Public corporations are independent organizations that incorporate the Parliament Act to facilitate their operations in the industry. The primary characteristic of public companies is that their shares are traded to the masses. However, every state corporation must generate sufficient income to increase their profits. The companies perform different business activities to ensure their sustainability in the market. Besides, public companies encounter challenges due to changes in revenue and stock rates that are threats to their existence in the industry (Brigham & Houston, 2013) . Public corporations examine the elements that can threaten their operations and develop mitigation plans to overcome the situation.
Total Revenue for the Past Three Years
Table 1: Total Revenue for Microsoft Corporation from 2017 to 2019
| Year | 2019 | 2018 | 2017 |
| Total Revenue | 125,843,000 | 110,360,000 | 96,571,000 |
Delegate your assignment to our experts and they will do the rest.
Adapted from: (Yahoo Finance, 2019)
Revenue is the income that an organization or individual generates from selling goods and services. Incomes consist of product returns and discounts that are included in the financial reports due to the settlement of invoices. Many enterprises gain revenue after performing primary activities such as interest on deposits for demanded products (Brigham & Houston, 2013) . The total revenue for Microsoft Corporation has increased over the past three years. The revenue for the company has been rising due to an increase in sales (Yahoo Finance, 2019) . An increase in gross income indicates that a company is performing well in the industry. Besides, high revenue demonstrates that the company has many trusted customers in the industry due to a large market.
The sales of Microsoft Corporation have been increasing, which has influenced the revenue rates. High revenue indicates that the company has excellent management, and there are considerable losses. Over the past years, Microsoft Corporation has been a leading company in the software and computer industry. The firm incorporates combined efforts in the processing and sales activities to retain its consumers. The strategy is essential in maintaining high profits in different financial years. The revenue results indicate a significant difference between the income for 2017 and 2019 (Yahoo Finance, 2019) . Microsoft Corporation specializes in developing software and designing hardware. The revenue report demonstrates that the firm has been selling a significant number of its products to generate high income.
Net Income for the Past Three Years
Table 2: Total Income for Microsoft Corporation from 2017 to 2019
| Year | 2019 | 2018 | 2017 |
| Total Income | 39,240,000 | 16,571,000 | 25,489,000 |
Adapted from: (Yahoo Finance, 2019)
Net income entails the total earnings of the company after deducting the expenses. Besides, total income comprises organizations’ revenues after subtracting taxes and deductions (Brigham & Houston, 2013) . The net income for the three consecutive years has been increasing due to the increase in revenue and reduction in expenses. However, the net income for Microsoft Corporation slightly decreased to $ 16,571,000 in 2018 (Yahoo Finance, 2019) . The corporation’s earnings reduced due to an increase in the net operating expenses. The financial reports indicate that the company spent more on research and development activities to enhance innovation. The analysis costs of the firm are essential in facilitating product development, which can increase sales (Brigham & Houston, 2013) . Besides, financial statements indicate that Microsoft Corporation the firm spent significant funds on selling and administration activities. The company had an opportunity to reduce the expenses by advertising their products using competitive strategies such as social media to reach out to the target market.
The operating costs of the company affected the business operations of Microsoft Corporation because the firm had insufficient income. However, the organization has been performing its activities due to the high revenue generated from sales activities. The high income demonstrates that the finance department has been reducing unnecessary expenses to ensure the company earns a significant profit (Brigham & Houston, 2013) . However, Microsoft Corporation can reduce its costs to optimize the income.
Profit Margin for 2019, 2018, and 2017
Profit margin = (Total Income / Total Revenue) * 100
2017= (25,489,000/ 96,571,000) * 100
= 0.2639 * 100
= 26.39%
2018 = (16,571,000/ 110,360,000) * 100
= 0.1502 * 100
= 15.02%
2019 = (39,240,000/ 125,843,000) * 100
= 0.3118 * 100
= 31.18%
Profit margin is the amount of revenue that company keeps considering costs and additional income. The gross profit margin indicates the firm’s potential in converting income to profits (Brigham & Houston, 2013) . The profit margin results indicate variations throughout the past three years due to changes in the total income. The company realized profit margin of 26.39% in 2017, but is decreased to 15.02% in 2018. However, the profit margin for Microsoft Corporation increased to 31.18% in 2019. The results demonstrate that the company has a significant potential of converting its income to profits.
The high-profit margin percentage indicates that Microsoft Corporation is using its finances to fund primary activities and additional expenses. However, the company is leaving a significant amount of revenue for investments or purchasing assets. The profit margin indicates that the firm has an excellent management team that focuses on controlling the usage of finances to prevent deficits due to high expenses (Brigham & Houston, 2013) . Therefore, Microsoft Corporation is in a position of sustaining decent profits and meeting all financial costs.
Is there a Performance Trend?
Yes, there is a performance trend in revenue, net income, and profit margin for Microsoft Company. The total revenue for the corporation has been increasing throughout the three years period due to a rise in sales. The increase in total revenue indicates that the company has been growing its sales volume from 2017 to 2019. Therefore, the net revenue of the company has improved within three years. Microsoft Corporation encountered variations in the net income due to the changes in costs. The company’s expenses increased in 2018, which influenced the total earnings. The income tax expense of Microsoft increased to $ 19,903,000 and affected the overall income (Yahoo Finance, 2019) . Thus, the activity indicates that the government has increased the income tax rates, which affect the profitability of the company. The profit margins for the three years were different due to variations in the net income. In 2018, Microsoft Corporation realized the least profit margin due to a reduction in the total earnings. However, the company attained the most significant profit margin of 31.18% in 2019.
Stock Prices and the Relationship with Performance
Table 3: Stock Prices for Microsoft Corporation from 2016 to 2018
| Year | 2018 | 2017 | 2016 |
| Stock Prices | 100.43 | 100.84 | 101 |
Adapted from: (Yahoo Finance, 2019)
The stock prices for the three years vary due to changes in market activities. The dividends prices have changed throughout the years, but they are not related to the performance of profit margins. The variations of the supply and demand for stock influence their prices (Brigham & Houston, 2013) . The factors that influence the stock prices are different from the elements that affect the profit margins of companies. For instance, income and expense are the primary elements that influence profit margins for firms (Brigham & Houston, 2013) . However, the performance trend for stock prices and profit margins is similar, but different factors influence the two financial elements.
In conclusion, public corporations are independent institutions that consider parliament policies to conduct business activities in the industry. Public companies encounter economic problems due to variations in income and stock levels. Corporations should incorporate strategies such as decreasing expenses and hedging current to prevent the effects of financial problems.
References
Brigham, E. F., & Houston, J. F. (2013). Fundamentals of financial management . Mason, Ohio: South-Western Cengage Learning. Bottom of Form
Yahoo Finance. (2019). Yahoo is now part of Oath. Retrieved 27 August 2019, from https://finance.yahoo.com/q/is?s=MSFT+Income+Statement&annual
Yahoo Finance. (2019). Yahoo Finance. Retrieved 27 August 2019, from https://finance.yahoo.com/quote/MSFT/history?ltr=1
