Financial and Management Accounting in Microsoft Essay

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Chapter 1: The Accounting Function in Microsoft

Background of the Organization

Microsoft Corporation is an American technology organization whose main center of operations are situated in Redmond, Washington. Founded by Paul Allen and Bill Gates in 1975, the company key operations encompass the discovery and development of manufacturing and licensing goods and services that are associated to computing (Bellis, 2017).In accordance to Statista (2017), the company has 124,000 employees across the world. In the past number of decades since its inception, the company has progressively grown to become a huge global corporation. Its extensive business portfolio encompasses electronics, personal computers, computer software and in the present day cloud computing. Some of these renowned products and services consists of Microsoft Office, Xbox, Internet Explorer, and Microsoft Operating System.

The organizational structure of Microsoft Corporation facilitates its business to grow and develop. The firm’s organizational structure replicates the needs of the computer hardware and software business in reaction to the dynamics of market supply and demand. A receptive organizational structure guarantees the establishment’s long-standing success. In particular, the organizational structure employed by Microsoft is a product-type divisional organizational structure. Basically, this encompasses having company divisions that are founded on particular computer hardware and software products as well as organizational productivities. Three features of the company’s organizational structure take into account product type branches, multinational corporate groups, and geographic segments (Lombardo, 2017).

Stakeholders

Stakeholders of a corporation consist of the parties whose interests ought to be taken into consideration whilst generating and carrying out policies and programs. The key stakeholders of Microsoft Corporation consist of the following with objectives of each with regard to the organization being outlined:

i. Employees

The company offers a wide range of resources to assist then in accomplishing a work-life balance. This includes the provision of resources such as work leave, part-time hours, telecommuting, and referral services.

ii. Suppliers

These include the different contractors and brokers working in tandem with the organization. The objective of this stakeholders is to ensure that dealing with Microsoft benefits and profits all.

iii. Shareholders

To maximize the returns of shareholders. They are the key owners of the company and therefore the organization takes their lead.

iv. Government

Microsoft works in tandem with the government to cultivate a setting where prospects and develop can succeed and thrive by means of invention, research, technology, acquiring international talent, and infrastructure.

v. Consumers

Guaranteeing a high magnitude of satisfaction amongst our consumers and associates is a fundamental element of Microsoft by means of Customer Partner Experience

vi. Civil society

Microsoft is dedicated to assisting Non-Governmental Organizations (NGOs) to release technology to facilitate the progression of social and economic growth. The firm’s approach is centered on accessibility of such organizations to steady and more protected technology, and enhancing the rendering of information technology solutions (Smithson, 2017).

Key Resources of the Organization

Key resources encompass assets that are specific to the organization. Microsoft Corporation has tangible resources, intangible resources and human resources. With respect to tangible resources, the organization has property and equipment, which include computer equipment, hardware and software (Anastacia, 2015). Moreover, there are land and buildings for the organization. All these total more than $18 billion. The company also has tangible resources in the form of cash reserves, which enable Microsoft to have substantial financial flexibility. Cash reserves of the company surpass $6 billion. Moreover, key resources include distribution channels and consumers. In particular, the company has been able to establish channels of distribution encompassing retailers and vendors for its various products. These tangible resources are indicative that Microsoft Corporation has substantial ability to borrow, has good investment capacity as well as reserves (Microsoft, 2016).

Key resources also come in the form of intangible resources, which consist of technology, organizational culture and reputation. To begin with, the key technological resources of Microsoft consist of intellectual property as well as its capacity for research and development. Its distinctive corporate culture is another intangible resource. It is deemed to be team-oriented and forceful with personnel being valued for their influences and making them committed. Taking this into consideration, it can be perceived that Microsoft is strongly positioned with respect to intangible resources owing to its vast technological competencies, brand, and culture (Microsoft, 2016). Lastly, there is human resources.

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The metrics of this key resources can be assessed in terms of personnel qualification as well as dedication to the organization. Microsoft Organization has the ability to appeal to as well as retain some of the outstanding and remarkable talents within the information technology industry. The company contains a proficient and dedicated workforce that is a major resource (Microsoft, 2016).

Corporate Governance

Corporate governance in Microsoft is purposed to institute and maintain accountability of the management team by suitably apportioning roles and responsibilities. It is also intended to buttress and protect organizational culture of business integrity and accountable business practices. It is also purposed to embolden the efficacious utilization of resources, and to necessity responsibility for their management of those resources. The corporate governance structures are in fact in line with what you would expect because the composition of the board takes into account independent directors who are not liable for everyday management. In addition, the business aspects include the use of independent advisors and also undertaking and performance evaluations. The company also has incessant communication with stakeholders to inform them of the operations and position of Microsoft (Smithson, 2017).

The Role of Accounting within the Organization

Accounting plays a key role in the organization in the sense that it is a fundamental way of assisting managers, suppliers, consumers, as well as other stakeholders to undertake decisions. Accounting offers information to the managers of the organization for external reporting, normal internal reporting, and unconventional internal reporting. This makes it possible to obtain information to both internal and external users and also in key decision making (Needles et al., 2013).

Accounting Software Used

The accounting software used by the company is Microsoft Dynamics 365. This is a software developed by the organization itself that helps in the analysis of the silos between Customer Relationship Management (CRM) and Enterprise Resource Planning (ERP) that is driven by data and intelligence, and helps seize new business prospects (Microsoft, 2017).

Chapter 2: Financial Accounting Analysis of Microsoft

Business Outlook and Performance

Microsoft’s business looks healthy and it appears to be growing. In the past financial year 2016, the company attained strong financial results and it is constructing a robust and substantial basis for an even positive future. Despite the fact that the organization was making investments in innovation as well as undertaking business expansion globally, Microsoft was still able to sustain it dedication to shareholder return and also had a 12 percent increase in its total return in cash amounts. Similarly, the firm generated $85.3 billion in revenue amounts and $20.2 billion in the operating income for the 2016 financial year. These financial results mirror sensational new product innovations in addition to increase in consumer usage as well as engagement across its businesses (Microsoft, 2016).

Financial Leverage

Financial leverage takes into account the utilization of debt in order to increase the volume of production, and therefore increase the revenues and earnings generated. Financial leverage is calculated as the ratio of the total debt against the total assets. Therefore, if the debt amount is higher, then the company has high financial leverage. The financial leverage for the past three years can be calculated as follows:

2016 = 121,697 / 193,694 = 0.6283 = 62.83%

2015 = 94,389 / 174,472 = 0.5410 = 54.10%

The inference of this is that Microsoft Corporation is highly geared and its more than 60 percent of its operations are financed using debt whilst the remaining 30 percent or so are financed by equity (Brigham and Houston, 2016).

Working Capital Management

Working capital management takes into account the issues that come about in the endeavor of managing the firm’s current assets, the current liabilities, and the inter-association that prevails between them. The objective of working capital management is to make certain that a company has the ability to continue its operations and that it has adequate capacity to address and fulfill both growing short-term debt and forthcoming operational outlays (Brigham and Houston, 2016). One of the key ratios of working capital management is working capital ratio, which is computed by current assets compared to current liabilities. Microsoft’s working capital ratio is calculated as follows:

2016 = 139,660 / 59,357 = 2.35

2015 = 122,797 / 49,647 = 2.47

This indicates that.....

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