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Microsoft Corporation

Microsoft Corporation

Introduction

Microsoft Corporation is an American global technology company headquartered in Washington. The company was founded by Paul Allen and Bill Gates in 1975 to sell and develop Altair 8800’s BASIC interpreters. The company began dominating the personal computer operating system sector in the mid-1980s after establishing MS-DOS. The company then gained popularity by establishing Windows, which is currently the largest software developer in the world based on revenue. The company also produces various enterprise and consumer software for laptops, desktops, tabs, servers, and gadgets, including cloud computing, mixed reality, and internet search. Although Microsoft Corporation has been successful over the years, various issues impact its growth. The issues include ethical, accounting, financial, economic, and statistics issues. This report provides a detailed analysis of these issues and recommendations for dealing with the issues for organizational success.

Brief history and ethical issues of my corporation

Microsoft Corporation has maintained a reputation for offering high-quality products since the 1980s. However, the company has been facing stiff competition over the past five years because of Android. To overcome the stiff competition, the company pushes its employees to increase productivity and looks for ways to increase profits, which leads to various ethical issues. Microsoft began experiencing ethical issues in 1989. The main ethical issue is overworking employees. According to the Seattle Times (2015), Microsoft Corporation is viewed as a Velvet Sweatshop characterized by employee access to everything they need and a convenient workplace in return for long working hours. The company has also faced criticism for creating a toxic work environment for its employees. For instance, a report by Bort (2012) indicated that the company had abusive managers who were only concerned about the company’s profitability. Unfortunately, nothing much has been done to change the work environment at the company despite employee complaints. A recent study conducted by the company in 2022 indicated that almost 50% of the employees at Microsoft and 53% of the managers are burned out (Smith, 2022). Another ethical issue is tax evasion. Microsoft Corporation was in the spotlight in 2020 after one of its subsidiaries declared £220 billion in profits but failed to pay corporation tax for 2020. Another ethical issue is accounting fraud. For instance, in 2020, the company diverted approximately $39 billion of its profits to Puerto Rico so that it would seem unprofitable (Kiel, 2020). The company has also been criticized for its surveillance program, which denies people their privacy.

Analysis of Accounting Issues

Microsoft Corporation’s accounting issues include accounting violations. The Securities and Exchange Commission filed a complaint against Microsoft Corporation for accounting violations after discovering that the company was committing various accounting violations and violating federal securities laws. The company had seven reserve accounts with balances of a minimum of $200 million and a maximum of $900 million that it was required to reconcile every quarter (Sullivan, 2002). The discrepancies in its accounting records led to understatements and overstatements of its income in the 1998 and 1995 quarters (U.S Securities and Exchange Commission, 2002). The Securities Exchange Commission also found that the company failed to properly document its accounting records and maintain proper internal controls in accordance with federal securities laws. The commission also found that the company did not have safeguards ensuring that adjustments to its reserve accounts and the accounts’ balances were accurately or appropriately reported.

Analysis of Finance Issues

A company’s financial success is important in maintaining its growth and sustainability. Although Microsoft Corporation has maintained a record of financial success, there are various financial issues that may affect its sustainability. One of the issues is fluctuations in its net income. According to Trueman (2022), Microsoft’s 2022 fourth quarter indicated that the company’s revenue was $52 billion, and the expected revenue increase would be 12% annually. However, the relative income had only increased by 2%. The fluctuations in net income may make it hard for the company to forecast its financial growth and make financial-related plans. The second financial issue is unfavorable foreign exchange. The unfavorable foreign exchange rates negatively impact the company’s revenue and dilute earnings per share. Unfavorable foreign exchange rates may also impact production by creating production shutdowns in regions where the foreign exchange rates increase production costs. Another financial issue is high operating expenses. For instance, the company was forced to reduce its operations in China because of high operating costs from asset impairment, bad debt expense, and severance (Bishop, 2022). The company’s personal computing market has also been impacted by manufacturing shutdowns linked to reduced revenue. The company’s revenue from the gaming segment also decreased, leading to an overall reduction in revenue.

Analysis of Economic Issues

Economic issues play a significant role in a company’s financial performance. One of the economic issues that Microsoft Corporation faces is the unfavorable foreign exchange movement. The company experienced a $0.04 diluted earnings per share and $595 million in revenue within the first quarter of 2022 because the unfavourable exchange rate led to poor financial performance (Newman, 2023). The unfavorable foreign exchange rate has also forced the company to shut down production in China, leading to the deterioration of the personal computer market and negatively impacting revenue. The second economic issue is high operating costs. The company has been forced to make several adjustments to reduce operating costs, such as reducing advertising spend, which negatively impacted the revenue generated from LinkedIn and Search and news advertising (Newman, 2023). Another economic issue impacting the company is economic instability in major markets such as Ukraine. For instance, the company experienced high operating costs in Russia during the war in Ukraine because of changes in the cost of production and asset impairments. The company also had to adjust its operations during the COVID-19 pandemic to reduce operating costs due to economic instability. For instance, some employees were laid off to reduce the costs of paying salaries.

Analysis of Statistics Issues

The main statistical issue that Microsoft Corporation faces is inaccurate forecasts. The company makes inaccurate forecasts by failing to consider all factors that could impact its financial performance and operations. For example, the company had to lower its revenue and profit in the fourth quarter of 2022 because of the pressure from a stronger greenback. The fluctuations in the United States dollar also contribute to inaccurate forecasts. For instance, without a stronger dollar, Microsoft Corporation’s 12% revenue growth per year would have been 4% higher, but it was reduced in the fourth quarter of 2022 by $1 billion (Reuters, 2022). Another factor that contributes to the inaccurate forecasts is foreign exchange rates. Foreign exchange reduced Microsoft Corporation’s revenue by almost $600 million because of the over $300 million reduction in the revenue from the PC market and over $100 million reduction in revenue from advertising (Reuters, 2022). The other factor leading to inaccurate forecasts is the changes in consumer behavior. For instance, the revenue in the gaming sector decreased because of reduced consumer demand which was attributed to the decrease in Xbox hardware, services, and content.

Conclusions with Recommendations

Microsoft Corporation is among the companies that have established dominance in the technological sector. However, the company’s future will be dictated by its ability to handle the ethical, accounting, financial, economic, and statistics issues it faces. The main ethical issues that must be addressed are overworking employees, tax evasion, and accounting fraud. I would recommend involving employees in developing work schedules to prevent overworking and soliciting employee feedback about the work environment to create a conducive work environment. The company should also consider conducting regular audits, which should be done by an external auditor to prevent tax evasion and accounting fraud issues. The main accounting issues that the company needs to address are accounting violations such as lack of safeguards and false financial reporting. Moreover, I would recommend training employees on acceptable accounting practices and following the recommendations given by the Securities and Exchange Commission to prevent accounting violations. I would also recommend setting strict accounting regulations in the company and holding those responsible for accounting violations accountable. Although Microsoft Corporation may have limited control over financial issues such as fluctuations in net income, unfavorable foreign exchange, and high operating expenses, the company can create mitigations to ensure that the issues do not negatively impact its performance. For instance, it can diversify income sources to prevent large net income fluctuations and invest locally to reduce the impact of foreign exchange. The company can also automate and source products locally to reduce operating expenses. Microsoft Corporation should also be prepared to deal with economic issues, including unfavorable exchange movements and economic instability. I would recommend using strategic alliances and partnerships to deal with unfavorable foreign exchange movements and creating mitigation measures to deal with economic instability, which is one of the economic issues facing the company. Microsoft Corporation can deal with its main statistical issue of inaccurate forecasts by considering all factors that could impact its financial performance before making forecasts.

Summary

This paper presented a brief history of Microsoft Corporation, including when it was established, its founders and its main products, and the ethical, accounting, financial, economic, and statistics issues facing the company. The ethical issues discussed include overworking employees and tax evasion. The accounting issues discussed include accounting violations. The financial issues discussed include fluctuations in net income, unfavorable foreign exchange, and high operating expenses. The economic issues discussed include unfavorable foreign exchange, high operating costs, and economic instability. The statistics issues discussed include inaccurate forecasts. The paper then recommends how the issues can be addressed.

Reference List

Bishop, T. (2022, July 27). Microsoft earnings come up short, hit by Global Economic Trends and cutbacks. GeekWire. https://www.geekwire.com/2022/microsoft-comes-up-short-in-earnings-report-impacted-by-global-economy-and-cutbacks/

Bort, J. (2012). Microsoft is filled with abusive managers and overworked employees, says the tell-all book. Business Insider. https://www.businessinsider.com/microsoft-is-filled-with-abusive-managers-and-overworked-employees-says-tell-all-book-2012-5?r=US&IR=T

Kiel, P. (2020, January 22). The IRS decided to get tough against Microsoft. Microsoft got tougher. ProPublica. https://www.propublica.org/article/the-irs-decided-to-get-tough-against-microsoft-microsoft-got-tougher

Newman, D. (2023, June 27). Microsoft revenue hits $51.9B for Q4 2022, $198b for FY2022. The Futurum Group. https://futurumgroup.com/insights/microsoft-revenue-hits-51-9b-for-q4-2022-198b-for-fy2022/

Reuters. (2022, July 26). Microsoft earnings hurt by slowing PC sales, stronger dollar: Business. Devdiscourse. https://www.devdiscourse.com/article/business/2123471-microsoft-earnings-hurt-by-slowing-pc-sales-stronger-dollar

Seattle Times. (2015, August 18). Archive: “Inside Microsoft – a ‘velvet sweatshop’ or a high-tech heaven?” The Seattle Times. https://www.seattletimes.com/business/archive-inside-microsoft-a-velvet-sweatshop-or-a-high-tech-heaven/

Smith, M. (2022, October 6). 50% of workers are burned out, and “productivity paranoia” could be making it worse: “People are just worn down.” CNBC. https://www.cnbc.com/2022/10/06/microsoft-50-percent-of-people-are-burned-out-at-work.html

Sullivan, B. (2002, June 3). Microsoft agrees to stop accounting violations. Computerworld. https://www.computerworld.com/article/2575805/microsoft-agrees-to-stop-accounting-violations.html

Trueman, C. (2022, July 27). Microsoft Weathers the financial storm with 12% revenue growth. Computerworld. https://www.computerworld.com/article/3668153/microsoft-weathers-the-financial-storm-with-12-revenue-growth.html

U.S Securities and Exchange Commission. (2002). SEC Brings Settled Accounting Charges Against Microsoft Corporation. U.S Securities and Exchange Commission. https://www.sec.gov/news/press/2002-

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Question 


Write a five-page paper (not counting the cover page, executive summary page, and reference list page) using the United States public-for-profit corporation on Microsoft Corporation.

Microsoft Corporation

Microsoft Corporation

The paper will be submitted as a Microsoft Word document. It will be double-spaced. Use at least five peer-reviewed publications, such as the most recent 10-K, and web pages from your corporation’s website. The paper must be in APA 7th ed. format.

The paper has the following:
Cover page
Executive Summary page
Body of paper
Reference page

*****Please use the outline I’ve attached*******

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