Question

Prompt: Using the SEC’s EDGAR database, search for a large public company and download the most recent Form 10-K. This form contains all the information that must be reported annually to the SEC. Within this form, ensure that it includes footnotes, the management discussion and analysis (MD&A) sections, review each of the previously listed sections, and discuss any off-balance sheet financing, management concerns, management’s expectations for the future, and anything interesting or out of the ordinary. Feel free to supplement your search with current articles that discuss your chosen company and the industry in which it operates.

Specifically, the following critical elements must be addressed:

I. Company Selection: Select and name the public company along with the fiscal year-end of the annual report that includes footnotes and the management discussion and analysis (MD&A) sections. - Company Apple

II. Footnotes: Review the footnotes of the financial statements and describe off-balance sheet financing in general or with specific examples provided within the Form 10-K of the selected company (e.g., operating lease or through special purpose entities).

III. Management Discussion and Analysis (MD&A): Review the MD&A of the annual report. Management often discusses issues of concern in this area of their report. They also include projected financial statements, which may suggest ideas about the firm’s potential for future earnings.

a. Describe any management concerns listed and/or explain anything you find interesting or out of the ordinary.

b. Describe any projections and/or future expectations of the management.

Answer 1

1. The company that I have selected is “Microsoft Corporation” and the year is the fiscal year ended June 30, 2106.

2. In terms of off balance sheet financing, Microsoft has operating leases for several of its facilities like U.S. and international sales facilities, support facilities, R&D facilities, retail stores etc.

The company’s future minimum rental commitments under non-cancellable facilities operating leases for the fiscal year ended 2016 are as shown in the table below

years	Amount in millions
year endinf june 30	amount
2017	961.00
2018	996.00
2019	922.00
2020	833.00
2021	634.00
thereafter	2118.00
Total	6464.00

3a. Management discussion and analysis – In terms of management concerns, the management of Microsoft has outlined that the industry that it operates it in is not only dynamic but also highly competitive. The industry witnesses frequent changes in both technologies and business models. Thus Microsoft faces the concern that changes in demands of customers and users, industry trends, and competitive forces can sometimes be difficult to keep pace with. The company tries to alleviate this concern by investing in a broad range of research and development activities. For instance the market for software, devices, and cloud-based services is dynamic and highly competitive. This makes it imperative for Microsoft to continue to evolve and adapt on a continuous and regular basis. Another concern mentioned by management is that the large amount of investments that it makes in developing new products and services might not produce desirable returns. The company invests in a variety of hardware and software, but due to the dynamic nature of the industry, these investments are often speculative as the management cannot say for sure which product will yield handsome returns.

3b. In terms of future expectations, the company expects good growth in its intelligent cloud revenue. It is planning to build and run cloud-based services in such ways that will increase the opportunities for the company. Going forward the company would also focus on better execution and strategy. It has already changed its reporting segments to the following three - Productivity and Business Processes, Intelligent Cloud, and More Personal Computing, in order to better reflect the company’s strategy.

No future projections was provided by the company.