Apple vs. Microsoft Financial Ratio Analysis 2021
This paper presents a comparative financial ratio analysis of Apple Inc. and Microsoft Corporation based on their 2021 fiscal year annual reports. Using sixteen key ratios — including earnings per share, current ratio, gross profit margin, return on assets, debt-to-assets ratio, and price-earnings ratio — the paper evaluates each company's liquidity, profitability, efficiency, and leverage. The analysis reveals that while Microsoft generally outperforms Apple in profitability margins, asset turnover, and dividend yield, Apple leads in inventory efficiency, return on assets, return on equity, free cash flow, and times interest earned. The paper concludes with an investment recommendation based on the overall comparative performance of both firms.
- Introduction: Overview of Apple and Microsoft as competitors
- Financial Ratio Summary Table: Sixteen ratios compared side by side
- Profitability Ratios: EPS, gross profit, profit margin, ROA, ROE analysis
- Liquidity and Efficiency Ratios: Current ratio, inventory, receivables, asset turnover
- Leverage and Investor Ratios: Debt ratio, interest coverage, dividends, P/E, cash flow
- Conclusion: Investment recommendation favoring Microsoft
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What makes this paper effective
- Each ratio is defined before its values are presented, giving readers context before interpretation — a strong pedagogical and analytical habit.
- The paper maintains a consistent comparative structure throughout: formula, Apple's value, Microsoft's value, then interpretation — making it easy to follow across sixteen different metrics.
- Interpretations go beyond restating numbers; they draw meaningful conclusions about which company performs better on each dimension and why this matters for investors.
Key academic technique demonstrated
The paper demonstrates systematic comparative ratio analysis — a foundational technique in corporate finance and accounting. By calculating and interpreting each ratio side by side for two real companies using publicly available annual reports, the paper models how financial statements translate into actionable investment insights. This approach reflects standard practice in equity research and financial statement analysis coursework.
Structure breakdown
The paper opens with brief company introductions, presents a consolidated ratio table for quick reference, then devotes a dedicated paragraph to each of the sixteen ratios — defining it, stating both companies' computed values, and drawing a comparative conclusion. A short investment recommendation closes the paper. This ratio-by-ratio architecture is highly modular and mirrors the structure of professional financial analysis reports.
Introduction
Apple Inc. and Microsoft Corporation are among the largest companies in the United States and globally. Apple Inc. is a multinational corporation specializing in software, consumer electronics, and online services. Microsoft, a major competitor to Apple Inc., is involved in the production of consumer electronics, computer software, and personal computers. This paper presents a comparative financial ratio analysis of both companies based on their 2021 fiscal year annual reports.
Financial Ratio Summary Table
The table below summarizes the sixteen financial ratios computed for Apple Inc. and Microsoft Corporation, along with the formulas used to derive each figure.
| Ratio | Formula | Apple Inc. | Microsoft Corporation |
|---|---|---|---|
| Earnings per Share (EPS) | Net Income / Outstanding Common Shares | 5.67 | 8.12 |
| Current Ratio | Current Assets / Current Liabilities | 1.07 | 2.08 |
| Gross Profit Rate | Gross Profit / Revenue | 41.78% | 68.93% |
| Profit Margin | Net Earnings / Revenue | 25.88% | 36.45% |
| Inventory Turnover | Cost of Goods Sold / Inventory | 32.36 | 19.81 |
| Days in Inventory | (Inventory / Cost of Goods Sold) × 365 | 11.28 | 18.42 |
| Accounts Receivable Turnover | Sales / Accounts Receivable | 13.92 | 4.42 |
| Average Collection Period | (Accounts Receivable / Revenue) × 365 | 26.22 | 82.61 |
| Asset Turnover | Revenue / Total Assets | 0.96 | 1.99 |
| Return on Assets (ROA) | Net Profit / Total Assets | 26.97% | 18.36% |
| Debt to Assets Ratio | Total Debt / Total Assets | 0.82 | 0.57 |
| Times Interest Earned Ratio | EBITDA / Interest Expense | 41.19 | 29.80 |
| Dividend Yield | Dividend per Share / Current Share Price | 0.15% | 0.83% |
| Return on Common Stockholders' Equity (ROE) | Net Income / Shareholders' Equity | 150.07% | 43.15% |
| Free Cash Flow | Current Assets – (Current Assets – Current Liabilities) + Depreciation | 136,765 | 100,343 |
| Price-Earnings Ratio | Share Price / Earnings per Share | 25.77 | 33.10 |
References
Tracy, A. (2012). Ratio analysis fundamentals: How 17 financial ratios can allow you to analyze any business on the planet. RatioAnalysis.net.
Raiyani, J. R., Raiyani, J. R., & Bhatasna, R. B. (2011). Financial ratios and financial statement analysis. New Century Publications.
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