Question

findings and make a statement about value creation. Is microsoft creating value for shareholders? You need to answer this question directly. Support your statement with relevant ratios, stock price movements, and news events. This is a question as to whether Microsoft is creating value and why. Please be unambiguous in your answe

Answer 1

Microsoft is the largest software company which is known for its window operating software.this company has been on a continuous upside in a past few decades and it has been creating value for its shareholders. It has grown multifold even after the tech bubble bust of 2000 and then recovered to gain more of the market share and establish itself as one of the leader in its windows operating system.

The share price of company has grown handsomely in last 5 years and it could be evidenced through the $46 lows in 2015 to $190 in 2019. It has also entered into the prestigious one trillion dollars market capitalisation company.

It has been a continuous upside and always creating value for its shareholders in the long as well as in the short term. It has beaten its earning estimate most of the times because of the growing technology and Monopoly in its window operating system software. It has also diversified through a number of different products through the innovative technology.

The return on equity has been growing handsomely at the return of 15% CAGR in comparison to 12% on industries average so it can be said to be in creating a value for its shareholders in the long run. The financial balance sheet looks very strong and it has a very low amount of debt that can easily be serviced through the return on its capital which is very high. It is a mature company which does not have that much potential of growth but it is always implementing new ideas and innovations and always trying to expand its market beyond imagination so it has a capable and innovative Management which can deliver a very high growth and good rate of return for investing in long term .So investment in Microsoft is not a bad idea.