Financial Statement Analysis Assignment for Corporate Accounting II

College of Economic and Business Administration CORPORTATE ACCOUTING II/2 (BSAC3103/BAAC3205) STRUCTURED GROUP ASSIGNMENT- SEM I, 2023-24 Objectives of the assignment are:  To familiarize the learning outcomes of the course with practical insights into the financial statements of Omani companies, including their share capital, earnings, and dividend payments.  To understand and analyze the financial statements to arrive at a meaningful conclusion.  To apply the course outcomes to interpret the results of financial information analysis and  To make the students learn Teamwork management and time management tactics. Pre requisites: 1. Students are required to select a company listed on Muscat Stock Exchange. 2. The lecturer’s approval is required before proceeding with the data analysis of the chosen company. 3. Each group should have a maximum of four members. Members should choose a leader. 4. Students must download the financial statements for 5 years and analyze the following details, commenting on the results: A. Share capital: Types and classes of shares, number of shares, authorized capital, issued capital, subscribed capital, paid-up capital, and any calls in arrears. Show and interpret the results for equity and preference capital separately. B. Reserves and Surplus : The net profit earned, other statutory and non-statutory reserves (including retained earnings) for the 5 years period. Interpret the results accordingly. C. Dividends: History of dividend payment for the 5 years, including types of dividends, amount of dividend, increase or decrease in dividend, and possible reasons for any changes from the notes. D. Earnings per Share: Basic and diluted earnings per shares for the 5 years, including the profits attributable to shareholders and average number of outstanding shares for each of the year. 5. Students must adhere to the university's plagiarism policy. The similarity percentage must be less than 20%.

College of Economic and Business Administration 6. The soft copy of the group assignment should be submitted through E-Learning by the group leader only, by 11:59 p.m. of 8 th December 2023. 7. The total marks for this project are 15. The rubric for assessment is as follows: Criteria Marks Cover page 0.5 Introduction 1 Main contents 12 Conclusion 1 References 0.5 Total 15 8. Marks for the main body of the assignment will be awarded based on creativity, originality, graphical representation of financial information, and logical interpretation. 9. Since all the financial information is publicly available, any inaccuracies, fabricated numbers, or malicious information presented in the report may result in deduction of marks. 10. For similarity and late submissions, marks will be reduced. 11. A sample, but not exhaustive, assignment is annexed for reference purpose (See pages 3 to 17). Procedure for Data Collection: The financial data of the companies are available in the financial reports of the listed companies in Muscat Stock Exchange (MSX) website. Follow the below steps for financial data: 1. Click the Company selection link given: https://www.msx.om/Companies-Fin-Pref.aspx 2. Type your Sector and click SHOW. Selection of sector will depend on your course teacher as given below: Course Teacher Sector Dr. Krishna Murthy Services Mr. Gopalan Puthukulam Financial Dr. Thahirunissa Arshath Industrial 3. Then click the selected company name from the list. 4. Then click Financial Reports. 5. Download the yearly audited financial reports for 5 years from 2018 to 2022.

College of Economic and Business Administration CORPORATE ACCOUTING II/2 (BSAC3103/BAAC3205) GROUP ASSIGNMENT ANALYSIS OF FINANCIAL STATEMENT OF MICROSOFT CORPORATION FOR THE YEARS 2018-2022 Prepared by: Abdullah Issa Al-Balushi 11J11145 Mohammed Abdullah Al-Salmani 11S188255 Nabhan Salim Al-Nabhani 11J182135 Submitted to Mr. Gopalan Puthukulam SEM I, 2023-24 Warning: Please note that the information provided in this report is fictitious and does not represent actual data. Students are advised not to reproduce or use this information as a reference in any academic or non-academic context, as it has no basis in reality

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College of Economic and Business Administration INTRODUCTION Microsoft is a multinational technology corporation founded by Bill Gates and Paul Allen in 1975. It is head quartered in Redmond, Washington and is primarily known for its software products such as the Windows operating system and Microsoft Office productivity suite. Over the years, Microsoft has expanded its product portfolio to include cloud services, gaming, hardware, and artificial intelligence. Some of Microsoft's most well-known products include Microsoft Teams, Xbox, Microsoft Surface, and LinkedIn, which it acquired in 2016. The company has a significant global presence and employs over 181,000 people worldwide. As of 2021, Microsoft is one of the world's most valuable companies, with a market capitalization of over $2 trillion. Microsoft's revenue is primarily generated through its Intelligent Cloud and More Personal Computing segments. The Intelligent Cloud segment, which includes Azure and other cloud-based services, generated $48.4 billion in revenue in 2021, while the More Personal Computing segment, which includes Windows, Surface, Xbox, and search advertising, generated $55.9 billion in revenue. Microsoft also has a strong balance sheet with over $130 billion in cash and short-term investments as of June 2021. It has consistently maintained a strong financial position with a debt-to-equity ratio of 0.64 and a current ratio of 2.5.

College of Economic and Business Administration Overall, Microsoft's financials are quite robust and the company is well- positioned for continued growth and innovation in the technology industry. In the 2021 fiscal year, Microsoft reported revenues of $168.1 billion, an increase of 15% from the previous year. Its net income for the same period was $61.3 billion, an increase of 38% from the previous year A. SHARE CAPITAL Summary of Share capital As of September 2021, Microsoft's total outstanding shares were approximately 7.57 billion. The company's market capitalization at that time was around $2.2 trillion, making it one of the most valuable companies in the world. Microsoft's capital structure includes both debt and equity. The company had approximately $62.1 billion in long-term debt as of June 2021. However, Microsoft is known for having a strong balance sheet with significant cash reserves, which can be used to pay off debt or invest in growth opportunities. In terms of equity, Microsoft's largest shareholders include institutional investors such as Vanguard Group, Blackrock, and State Street Corporation. As of June 2021, the company's insiders, including executives and board members, held around 1.3% of the outstanding shares. Types of shares issued by the company:- The company has issued Equity and preference shares. The details are given below.  Equity Share capital as on 31-12-2022:

College of Economic and Business Administration o Authorized Share capital 25 billion divided in to $1 o Issued share capital $13 billion o Subscribed share capital $13 billion o Called up share capital $13 billion o Paid up share capital $13 billion The company has calls in arrears of $ 12000 last year and now collected it in full. Table 1: Details of Equity and Preference share capital Type of shares 2018 2019 2020 2021 2022 % of change from 2018-2022 if ant Equity paid up capital (billion) 10 12 12.5 12.5 13 There is a change of 30% Preference capital (billion) 15 15 15 15 10 There is reduction of 50% Source: Company Financial Statements Chart 1: Graph showing increase or decrease in the share capital

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College of Economic and Business Administration 2018 2019 2020 2021 2022 0 2 4 6 8 10 12 14 Equity (million) 2018 2019 2020 2021 2022 0 2 4 6 8 10 12 14 16 Preference (million) Interpretation:- The equity of this company has increased significantly from 2018 to 2022, primarily as a result of the issuance of 5 million right shares in 2022 to raise funds for its expansion in European markets.

College of Economic and Business Administration However, the company's preference capital decreased due to the redemption of 5 million last year. This indicates that the company's strategy is to issue more equity shares than preference shares to fund its expansion program. Any other important points, observation etc. B. RESERVES AND SURPLUS Summary:- As of its most recent financial statements, Microsoft Corporation reported a net income of $44.3 billion for the fiscal year ended June 30, 2021. Microsoft also reported that it had retained earnings of $149.8 billion, which represents the portion of the company's profits that have been reinvested in the business instead of being paid out as dividends. This amount is reported as part of the company's total equity, which was $141.7 billion as of June 30, 2021. In addition to retained earnings, Microsoft has other statutory reserves, including legal reserves and tax reserves, which are set aside to cover potential liabilities or tax obligations. Overall, Microsoft has a strong financial position with significant reserves and surplus, reflecting the company's profitability and financial stability. These reserves and surplus provide the company with a cushion to weather economic downturns or other challenges and to invest in growth opportunities. Table 2: Net profit Type of reserve 2018 2019 2020 2021 2022 % of change 2018-2022 Revenue(Billion 12 16 18 20 22 ?

College of Economic and Business Administration ) Net profit (Billion) 2 2.5 4 5 6 ? Source: Company Financial Statements Chart 2: Graph Showing Change Revenue and Profit 2018 2019 2020 2021 2022 0 5 10 15 20 25 Chart Title Revenue(Million) Net profit (Million)

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College of Economic and Business Administration Interpretation:- Table 3: Reserves and Surplus Type of reserve 2018 2019 2020 2021 2022 % of change 2018-2022 Reserve and Surplus (billion) 2 3 4 4.5 5 150% Statutory reserve (billion) 1 1 1 1.2 1.2 20% Other reserve (billion) 2 4 6 3 4 100% Retained earnings (billion) 8 6 4 3 6 (25%) Any other items (Revaluation) (billion 0 0 0 0 2 Source: Company Financial Statements Chart 3: Charts showing increase/ Decrease in Reserves and surplus

College of Economic and Business Administration 1 0 0.2 0.4 0.6 0.8 1 1.2 Chart Title Series1 Series2 Series3 Series4 Series5 Interpretation:- C. DIVIDEND POLICY Summary of Dividend policy

College of Economic and Business Administration Microsoft has a long-standing history of returning value to its shareholders through dividends and share buybacks. The company's dividend policy is to pay a quarterly dividend to shareholders, with the amount of the dividend being determined by the Board of Directors. Microsoft has consistently increased its dividend over the years, with the most recent increase in September 2021. As of September 2021, Microsoft's quarterly dividend was $0.62 per share, which represents an annual dividend yield of approximately 0.8%. The company's dividend payout ratio is relatively low, at around 26% of earnings, which indicates that Microsoft has room to continue increasing its dividend in the future. In addition to dividends, Microsoft also repurchases its own shares as a way of returning value to shareholders. The company has an ongoing share repurchase program, and as of June 2021, had approximately $63.3 billion remaining under the program. Overall, Microsoft's dividend policy reflects the company's commitment to returning value to its shareholders while also maintaining a strong financial position and investing in growth opportunities. Types of Dividend: Microsoft typically pays cash dividends to its shareholders, which are distributed on a quarterly basis. These cash dividends are the most common type of dividend paid by companies and represent a portion of the company's profits that are distributed to shareholders. In addition to cash dividends, Microsoft has also engaged in share buybacks, which can also be considered a form of returning value to shareholders. Share

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College of Economic and Business Administration buybacks involve a company purchasing its own shares from the market, which reduces the number of outstanding shares and increases the value of the remaining shares. While not strictly considered a type of dividend, Microsoft has also offered special dividends in the past. These one-time payments are usually larger than regular dividends and are distributed to shareholders when the company has excess cash or profits to distribute. Overall, the primary type of dividend paid by Microsoft is cash dividends, with share buybacks and special dividends being less common but still utilized by the company in certain circumstances. Table 4: Dividend payout Year Dividend per share Dividend payout ratio 2022 $2.48 26.20% 2021 $2.04 32.10% 2020 $1.84 39.50% 2019 $1.68 47.10% 2018 $1.56 52.40% Source: Company Financial Statements Chart 4: Graph showing dividend and payout ratio

College of Economic and Business Administration 1 0 0.2 0.4 0.6 0.8 1 1.2 Chart Title Series1 Series2 Interpretation Microsoft has a strong dividend history, with consistent increase in the dividend payout over the past five years. The dividend payout ratio has been consistently below 50%, indicating that Microsoft has retained a significant portion of its earnings for reinvestment in growth opportunities and other uses. Despite the relatively low payout ratio, Microsoft's dividend yield has been competitive with other companies in the technology sector, reflecting the company's strong financial position and long-term growth prospects. Overall, Microsoft's dividend policy reflects a balance between returning value to shareholders through dividends while also maintaining a strong financial position and investing in growth opportunities.

College of Economic and Business Administration D. EARNINGS PER SHARE Microsoft annual and quarterly earnings per share history from 2010 to 2023. Earnings per share can be defined as a company's net earnings or losses attributable to common shareholders per diluted share base, which includes all convertible securities and debt, options and warrants. Microsoft EPS for the quarter ending June 30, 2023 was $2.68, a 19.64% increase year-over-year. Microsoft EPS for the twelve months ending June 30, 2023 was $9.68, a 0.31% increase year-over-year. Microsoft 2023 annual EPS was $9.68, a 0.31% increase from 2022. Microsoft 2022 annual EPS was $9.65, a 19.88% increase from 2021. Microsoft 2021 annual EPS was $8.05, a 39.76% increase from 2020 . Table 5: Earnings per share Year Earnings per share Profits attributable to Equity shareholders (billions) Number of outstanding shares (billions) 2022 $2.48 8 13 2021 $2.04 6 12.5 2020 $1.84 4 12.5 2019 $1.68 3 12 2018 $1.56 6 10 Source: Company Financial Statements

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College of Economic and Business Administration Chart 4: Graph showing Earnings per share 1 0 0.2 0.4 0.6 0.8 1 1.2 Chart Title Series1 Linear (Series1) Series2 Interpretation

College of Economic and Business Administration CONCLUSION Microsoft Corporation is a multinational technology company with a strong financial position. As of its most recent financial statements, Microsoft had a market capitalization of over $2 trillion, making it one of the largest companies in the world. Microsoft has a history of consistent profitability, with a net income of $44.3 billion for the fiscal year ended June 30, 2021. The company also has a strong dividend history, with a current annual dividend per share of $2.48 and a dividend payout ratio of 26.2%. In terms of its share capital, Microsoft does not have a face value for its shares, but the company has a significant number of outstanding shares, with over 7.6 billion shares outstanding as of June 30, 2021. Microsoft's financial position is also strong, with significant reserves and surplus, including retained earnings of $149.8 billion. Overall, Microsoft is a financially stable and profitable company with a strong dividend history, significant reserves and surplus, and a large market capitalization. These factors suggest that Microsoft is well-positioned for long- term growth and continued success in the technology industry.

College of Economic and Business Administration REFERENCES 1. Microsoft's most recent financial statements: https://www.microsoft.com/investor/reports/ar21/index.html 2. Information on Microsoft's market capitalization: https://www.reuters.com/business/microsoft-corp-market- capitalization-2-trln-time-2021-06-22/ 3. Microsoft's net income for FY2021: https://www.business- standard.com/article/companies/microsoft-q4-profit-tops-forecasts- driven-by-strong-cloud-demand-121072300457_1.html 4. Microsoft's dividend history: https://www.nasdaq.com/market-activity/stocks/msft/dividend-history 5. Information on Microsoft's outstanding shares: https://www.nasdaq.com/market-activity/stocks/msft 6. Microsoft's financial position and reserves: https://www.forbes.com/companies/microsoft/?sh=15f9818f1755

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Corporate-II Assignment Guidelines (1)

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