Introduction
Apple Inc. and Microsoft Corporation are two obvious public companies that can be compared. Apple Inc. is a multinational technology company that designs, develops, and sells consumer electronics, computer software, and online services. Microsoft Corporation, on the other hand, is a multinational technology corporation that develops, manufactures, licenses, supports, and sells computer software, consumer electronics, and personal computers.
Financial Analysis
To assess these companies’ financial performance, it is feasible to choose two ratios from distinct categories. First, the current ratio will be compared, which gauges a company’s capacity to fulfill immediate obligations. Second, the return on assets (ROA) will be analyzed, which evaluates a company’s profitability in relation to its total assets.
Liquidity
From the liquidity ratio category, let’s consider the current ratio. The current ratio measures a company’s ability to pay short-term and long-term obligations. As of Q3 2021, Apple’s current ratio is approximately 1.1, while Microsoft’s current ratio is about 2.5 (Al Mheiri et al., 2021; Stock Analysis on Net, n.d.). This indicates that Microsoft has a better short-term financial strength than Apple. Microsoft has more than enough short-term assets to cover its short-term liabilities. At the same time, Apple’s ratio suggests it has just enough to cover its short-term debts.
Profitability
From the profitability ratio category, ROA is worth considering. ROA indicates how profitable a company is relative to its total assets. It gives an idea of how efficient management uses its assets to generate earnings. As of Q3 2021, Apple’s ROA is approximately 17.5%, while Microsoft’s is about 14.8% (Al Mheiri et al., 2021; Stock Analysis on Net, n.d.). This suggests that Apple is more efficient at converting its investments into profits.
Conclusion
Overall, while Microsoft seems to be in a better liquidity position, Apple demonstrates a higher efficiency in using its assets to generate profits. Both companies, however, stand as giants in the tech industry and continue to display strong financial performance. These ratios provide a snapshot of the financial health of Apple and Microsoft, but a more comprehensive analysis would take into account other financial ratios and information.
References
Al Mheiri, R., Al Hosani, N., Saif, E., Nobanee, H. (2021). Ratio analysis of Apple. SSRN. Web.
Stock Analysis on Net. (n.d.). Microsoft Corp. (NASDAQ: MSFT). Adjusted financial ratios. Web.