Before reading any background information in this module, I looked at the case assignment. The question asked, "Which of these three companies, Yahoo, Coke, or Microsoft, do I think would be the best investment. Since my last research paper was on the Coca Cola company (located here in Atlanta), I knew of its history and the fact that the company has paid out dividends to their stockholders every year for the past forty-two years. The company also posts a $3.53 billion net profit with very little debt.
Although this was the only company I had any real concrete information (pre-research) on, I was still torn between Coke and Microsoft as being the best investment. Really, is there anyone who doesn't know about Microsoft or Bill Gates? The name Microsoft alone carries a lot of weight. They are known as the computer giant monopolizing the IT industry. While I wanted to choose Coke I knew that Microsoft was too big not to invest in.
Microsoft Building
Microsoft and Flickr
Trade Off theory diagramAgain, prior to doing any research, I pulled down the Income statements for each company and the financial graph for the last two years. Had I chosen the company on the graphs alone, Yahoo looked the best. Their graph did nothing but move upwards while Coke and Microsoft had a series of jagged ups and downs. Regardless, I looked at the income statements for the past three years and calculated the percentage of net income to their Total Revenue per year.
2004 2003 2002
Microsoft 22% 31% 27%
Coke 22% 20% 15%
Yahoo 23% 14% 04%
As you can see (and to my surprise), Microsoft dropped tremendously from the year prior. Coke has remained steady and Yahoo is showing massive movement. Obviously, after seeing this, I chose Yahoo to invest in.
Now--time to actually read the module...