Just staring at the word Microsoft, you can immediately sense the importance of this word. The word can quickly drive the idea of million dollars profit and earnings ad Bill Gates is considered as one of the wealthiest man that has ever walked the planet Earth. Microsoft got that image which even makes you wonder on how this company was able to get hold of such wealth.
Considered as one of the companies that has maintained the growth of its assets and capital. Financial Strategy at Microsoft is based on conservative financial accounting of which it is being believed to have increased its market value.
Probably, you might wonder what is meant when the market value is being used. Market Value refers to the brand value, customer loyalty and human capital.
These factors cannot be recorded but considered as the factors that will determine the company’s future. It cannot be denied that the assets of Microsoft continuously soaring up. History had been shaped not only by political events, but Microsoft had also leaved its mark in history.
The success of Microsoft as a company in terms of economic growth cannot be denied. Analyst tried to come out for their financial analysis on the Financial Strategy at Microsoft. Financial analyst believes that the Financial Strategy at Microsoft is based on several factors that will keep the company to be on top of the game.
It will be better for you to have a cursory analysis on each factor that can be considered as part of the Financial Strategy at Microsoft:
1. Hiding Profits – This factor is what Microsoft is known for. This company has the ability to hide their profits not only to avoid government regulation but mostly from their competitors.
Microsoft tried to hide their success from their competitors and, of course, to avoid stringent government regulation. But the policy of Microsoft pertaining to product capitalization came even before the government had tightened its regulations on Microsoft.
2. Having a competitive weapon, wherein Microsoft has armed itself with a weapon by influencing accounting policies and principles with SOP on software revenue recognition. This would make Microsoft as a strong player in the industry by making its competitor has a hard time in showing their performance.
3. By choosing conservative accounting that is considered as the factor of signaling, Microsoft can signal their financial strength. By way of signaling Microsoft can be able to show that it can take “hit” to earnings and at the same time gives definite result.
4. The last one for the investment strategy is to avoid complacency. This will explain the reason behind Microsoft’s policy to talk down their success.
It is geared in order not to create a state of paranoia of success to the company. This strategy tends to dampen the company’s earning performance or the company would rather talk down as to their success. Microsoft strategy is consistent to Bill Gate’s policy that is maintaining a sizeable cash balance.
This can be achieved if the company is on top to avoid the competition. Financial Strategy at Microsoft is something that a lot of financial analysts will want to study, not only that this company had proven its tremendous growth when it comes to financial assets and maintained its reign of supremacy in the field of technology.