Microsoft Corporation (Microsoft) and Oracle Corporation (Oracle) engage in the design, manufacture, and sale of computer software. Microsoft sells and licenses a wide range of systems and application software to businesses, computer hardware manufacturers, and consumer retailers. Oracle sells software for information management almost exclusively to businesses. Exhibit 4.22 presents selected data for the two firms for 2006–2008.
a. Calculate the accounts receivable turnover ratio for Microsoft and Oracle for 2006, 2007, and 2008.
b. Suggest possible reasons for the differences in the accounts receivable turnovers of Microsoft and Oracle during the three-year period.
c. Suggest possible reasons for the changes in the accounts receivable turnover for the two firms over the three-year period.