Return on Investment Analysis: Comparative Performance Evaluation of Google Inc. and Microsoft Inc.
Overview
This paper analyzes the Return on Investment (ROI) performance of Google Inc. and Microsoft Inc. using financial metrics including net profit margin and assets turnover. The analysis compares the companies' financial efficiency across 2018 and 2019, demonstrating that while Google performed better in 2018, Microsoft showed significant improvement in 2019 with superior investment efficiency.
What this coursework covers
- Definition and explanation of ROI as a financial performance metric
- Google Inc. financial analysis: profit margins and asset turnover for 2018-2019
- Microsoft Inc. financial analysis: profit margins and asset turnover for 2018-2019
- Comparative analysis and conclusion regarding relative investment efficiency
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Return on Investment
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Return on Investment
Return on Investment (ROI) is a financial ratio used to evaluate the performance of a company. The ratio determines how efficient a business can optimize its investments into returns to the investors. The returns are expressed as the ratio of the profits or losses against the stake. In this regard, ROI is a product of a company's net profit margin and the assets turnover. This paper discusses the performance of Google Inc. and Microsoft Inc. based on ROI.
Google Inc. has a margin ratio of 21.22% and 22.46% as of 2019 and 2018, respectively. The net profit margin of the company slightly decreased in 2019 as compared to 2018 due to the high rate of increase in company sales as compared to the rate of growth in the net income. The assets turnover of Google Inc. is 58.66% and 58.77% as of 2019 and 2018, respectively. Microsoft Inc. had a margin of 31.18% and 15.02% as of 2019 and 2018, respectively. The profit margin increased by approximately 16.16% in 2019 as compared to 2018 due to the company's high increase in the net profits. Microsoft's turnover was 43.92% and 42.64% as of 2019 and 2018, respectively.
In the comparison of the two previously mentioned companies, Google Inc. has a better financial performance in 2018 as compared to Microsoft. Google had an ROI of 13.20%, while Microsoft had an ROI of 6.40%.