Question

1. Go to the Microsoft Corporate website (Official Home Page) and click on “Investors” at the bottom of the page. This will direct you to the Investor Relations Page. Click on Annual Reports and select download the 2019 Annual Report. Scroll down to the 2019, 2018, 2017 comparative financial statement of Cash Flows Statement (About half way down the document).

Questions:

a. What cash flow format does Microsoft use? How do you know? What are the cash flows for Operating, Investing, and Financing in 2019?

b. Explain the Financing cash flows for 2019. What are the two major financing cash flows? What is Microsoft doing? Explain your answer in detail.

c. Explain the Investing cash flows for 2019. What are the two major Investing cash flows? What is Microsoft doing? Explain in detail.

d. Looking at the balance sheet for 2019 – what is Cash, Cash Equivalents, and Short term investments at June 30, 2019? What is a cash equivalent (look it up in your text book)?

Answer 1

Ans a

Microsoft use direct method of cash flow statement. Under the direct method, the cash flows from receipts and payments made during the financial period are listed and then subtracted from the cash inflows to calculate the net cash flow from operations of a company.

Net cash from operations was $52,185 million in FY2019

Net cash used in financing was $36,887 million in FY2019

Net cash used in investing was $15773 million in FY2019

Ans b

Two major financing cash flows are into buyback and giving dividends. The company is buying back its shares and giving excess cash to its shareholders

Ans c

Two major investing cash flows are into purchase and sale of investments. Microsoft is investing its capital into acquisition and also by selling its investments.

Ans d

Cash and cash equivalents as at 30 June 2019 is $11,356 million

Short term investments $122,463 million as at 30 June 2019

Cash equivalents are investments securities that are meant for short-term investing; they have high credit quality and are highly liquid. Cash equivalents, also known as "cash and equivalents," are one of the three main asset classes in financial investing, along with stocks and bonds.