools called Microsoft Visual Studio, Microsoft Silverlight, a web application framework, and Systems Management Server, a collection of tools providing remote-control abilities, patch management, software distribution and a hardware/software inventory. Other server products include: Microsoft SQL Server, a relational database management system, Microsoft Exchange Server, for certain business-oriented e-mail and scheduling features, Small Business Server, for messaging and other small business-oriented features; and Microsoft BizTalk Server, for business process management. Microsoft provides IT consulting ("Microsoft Consulting Services") and produces a set of certification programs handled by the Server and Tools division designed to recognize individuals who have a minimal set of proficiencies in a specific role; this includes developers ("Microsoft Certified Solution Developer"), system/network analysts ("Microsoft Certified Systems Engineer"), trainers ("Microsoft Certified Trainers") and administrators ("Microsoft Certified Systems Administrator" and "Microsoft Certified Database Administrator"). Microsoft Press, which publishes books, is also managed by the division. The Online

Services Business division handles the online service MSN and the search engine Bing. As of December 2009, the company also possesses an 18% ownership of the cable news channel MSNBC without any editorial control; however, the division develops the channel's website, msnbc.com, in a joint venture with the channel's co-owner, NBC Universal.

Business Division The Microsoft Business Division produces Microsoft Office including Microsoft Office 2010, the company's line of office software. The software product includes Word (a word processor), Access (a relational database program), Excel (a spreadsheet program), Outlook (Groupware, frequently used with Exchange Server), PowerPoint (presentation software), and Publisher (desktop publishing software). A number of other products were added later with the release of Office 2003 including Visio, Project, MapPoint, InfoPath and OneNote. The division also develops enterprise (ERP) software for companies under the Microsoft Dynamics brand. These include: Microsoft Dynamics AX, Microsoft, Microsoft Dynamics GP, and Microsoft Dynamics SL. They are targeted at varying company types and countries, and limited to organizations with under 7,500 employees. Also included under the Dynamics brand is the customer relationship management software Microsoft Dynamics CRM, part of the Azure Services Platform. Entertainment and Devices Division The Entertainment and Devices Division produces the Windows CE OS for embedded systems and Windows Phone for smart phones. Microsoft initially entered the mobile market through Windows CE for handheld devices, eventually developing into the Windows Mobile OS and now, Windows Phone. Windows CE is designed for devices where the OS may not directly be visible to the end user, in particular, appliances and cars. The division also produces computer games that run on Windows PCs and other systems including titles such as Age of Empires, Halo and the Simulator series, and houses the Macintosh Business Unit which produces Mac OS software including Microsoft Office 2011 for Mac. Microsoft's Entertainment and Devices Division designs, markets, and manufactures consumer electronics including the Xbox 360 game console, the handheld Zune media player, and the television-based Internet appliance MSN TV. Microsoft also markets personal computer hardware including mouse, keyboards, and various game controllers such

as joysticks and gamepads.

Culture Technical reference for developers and articles for various Microsoft magazines such as Microsoft Systems Journal (or MSJ) are available through the Microsoft Developer Network(MSDN). MSDN also offers subscriptions for companies and individuals, and the more expensive subscr iptions usually offer access to prerelease beta versions of Microsoft software.[55][56] In April 2004 Microsoft launched a community site for developers and users, titled Channel9, that provides a wiki and an Internet forum.[57] Another community site that provides daily videocasts and other services, On10.net, launched on March 3, 2006. [58] Free technical support is traditionally provided through online Usenet newsgroups, andCompuServe in the past, monitored by Microsoft employees; there can be several newsgroups for a single product. Helpful people can be elected by peers or Microsoft employees forMicrosoft Most Valuable Professional (MVP) status, which entitles them to a sort of special social status and possibilities for awards and other benefits. Noted for its internal lexicon, the expression "eating our own dog food" is used to describe the policy of using prerelease and beta versions of products inside Microsoft in an effort to test them in "real-world" situations. This is usually shortened to just "dog food" and is used as noun, verb, and adjective. The company is also known for its hiring process, mimicked in other organizations and dubbed the "Microsoft interview", which is notorious for off-the-wall questions such as "Why is a manhole cover round?" Microsoft is an outspoken opponent of the cap on H1B visas, which allow companies in the U.S. to employ certain foreign workers. Bill Gates claims the cap on H1B visas makes it difficult to hire employees for the company, stating "I'd certainly get rid of the H1B cap" in 2005.[63] Critics of H1B visas argue that relaxing the limits would result in increased unemployment for U.S. citizens due to H1B workers working for lower salaries.[64] The Human Rights Campaign Corporate Equality Index, a report of how progressive the organization deems company policies towards LGBT (lesbian, gay, bisexual and transsexual) employees, rated Microsoft as 87% from 2002 to 2004 and as 100% from 2005 to 2010 after they allowed gender expression.

Corporate affairs The company is run by a board of directors made up of mostly company outsiders, as is customary for publicly traded companies. Members of the board of directors as of June 2010 are: Steve Ballmer, Dina Dublon, Bill Gates (chairman), Raymond Gilmartin, Reed Hastings, Maria Klawe, David Marquardt, Charles Noski, and Helmut Panke. Board members are elected every year at the annual shareholders' meeting using a majority vote system. There are five committees within the board which oversee more specific matters. These committees include the Audit Committee, which handles accounting issues with the company including auditing and reporting; the Compensation Committee, which approves compensation for the CEO and other employees of the company; the Finance Committee, which handles financial matters such as proposing mergers and acquisitions; the Governance and Nominating Committee, which handles various corporate matters including nomination of the board; and the Antitrust Compliance Committee, which attempts to prevent company practices from violating antitrust laws.

Five year history graph of (NASDAQ:MSFT) stock on September 29, 2009. When Microsoft went public and launched its initial public offering (IPO) in 1986, the opening stock price was $21; after thetrading day, the price closed at $27.75. As of July 2010, with the company's nine stock splits, any IPO shares would be multiplied by 288; if one was to buy the IPO today given the splits and other factors, it would cost about 9 cents. The stock price peaked in 1999 at around $119 ($60.928 adjusting for splits). The company began to offer a dividend on January 16, 2003, starting at eight cents per share for the fiscal year followed by a dividend of sixteen cents per share the subsequent year, switching from yearly to quarterly dividends in 2005 with eight

cents a share per quarter and a special one-time payout of three dollars per share for the second quarter of the fiscal year.[72][73] Though the company had subsequent increases in dividend payouts, the price of Microsoft's stock remained steady for years. One of Microsoft's business tactics, described by an executive as "embrace, extend and extinguish," initially embraces a competing standard or product, then extends it to produce their own version which is then incompatible with the standard, which in time extinguishes competition that does not or cannot use Microsoft's new version. Various companies and governments sue Microsoft over this set of tactics, resulting in billions of dollars in rulings against the company. Microsoft claims that the original strategy is not anti-competitive, but rather an exercise of its discretion to implement features it believes customers want.

Financial Standard and Poor's and Moody's have both given a AAA rating to Microsoft, whose assets were valued at $41 billion as compared to only $8.5 billion in unsecured debt. Consequently, in February 2011 Microsoft released a corporate bond amounting to $2.25 billion with relatively low borrowing rates compared to government bonds. For the first time in 20 years Apple Inc. surpassed Microsoft in Q1 2011 quarterly profits and revenues due to a slowdown in PC sales and continuing huge losses in Microsoft's Online Services Division (which contains its search engine Bing). Microsoft profits were $5.2 billion, while Apple Inc. profits were $6 billion, on revenues of $14.5 billion and $24.7 billion respectively. Microsoft's Online Services Division has been continuously loss-making since 2006 and in Q1 2011 it lost $726 million. This follows a loss of $2.5 billion for the year 2010. Environment Microsoft is ranked on the 17th place in Greenpeaces Guide to Greener Electronics that ranks 18 electronics manufacturers according to their policies on toxic chemicals, recycling and climate change.[81] Microsofts timeline for phasing out BFRs and phthalates in all products is 2012 but its commitment to phasing out PVC is not clear. As yet (January 2011) it has no products that are completely free from PVC and BFRs.

Microsoft's main U.S. campus received a silver certification from the Leadership in Energy and Environmental Design (LEED) program in 2008, and it installed over 2,000 solar panels on top of its buildings in its Silicon Valley campus, generating approximately 15 percent of the total energy needed by the facilities in April 2005. Microsoft makes use of alternative forms of transit. It created one of the worlds largest private bus systems, the "Connector", to transport people from outside the company; for on-campus transportation, the "Shuttle Connect" uses a large fleet of hybrid cars to save fuel. The company also subsidises regional public transport as an incentive. In February 2010 however, Microsoft took a stance against adding additional public transport and high-occupancy vehicle (HOV) lanes to a bridge connecting Redmond to Seattle; the company did not want to delay the construction any further. Marketing In 2004, Microsoft commissioned research firms to do independent studies comparing the total cost of ownership (TCO) of Windows Server 2003 to Linux; the firms concluded that companies found Windows easier to administrate than Linux, thus those using Windows would administrate faster resulting in lower costs for their company (i.e. lower TCO). This spurred a wave of related studies; a study by the Yankee Group concluded that upgrading from one version of Windows Server to another costs a fraction of the switching costs from Windows Server to Linux, although companies surveyed noted the increased security and reliability of Linux servers and concern about being locked into using Microsoft products. Another study, released by the OSDL, claimed that the Microsoft studies were "simply outdated and one-sided" and their survey concluded that the TCO of Linux was lower due to Linux administrators managing more servers on average and other reasons. As part of the "Get the Facts" campaign Microsoft highlighted the .NET trading platform that it had developed in partnership with Accenture for the London Stock Exchange, claiming that it provided "five nines" reliability. After suffering extended downtime and unreliability[89][90] the LSE announced in 2009 that it was planning to drop its Microsoft solution and switch to a Linux based one in 2010.

EMPLOYEES As of June 30, 2010, Microsoft has employed approximately 71,000 people on a full-time basis, 44,000 in the United States and 27,000 internationally. Of the total, 28,000 were in product research and development, 21,000 in sales and marketing, 13,000 in product support and consulting services, 2,000 in manufacturing and distribution, and 7,000 in general and administration. Its success is highly dependent on its ability to attract and retain qualified employees. None of its employees are subject to collective bargaining agreement. Executive compensation is a very important thing to consider when evaluating an investment opportunity. Executives who are improperly compensated may not have the incentive to perform in the best interest of shareholders, which can be costly for those shareholders. While new laws and regulations have made executive compensation much clearer in company filings, many investors remain clueless as to how to find and read these critical reports. This article will take a look at the different types of executive compensation and how investors can find and evaluate compensation information.

Types of Executive Compensation There are many different forms of executive compensation that offer a variety of tax benefits and performance incentives. Below are the most common forms:

1. Cash Compensation This is the sum of all standard cash salary compensation that the executive receives for the year.

2. Option Grants This is a list of all options granted to the executive; the information includes strike prices and expiration dates..

3. Deferred Compensation This is compensation that is deferred until a later date, typically for tax purposes. However, changes in regulations have lessened the popularity of this type of compensation.

4. Long-Term Incentive Plans (LTIPs) Long-term incentive plans encompass all compensation that is tied to performance for tax purposes. Current tax laws favor pay for performance-type compensation.

5. Retirement Packages These are packages given to executives after they

retire from the company. These are important to watch because they can contain so-called "golden parachutes" for corrupt executives.

6. Executive Perks These are various other perks given to executives, including the use of a private jet, travel reimbursements and other rewards.

7. Finding Executive Compensation All executive compensation information can be found in public filings with the Securities and Exchange Commission (SEC). The SEC mandates that all public companies disclose how much they are paying their executives, how this amount is derived and who is involved in determining pay. The information itself is disclosed in several locations, including:

Form 8-K: The current event filing can be used to disclose compensation information if the event is related to changes in compensation policies and/or procedures.

Form 10-K: The annual report filing is always used to disclose yearly compensation information.

Form 10-Q: The quarterly report filing also contains quarterly compensation information.

S-1/S-3 Forms: New issues contain executive compensation information relevant for future investors to consider.

Evaluating Executive Compensation Evaluating executive compensation can be a difficult task for the individual investor. Luckily, there are many tools that are now available to make the process much easier. These tools automatically parse SEC filings to pull the numbers and make comparisons designed to give meaning to raw information. Pay Vs. Performance

One of the most popular ways to evaluate executive compensation is by comparing pay versus performance. Unfortunately, many executives are given raises and bonuses even when their companies are faltering. Comparing pay to stock performance can help you determine whether executives are overpaid. The specific metric used most often is comparing the change year-over-year in executive pay increases to the change year-over-year in stock price. Obviously, if the change in the stock price outpaces the change in pay, the executive is not overpaid. Here is an example of a comparison for Bill Gates, who was Microsoft's CEO between 1975 and 2000 and the company's chief software architect and chairman between 2000 and 2006:

Source: ExecutiveDisclosure.com

Between 1998 and 2006, Bill Gates' compensation is tied pretty closely to the company's overall performance. When the company makes more money, Gates receives more compensation and vice versa. This is healthy because it provides executives with the incentive to perform well and increase their personal wealth. Trends showing executives receiving a higher rate than performance can mean overcompensation for underperformance which can hurt investors both in

dollars paid out and incentive to perform. (For related reading, see Putting Management Under The Microscope.) Peer Comparison Another popular way to evaluate executive compensation is to compare one executive to his or her industry peers. While market leaders typically have CEOs that are paid slightly more than their industries, the majority of executives should be paid on par with their peers. Here is the same example as above, except this time it's a peer comparison instead of pay vs. performance:

Source: ExecutiveDisclosure.com

Here we can clearly see that Bill Gates made more than the average executive in his industry over the charted period. Sometimes, if the executive is the founder of the company, or a high-class CEO, he or she may deserve higher compensation. Because Bill Gates is both an industry mogul and the company's founder, this may explain his comparatively higher compensation. Significant deviations between these two in standard non-founder CEOs can indicate . Executive Compensation Laws

There have been many new laws passed to help satisfy investor concerns over executive compensation. Changes in SEC reporting requirements have forced companies to include an "Executive Compensation Discussion & Analysis" section to accompany all future pay documentation in all SEC forms. This section requires a "readable" explanation of how the compensation was determined and what it encompasses.

PROPERTIES:

Microsoft corporate offices consist of approximately 11.0 million square feet of office building space located in King County, Washington: 8.5 million square feet of owned space that is situated on approximately 500 acres of land it own in its corporate campus and approximately 2.5 million square feet of space it lease. Microsoft own approximately 533,000 square feet of office building space domestically (outside of the Puget Sound corporate campus) and lease many sites domestically totaling approximately 2.7 million square feet of office building space. Microsoft occupies many sites internationally, totaling approximately 6.9 million square feet that is leased and approximately 883,000 square feet that is owned. These facilities include its European Operations Center that leases an 187,000 square foot campus in Dublin, Ireland, a 56,000 square foot disk duplication facility in Humacao, Puerto Rico, and a 159,000 square foot facility in Singapore for the Asia Pacific Operations Center and Regional headquarters. Leased office building space includes the following locations: Tokyo, Japan 408,000 square feet; Unterschleissheim, Germany 381,000 square feet; Les Ulis, France 262,000 square feet; Reading, England 241,000 square feet; and Mississauga, Canada 161,000 square feet. In addition to the above locations, it has various product development facilities, both domestically and

internationally, as described in Operations above. Microsoft facilities are fully used for current operations of all segments, a suitable additional space is available to accommodate expansion needs. Microsoft own 63 acres of land in Issaquah, Washington, which can accommodate 1.2 million square feet of office space and it has an agreement with the City of Redmond under which it may develop an additional 2.2 million square feet of facilities at its campus in Redmond, Washington.

Competitors Competitors to the Microsoft Office system include many software application vendors such as Apple, Corel, Google, IBM, Novell, Oracle, Red Hat, Sun Microsystems, and local application developers in Europe and Asia. IBM (SmartSuite) and Corel (WordPerfect Suite) have measurable installed bases with their office productivity products. Apple may distribute certain of their application software products with various models of their PCs.

The OpenOffice.org project provides a freely downloadable cross-platform application that also has been adapted by various commercial software vendors to sell under their brands, including IBM, Novell, Red Hat, and Sun. Corels suite and many local software suites around the world are aggressively priced for OEMs to preinstall on low-priced PCs. In addition to traditional client-side applications, Web-based offerings such as AjaxWrite, gOffice, iNetOffice, SimDesk, ThinkFree, wikiCalc, or other small projects competing with individual applications, can also provide an alternative to Microsoft Office system products. Google has announced spreadsheet and word processing applications as web-based offerings and also provides an enterprise search offering that competes with SharePoint and the new enterprise search product.

IBM has many different points of competition with Office system products with its Notes and Workplace offerings. As Microsoft continue to respond to market demand for additional functionality and products, it compete with additional vendors, most notably in enterprise content management, collaboration tools, unified messaging, and business intelligence. These competitors include WebEx, and a number of business intelligence vendors such as Business Objects, Cognos, and Hyperion.

Microsoft competition varies based upon the size and geographic location of the customer for whom it is competing. It competes with well-known vendors such as Intuit and Sage in the market focused on providing solutions for small and midsized businesses. The market for large organizations and divisions of global enterprises continues to be intensely competitive with a small number of primary vendors including Oracle and SAP.

Additionally, these large enterprise-focused vendors are repositioning some of their business applications to focus on small and mid-sized businesses. Microsoft believe its products compete effectively with these vendors based on its strategy of providing integrated, adaptable solutions that work like and with Microsoft technologies its customers already have..

CHAPTER-3 THEORETICAL REVIEW:

Definition and Explanation of Financial Statement Analysis:

Financial statement analysis is defined as the process of identifying financial strengths and weaknesses of the firm by properly establishing relationship between the items of the balance sheet and the profit and loss account.

There are various methods or techniques that are used in analyzing financial statements, such as comparative statements, schedule of changes in working capital, common size percentages, funds analysis, trend analysis, and ratios analysis.

Financial statements are prepared to meet external reporting obligations and also for decision making purposes. They play a dominant role in setting the framework of managerial decisions. But the information provided in the financial statements is not an end in itself as no meaningful conclusions can be drawn from these statements alone. However, the information provided in the financial statements is of immense use in making decisions through analysis and interpretation of financial statements.

Financial statement analysis (or financial analysis) is the process of understanding the risk and profitability of a firm (business, sub-business or project) through analysis of reported financial information, particularly annual and quarterly reports.

Financial statement analysis consists of 1) reformulating reported financial statements, 2) analysis and adjustments of measurement errors, and 3) financial ratio analysis on the basis of reformulated and adjusted financial statements. The two first steps are often dropped in practice, meaning that financial ratios are just calculated on the basis of the reported numbers, perhaps with some adjustments. Financial statement analysis is the foundation for evaluating and pricing credit risk and for doing fundamental company valuation.

Tools and Techniques of Financial Statement Analysis:

Following are the most important tools and techniques of financial statement analysis:

1. Horizontal and Vertical Analysis

2. Ratios Analysis

1. Horizontal and Vertical Analysis:

Horizontal Analysis or Trend Analysis:

Comparison of two or more year's financial data is known as horizontal analysis, or trend analysis. Horizontal analysis is facilitated by showing changes between years in both dollar and percentage form.

Trend Percentage:

Horizontal analysis of financial statements can also be carried out by computing trend percentages. Trend percentage states several years' financial data in terms of a base year. The base year equals 100%, with all other years stated in some percentage of this base.

Vertical Analysis:

Vertical analysis is the procedure of preparing and presenting common size statements. Common size statement is one that shows the items appearing on it in percentage form as well as in dollar form. Each item is stated as a percentage of some total of which that item is a part. Key financial changes and trends can be highlighted by the use of common size statements.

Advantages of Financial Statement Analysis:

There are various advantages of financial statements analysis. The major benefit is that the investors get enough idea to decide about the investments of their funds in the specific company. Secondly, regulatory authorities like International Accounting Standards Board can ensure whether the company is following accounting standards or not. Thirdly, financial statements analysis can help the government agencies to analyze the taxation due to the company. Moreover, company can analyze its own performance over the period of time through financial statements analysis. STUDY OF CASH FLOW STATEMENT MEANING: Cash flow statement or statement of cash flows is a financial statement that shows a company's incoming and outgoing money (sources and uses of cash) during a time period (often monthly or quarterly). The statement shows how changes in balance sheet and income accounts affected cash and cash equivalents, and breaks the analysis down according to operating, investing, and financing activities. As an analytical tool the statement of cash flows is useful in

determining the short-term viability of a company, particularly its ability to pay bills. PURPOSE: The cash flow statement reflects a firms liquidity or solvency. The main purpose to make cash flow statement are as follows:

cash flow statement. 1.provide information on a firm's liquidity and solvency and its ability to change cash flows in future circumstances 2.provide additional information for evaluating changes in assets, liabilities and equity 3.improve the comparability of different firms' operating performance by eliminating the effects of different accounting methods 4.indicate the amount, timing and probability of future cash flows

ACTIVITIES INVOLVED IN CASH FLOW: The cash flow statement is partitioned into cash flow resulting from operating activities, cash flow resulting from investing activities, and cash flow resulting from financing activities. Operating activities: Operating activities include the production, sales and delivery of the company's product as well as collecting payment from its customers. This could include purchasing raw materials, building inventory, advertising. Investing activities: Investing activities focus on the purchase of the long-term assets a company needs in order to make and sell its products, and the selling of any long-term assets.

Financing activities: Financing activities include the inflow of cash from investors such as banks and shareholders, as well as the outflow of cash to shareholders as dividends as the company generates income. Other activities which impact the long-term liabilities and equity of the company are also listed in the financing activities section of the c

Analysis of cash flow statement is necessary for every organisation to depict its cash inflow and outflow.

On August 18, 2010, Microsoft announced that the authorization for the ongoing share repurchase program, previously announced on July 20, 2010, had been increased by approximately $16.2 billion. As a result, the company is authorized to repurchase additional shares in an amount up to $36.2 billion through June 30, 2011.

PROFORMA OF CASH FLOW STATEMENT (Direct Method) PARTICULARS AMOUNT RS. AMOUNT RS.

A. Cash Flow from Operating Activities Cash Receipts from: Sales Interest Received Cash Payments for: Purchases Operating Expenses Interest Payments Income Taxes XXX XXX XXX XXX XXX XXX XXX

Net Cash Flow from Operating Activities

B. Cash Flow from Investing Activities: Sale Of Plant Assets Sale Of Investments Purchase Of Plant Assets Purchase Of Investments Net Cash Flow used by Investment Activities XXX XXX XXX XXX

C. Cash Flow from Financing Activities: Repayment of Bonds And Debentures Issue of Common Shares Dividends Paid Net Cash Flows from Financing Activities Net Increase / Decrease in Cash XXX XXX XXX

XXX

XXX

XXX XXX

XXX XXX

CHAPTER IV

DATA ANALYSIS & INTERPRETATION:

SELECTED FINANCIAL DATA, STOCK PRICE INFORMATION, AND ISSUER PURCHASES OF EQUITY SECURITIES (In millions, except per share data) 2008 2009 2010

Fiscal Year Ended June 30

Revenue $ Operating income 16,472 Net income 12,599 44,282 $

39,78 8 14,56 1 12,25 4 $

36,83 5

9,034

8,168

Diluted earnings per share Cash dividends declared per share Cash and short-term investments

$ $

1.20 0.35

$ $

1.12 3.40 37,75

$ $

0.75 0.16 60,59 2 94,36 8 4,574 74,82 5

34,161 Total assets 69,597 Long-term obligations Stockholders equity 40,104 7,051

1 70,81 5 5,823 48,11 5

Microsoft common stock is traded on the NASDAQ Stock Market under the symbol MSFT. On August 18, 2010, there were 148,993 registered holders of record of our common stock. The high and low common stock prices per share were as follows

Quarter Ended Fiscal year 2009 Common stock price per share: High

Sep. 30 Dec. 31

Mar. 31 June 30 Year

29.9 $ 29.00 $ 8 26.5 $ 26.88 $ 3 $ 23.92 $ $ 26.84 $

26.0 7 24.1 2 $ 23.92 $ 29.98

Low

Fiscal year 2010 Common stock price per share: High $ 27.76 $ Low $ 24.65 $ 28.1 6 24.3 0 $ 26.28 $ $ 28.15 $ 27.7 4 21.5 1 $ 21.51 $ 28.16

stockholders equity

high low sep dec mar june

fiscal year2009

stockholders equity

high low sep dec mar june

fiscal year2010

Stockholders Equity of the Notes to Financial Statements for information regarding dividends approved by our Board of Directors in fiscal years 2010 and 2009. On July 20, 2010, Microsoft announced the completion of the repurchase

program approved by its Board of Directors on July 20, 2008, to buy back up to $30 billion in Microsoft common stock. The repurchases were made using our cash resources. Microsoft repurchased common stock in each quarter of fiscal year 2010 as follows:

Total number of Period July 1, 2009 September 30, 2009 October 1, 2009 December 31, 2009 January 1, 2010 March 31, 2010 April 1, 2010 June 30, 2010 shares purchased 114,134,218 283,112,246 180,720,830 175,609,060

Average price paid per share $ 26.54 $ 27.08 $ 27.00 $ 23.78

Common stock repurchases in the fourth quarter of fiscal year 2010 were as follows (d) Maximum number (c) Total number of shares (or of shares (a) Total numbe (b) Average purchased as r of shares Period purchased r share approximate dollar value) of shares that

price paid pe part of publicly may yet be purchased announced plans under the plans or or programs programs (in millions)

April 1, 2010 April 30, 2010 May 1, 2010 May 31, 2010 June 1, 2010 June 30, 2010 128,949,609 $ 22.76 128,949,609 $ 2,249 8,618,036 $ 24.37 8,618,036 $ 5,184 38,041,415 $ 27.08 38,041,415 $ 5,394

175,609,060

175,609,060

On July 20, 2010, it announced that its Board of Directors authorized two new share repurchase programs: a $20 billion tender offer which was completed on August 17, 2010; and authorization for up to an additional $20 billion ongoing share repurchase program with an expiration of June 30, 2014. Under the tender offer, it repurchased approximately 155 million shares of common stock, or 1.5% of its common shares outstanding, for approximately $3.8 billion at a price per share of $24.75

INCOME STATEMENT

Absolute Change (In millions, except per share amounts) 2010 2009 in $

Percentage Change %

Year Ended June 30

Revenue

$ 44,282 $ 39,788 4494 11.29

Operating expenses: Cost of revenue Research and development Sales and marketing General and administrative Total operating expenses 7,650 6,584 9,818 3,758 27,810 6,031 6,097 8,563 4,536 25,227 1619 487 1255 (178) 2583 26.84 7.98 14.65 (3.92) 10.23

Operating income Investment income and other Income before income taxes Provision for income taxes Net income

16,472 1,790 18,262 5,663 $ 12,599

14,561 2,067 16,628 4,374

1911 (277) 1634 1289

13.12 (13.40) 9.82 29.46

12,254

345

2.81

Earnings per share: Basic $ 1.21 Diluted $ 1.20 $ 1.12 0.08 7.14 $ 1.13 0.08 7.07

Weighted average shares outstanding: Basic Diluted 10,438 10,531 10,839 10,906 (401) (375) (3.69) (3.43)

Cash dividends declared per common share

$ 0.35

3.40 (3.05) (89.70)

INTERPRETATION: .

From the above Income Statement analysis I find that the total operating expenses had a tremendous increase of $2583 million with a 10.23% of change, the revenue increased from $39788 million to $44282 million with an Absolute change of $4494 Million with 11.29% of change. Where as the net income from all sources is just increased to $345 million. The earning per share has an increase of 7.07% and 7.14% whereas the weighted average share outstanding is reduced to 3.69% and 3.43%

BALANCE SHEET

Absolute Precentag Change (In millions) 2010 2009 in $ e Change %

June 30 Assets Current assets: Cash and equivalents Short-term investments (including securities pledged as collateral of $3,065 and $-) Total cash and short-term investments Accounts receivable, net of allowance for doubtful accounts of $142 and $171 Inventories, net Deferred income taxes Other Total current assets Property and equipment, net Equity and other investments

6,714 $ 4,851

1863

38.40

27,447 34,161

32,900 (5453) (16.57) 37,751 (3590) (9.50)

9,316 1,478 1,940 2,115 49,010 3,044 9,232

7,180 491 1,701 1,614

2136 987 239 501

29.74 201.01 14.05 31.04 0.56 29.75

48,737 273 2,346 698

11,004 (1772) (16.10)

Goodwill Intangible assets, net Deferred income taxes Other long-term assets Total assets

3,866 539 2,611 1,295

3,309 499 3,621 1,299

557 40

16.83 8.01

(1010) (27.89) (4) (0.30)

$ 69,597 $ 70,815 (1218) (1.72)

Liabilities and stockholders equity Current liabilities: Accounts payable Accrued compensation Income taxes Short-term unearned revenue Securities lending payable Other Total current liabilities $ 2,909 $ 2,086 1,938 1,557 9,138 3,117 3,783 22,442 1,662 2,020 7,502 3,607 823 276 (463) 1636 3117 176 39.45 16.60 (22.92) 21.80 100 4.87 32.97

16,877 5565

Long-term unearned revenue Other long-term liabilities Commitments and contingencies Stockholders equity: Common stock and paid-in capital shares authorized 24,000; outstanding 10,062 and 10,710 Retained earnings (deficit), including accumulated other comprehensive income of $1,229 and $1,426 Total stockholders equity Total liabilities and stockholders equity

1,764

1,665

99

5.94

5,287

4,158 1129

27.15

59,005

60,413 (1408) (2.33)

(18,90 1) 40,104

(12,298 ) (6603) 53.69

48,115 (8011) (16.64)

$ 69,597 $ 70,815 (1218) (1.72)

balance sheet

amount

year

CASH FLOW STATEMENTS

Absolute Precentag Change (In millions) 2010 2009 in $ e Change %

Year Ended June 30

Operations Net income Depreciation, amortization, and other non cash items Stock-based compensation Net recognized gains on investments Stock option income tax benefits Excess tax benefits from stock-based payment arrangements Deferred income taxes (89) 219 (179) (89) 398 (222.34) 903 1,715 (270) 855 2,448 (527) 668 $ 12,599 $ 12,254 345 48 (733) 257 (668) 2.81 5.61 (29.94) (48.76) (100)

Unearned revenue Recognition of unearned revenue Accounts receivable Other current assets Other long-term assets Other current liabilities Other long-term liabilities Net cash from operations

16,453 (14,729) (2,071) (1,405) (49) (145) 1,273 14,404

13,831

2622

18.95 14.01 66.61 473.46 (333.33) (136.61) 2.24 (13.25)

(12,919) (1810) (1,243) (245) 21 396 1,245 16,605 (828) (1160) (70) (541) 28 (2201)

Financing Common stock issued Common stock repurchased Common stock cash dividends Excess tax benefits from stock-based payment arrangements Other Net cash used in financing 89 (20,562) (18) 89 18 100 (49.94) 2,101 (19,207) (3,545) 3,109 (8,057) (1008) (11150) (32.42) 138.38 (90.18)

(36,112) 32567

(41,078) 20516

Investing Additions to property and equipment (1,578) (812) (207) (766) (442) 94.33 213.52 (24.87) (86.70) (1.06) 100 (46.74) Acquisition of companies, net of cash acquired (649) Purchases of investments Maturities of investments Sales of investments Net proceeds from securities lending Net cash from (used in) investing (51,117) 3,877 54,353 3,117 8,003

(68,045) 16928 29,153 54,938 15,027 (25276) (585) 3117 (7024)

Net change in cash and equivalents

1,845

(9,446) (7)

11291 25

(119.53) (357.14)

Effect of exchange rates on cash and equivalents 18

Cash and equivalents, beginning of period Cash and equivalents, end of period

4,851 $ 6,714

14,304

(9453)

(66.08) 38.40

$ 4,851 1863

cash flow statement

investing amount

financing

operating year 2010-2009

STOCK HOLDER`S EQUITY STATEMENT Absolute Precentag Change (In millions) 2010 2009 in $ e Change %

Year Ended June 30

Common stock and paid-in capital Balance, beginning of period $ 60,413 Common stock issued Common stock repurchased Stock-based compensation expense 1,939 (4,447) 1,715 $ 56,396 4017 (1294) 3310 (733) 7.12 (40.14) (190.55) (29.94)

3,223 (1,737) 2,448

Stock option income tax benefits/ (deficiencies) Other, net Balance, end of period (617) 2 $ 59,005 $ 60,413 89 (6)

(706) 8 (1408)

(793.25) (133.33) (2.33)

Retained earnings (deficit) Balance, beginning of period Net income Other comprehensive income: Net gains/(losses) on derivative instruments 76 Net unrealized investments gains/(losses) Translation adjustments and other Comprehensive income Common stock cash dividends Common stock repurchased Balance, end of period Total stockholders equity (282) 9 12,402 (3,594) (15,411) (18,901) $ 40,104 $ 48,115 (8011) (16.64) (58) 371 (6) 12,561 (36,968) (6,320) (12,298) 134 (653) 15 (159) 33374 (9091) (6603) (231.03) (176.01) (250) (1.26) (90.27) 143.84 53.69 (12,298) 12,599 18,429 12,254 (30727) 345 (166.73) 2.81

INTERPRETATION: From the Balance sheet I conclude the there is decrease total cash and shortterm investment, the figure reduces from $37756 million to $34161 million with a 10.5% of decrease, whereas the total current assets has increase of $273 million. But the total current liability has been increased $16877 million to $22442 million with a total change of $5565 million and 75.2% in change where as the stock holders equity has been tremendously reduction of $8011 million. But overall the balance sheet shows net decrease of $1218 million from the pervious year. The statements are not satisfactory according to me, but I think there must be some hidden reserve, investment or some gains kept secrete which is not furnished for

valuation of statement.

PERFORMANCE GRAPH: The chart below compares the five-year cumulative total return, assuming the reinvestment of dividends, on Microsoft common stock with that of the S&P 500 Index and the NASDAQ Computer Index. This graph assumes $100 was invested on June 30, 2010, in each of Microsoft common stock, the S&P 500 companies, and the companies in the NASDAQ Computer Index. Microsoft management cautions that the stock price performance shown in the graph below should not be considered indicative of potential future stock price performance.

COMPARISION OF 5 YEAR CUMULATIVE TOTAL RETURNS AMONG MICROSOFT CORPORATION, THE S&P 500 INDEX AND THE NASDAQ COMPUTER INDEX

Cumulative Total Return

6/05

6/06

6/07

6/08

6/09

6/10

Microsoft Corporation NASDAQ Computer Index S&P 500 Index

100.00 100.00 100.00

74.93 90.10 82.01

70.48 70.13 82.22

78.93 98.36 97.93

77.07 93.62 104.12

73.25 99.03 113.11

RATIO ANALYSIS:

(in millions ) 2009 2010

Current Asset 1 Current Ratio Current Liability

4873 7 =2.8877 1687 7

4901 0 =2.184 2244 2

4493 Liquid Asset 2 Quick Ratio Current Liability 1687 7 1 =2.662

4347 7 =1.937 2244 2

Cash & Bank + 3 Absolute Liquid Ratio Current Liability Securities

3775 1 =2.326 1687 7

9779 2244 2 =0.435

Sale 4 Stock turnover Ratio Inventory

8563 =2.249 3806

9818 =1.742 5633

Sale 8563 5 Capital Turn Over Ratio --------------------------X 100 Capital Employed 7081 5 X 10 0 =12.092 9818 X10 6959 7 0 =14.108

RATIO ANALYSIS
16 14 12 10 POSITION 8 6 4 2 0

2010 2009 C.R A.B.R YEAR 2009-2010 C.T.R

Comment: From the above ratio analysis that the current ratio of the company is quit satisfactory in the year 2010 but not in 2009 because the ratio should lies within the standard limit of 2:1 but in the year 2010 it is just above the standard limit which can be ignored but in 2009 the ratio largely exceed the standard limit, which means the company is inefficient in proper utilization of fund. Acid test ratio or the Quick ratio on the other hand is quit more the normal standard of 1:1, in the year 2009 the company holds more than the standard limit which means the firm has not utilized the funds, in 2010 the firm has maintained the standard limit by keeping the ratio by 1.937:1 which is just good enough than the previous year 2009. Absolute liquid ratio or Cash ratio is slightly low in the year 2010 (0.436:1) whereas the accepted standard is 0.5. But in the year 2009 the firm has 2.326:1 as absolute ratio which means the holds a large amount of cash and securities in hand and unable to utilize the funds. Inventory turnover ratio or the stock turnover ratio Capital turn over ratio is increased by 2.016%, which means the company is efficient and it utilizes its resources effectively.

CHAPTER-V SUMMARY &FINDINGS: From this project report I got to know Microsofts financial position, investments plan, liquidity position, solvency position, profitability ratio, net income, total assets and liabilities, income from all possible operations, considering income statement, balance sheet and cash flow statement including the comparative statement analysis of 2009-2010. The total operating expenses has increase by $2583 million with a ratio increase 10.23% and net income increase to $12599 million. Whereas total current assets increased by $273 million with 0.58%. The detail analysis and observation has been mentioned below. Observation : From the above analysis I have observed that the company is passing through many up and downs in the middle of the previous year but some how the company manage to control the total return at the end of the period. But in the year 2010 the company total operating expenses had a tremendous increase of $2583 million with a 10.23% of change, the revenue increased from $39788 million to $44282 million with an Absolute change of $4494 Million with 11.29% of change. Where as the net income from all sources is just increased to $345 million. The earning per share has an increase of 7.07% and 7.14% whereas the weighted average share outstanding is reduced to 3.69% and 3.43%. But there is decrease total cash and short-term investment, the figure reduces from $37756 million to $34161 million with a 10.5% of decrease, whereas the total current asset has an increase of $273 million. But the total current liability has been increased $16877 million to $22442 million with a total change of $5565 million and 75.2% in change where as the stock holders equity has been tremendously reduction of $8011 million. But overall the balance sheet shows net decrease of

$1218 million from the pervious year. The statements are still not satisfactory according to me, but I think there must be some hidden reserve, investment or some gains kept secrete which is not disclosed or declared for valuation of stock and income of the year 2010

MAJOR SUGGESTION:

Microsoft has tremendously increased the per capita income of the company in 2010 up to $12599 million with a net increase of $345 million and with 2.81% of increase, but in 2010 the companys investment income is greatly reduced $277 million with a net fall of 13.4% from the previous year 2009. The company should try to maintain a positive figure towards investment income by safe guarding the invested amount in proper way. Microsoft should give more attention towards shot-term investments including securities I suggest that Microsoft should expand its business to hardware manufacturing and assembling. Though Microsoft is one of the software agencies, it should try to hold a position in hardware production and than Microsoft will become the Global Leader in overall IT sector. At last I suggest to the management of Microsoft to improve their investment by imposing new policies, plans as well as other funds. Particularly, the long-term investment also increased during the 2009-2010.In a basic analysis I want to suggest the management to improve the rate of growth

Conclusion:

Microsoft is one of the leading Software agency and remains on top among other software agencies, creating a new dimension for the next generations technology. From the above study I conclude that Microsoft has relatively high earned revenue in an increasing order with an average net growth rate of 9% to 18% and with a net income increases every year with every new product and product update launch, since last decades. Microsoft always kept its policies of product assurance and so as of its shareholders. From this project report I found that the Microsoft will increases its amount of investment in a speed way. Microsoft also generates new system even in the firms production. Here; the long-term investment also increases to a high by the end of 2010. No doubt in fiscal year 2011, I expect double digit revenue growth primarily as a result of the upcoming launches of Windows Vista and the 2011 Microsoft Office system. I estimate worldwide PC shipments will grow between 8% and 10% and PC unit growth rates will be higher in the consumer segment than in the business segment and higher in emerging markets than in mature markets. I estimate worldwide server unit shipments will grow between 10% and 12% in fiscal year 2011 as compared to fiscal year 2010. I do not expect a significant impact from year-over-year foreign currency exchange rates in fiscal year 2011.

BIBLIOGRAPHY & REFERENCE 1. Mellon Investor Services P.O. Box 3315 South Hackensack, New Jersey 07606-1915 U.S.A 2. Investor Relations Microsoft Corporation One Microsoft Way Redmond, Washington 98052-6399 U.S.A 3. msft@melloninvestor.com 4. Call (425) 706-4400. 5. NASDAQ (USA Stock exchange) Stock Review Bulletin 6. Microsoft Help Desk 7. Microsoft Share Holders Reports 8. http://www.thocp.net/companies/microsoft/microsoft_company.htm