microsoft intuit case solution

8/13/2019 Microsoft Intuit Case Solution

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TABLE 1: Intuit Corp Balance Sheet

1988 1989 1990

Cash and Equivalents 1,059,000 1,884,000 3,778,000

Accounts Receivable 0 0 0

Inventory 0 0 0Current Asset 741,000 2,228,000 5,332,000

Net Fixed Assets 446,000 1,752,000 4,221,000

Long Term Investments 0 0 0

Total Assets 2,246,000 5,864,000 13,331,000

Accounts Payable (Current Liability) 945,000 1,894,000 5,751,000

Long Term Debt 0 0 0

Pension Benefit Obligations 0 0 0

Common Stock Equity (Net worth) 1,301,000 3,970,000 7,580,000

Total Liabilities and Equity 2,246,000 5,864,000 13,331,000

TABLE 2: Intuit Corp Income Statement

Year 1988 1989 1990

Revenue 6,067,000 18,658,000 33,059,000

Cost of Sales (ex D&A) 2,185,000 6,853,000 11,951,000

General Expenses (ex D&A) 2,465,000 7,513,000 15,612,000

EBITDA 1,417,000 4,292,000 5,496,000

Depreciation and Amortization 0 0 0

EBIT 1,417,000 4,292,000 5,496,000

Interest Income 150,000 150,000 164,000

Long Term Investment Income 0 0 0

Interest Expense 30000 35000 39000

Income before Taxes 1,537,000 4,407,000 5,621,000

Provision for Income Taxes 580,000 1,693,000 2,062,000

Income after Taxes 957,000 2,714,000 3,559,000

Accounting Changes 0 0 0

Discontinued Operations 0 0 0

Extraordinary Items 0 0 0

Net Income 957,000 2,714,000 3,559,000

TABLE 3: Intuit Historical Financial Ratios

%, except Coverage Ratio

1988 1989 1990


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EBITDA/REVENUE 23.36% 23.00% 16.62%

EBIT/Revenue 23.36% 23.00% 16.62%

COS (ex D&A) / Revenue 36.01% 36.73% 36.15%

GE (ex D&A)/ Revenue 40.63% 40.27% 47.22%

AR/ Revenue 0.00% 0.00% 0.00%Inventory/ Revenue 0.00% 0.00% 0.00%

AP/COS and GE (ex D&A) 20.32% 13.18% 20.86%

Total Debt/ Total Liabilities and Equity 0.00% 0.00% 0.00%

Debt/ EBITDA 0.00% 0.00% 0.00%

CE/Revenue 17.46% 10.10% 11.43%

CE/TA 47.15% 32.13% 28.34%

Net fixed Assets/ Revnue 7.35% 9.39% 12.77%

Depreciation/Prior net fixed assets 0.00% 0.00%

CAPEX/ Prior net fixed assets 292.83% 140.92%

Long term Assets/ Total Assets 0.00% 0.00% 0.00%

Pension/ Total Liabilities and Equity 0.00% 0.00% 0.00%

Interest income/ CCE 14.16% 8.70%

Interest rate on debt 0.00% 0.00%

Return on long term investment 0.00% 0.00%

Effective tax rate 37.74% 38.42% 36.68%

Cash ratio % 112.06% 99.47% 65.69%

Quick Ratio 112.06% 99.47% 65.69%

Current ratio 190.48% 217.11% 158.41%

Items ratio 0.00% 0.00% 0.00%

Coverage ratio 47.23 122.63 140.92

TABLE 4: Intuit Corp Historical Growth Rates

Revenue Growth 207.53% 77.18%

EBITDA Growth 202.89% 28.05%

EBIT Growth 202.89% 28.05%

Net Income Growth 183.59% 31.13%

EBITDA leverage 0.98 0.36

EBIT leverage 0.98 0.36

Net Income Leverage 0.88 0.40

Cash and Equivalents growth 77.90% 100.53%

Net fixed Assets growth 292.83% 140.92%

Long term investments growth 0.00% 0.00%


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Debt Growth 0.00% 0.00%

Equity Growth 205.15% 90.93%

Total Assets Growth 161.09% 127.34%

TABLE 5: Operating CashYear Revenue Operating cash

1988 6067000 18% 1092060

1989 18658000 18% 3358440

1990 33059000 18% 5950620

1991 44539000 18% 8017020

1992 83793000 18% 15082740

1993 121372000 18% 21846960

1994 194126000 18% 34942680

TABLE 6: Operating Quick Ratio

Year Operating Quick Ratio

1988 48.62%

1989 57.27%

1990 44.64%

1991 41.97%

1992 50.90%

1993 29.61%

1994 14.29%

TABLE 7: Intuit Re-organized Balance Sheet

1988 1989 1990

Operating cash 1092060 3358440 5950620

Excess Cash -33060 -1474440 -2172620

Accounts Receivable 0 0 0

Inventory 0 0 0

Current Asset 741,000 2,228,000 5,332,000

Net Fixed Assets 446,000 1,752,000 4,221,000

Long term investments 0 0 0

Total Assets 2,246,000 5,864,000 13,331,000

Accounts Payable(Current Liability) 945,000 1,894,000 5,751,000

Long term debt 0 0 0

Pension Benefit 0 0 0


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Common stock equity(Net worth) 1,301,000 3,970,000 7,580,000

Total Liabilities and Equity 2,246,000 5,864,000 13,331,000

TABLE 8: Intuit Re-organized Income Statement

1988 1989 1990Revenue 6,067,000 18,658,000 33,059,000

Cost of Sales (ex D&A) 2,185,000 6,853,000 11,951,000

General Expenses (ex D&A) 2,465,000 7,513,000 15,612,000

EBITDA 1,417,000 4,292,000 5,496,000

Depreciation and Amortization 0 0 0

EBIT 1,417,000 4,292,000 5,496,000

Interest Income - operating 154683 292348

Interest income - Excess -4683 -128348

Interest Income150,000 150,000 164,000

Long term Invenstment Income 0 0 0

Interest expense 30,000 35,000 39,000

Income before taxes 1,537,000 4,407,000 5,621,000

Provision for income tax 580,000 1,693,000 2,062,000

Income after taxes 957,000 2,714,000 3,559,000

Accounting Change 0 0 0

Discontinued Opeations 0 0 0

Extraordinary Itesm 0 0 0

Net Income 957,000 2,714,000 3,559,000

Table 9: Advanced Financial Model of Intuit

1988 1989 1990

Operating Working Capital 147,060 1,464,440 199,620

Invested Capital 593,060 3,216,440 4,420,620

Adjusted EBIT 4,446,683 5,788,348

NOPLAT 2738438.14 3664958.46

NOPLAT Margin 14.68% 11.09%

Capital Efficiency 31.46 10.28

ROIC 461.75% 113.94%

Core Free Cash Flow 115,058 2,460,778

Opportunity Cost of Invested Capital 15% 15%

Core Economic Profit 2649479 3182492


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Built up method for Cost oEquity

Treasury Rate Risk Premium Industry Size

3.20% 5.40% 3.40% 2.00%

Treasury rate: Based on http://research.stlouisfed.org/fred2/series/BAA?cid=119 is 4.85% for Baa bond. I assRisk Primium for Equity is based on Professor Aswath Damodaran from his website http://research.stlouisfed.

Industry risk: 3.40% for computer sofware based on SBBI Industry Risk Table

Size Risk: The company is not very big as big companies are expected to have no risk, therefore 2% risk is co

Company Specific Risk: The company is considered to be risky since it's not doing very well in last year and 1

Finally, a discount rate of 15% is considered for this company.

Table 10: Intuit CFCF/EBITDA

Year Ratio

1988 0.0%

1989 2.7%

1990 44.8%

1991 63.3%

1992 3.6%

1993 102.5%

1994 199.9%

Table 11: Historical Finanical Model of Intuit Corp

1988 19989 1990

Revenue 6,067,000 18,658,000 33,059,000

Revenue Growth 208% 77%

EDBITDA 1,417,000 4,292,000 5,496,000

NOPLAT 2,738,438 3,664,958

NOPLAT Margin 15% 11%

Invested Capital 593,060 3,216,440 4,420,620

Invested Capital growth 442% 37%

Capital Efficeincy 31.46 10.28

ROIC 462% 114%

Core Free Cash Flow 115,058 2,460,778

Opportunity Cost 15% 15%

Core Economic Profit 2,649,479 3,182,492

Net Income 957,000 2,714,000 3,559,000

Table 12: Estimated Return on Invested Capital by Industry


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Industry ROIC

Pharmaceuticals and biotechnology 21.80%

Household and personal products 18.80%

Software and software services 18.10%

Media 14.30%Healthcare Equipment and services 14.80%

Food, Beverage, and tobacco 11.90%

Automobile and components 10.50%

Table 13: Finanical Forecost for Intuit

Previous Yrs Averag 1995 1996

Revenue Growth 85% 75% 65%

NOPLAT Margin 10% 9% 9%

Capital Efficiency Ratio 19.93 10 10

Opportunity Cost of Invested Capital 12.00% 12.00%

Revenue 194,126,000 339720500 560538825

NOPLAT 30574845 50448494

Invested Capital 100,823,680 56053883 89686212

Core Free Cash Flow 75344643 16816165

Present Value Factor 1 0.892857 0.797194

Discounted Cash Flow 67272002 13405744

Present Value 488,129,674

Core Ecnomic Profit 18476003 43722028

Present Value Factor 1 0.892857 0.797194

Discounted Economic Profit 16496432 34854933

Present Value 596,725,882

Valuation Using Core Free Cash Flow

add excess cash 48,943,320

add long term investement 0

Subtract pension obligation 0

Total 48,943,320

Enterprise Value 537,072,994

Current Debt 0

Long term debt 0


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Total Debt 0

Equity Value 537,072,994

Valuation Using Economic Profit

Invested Capital 100,823,680Total Value 697,549,561.87


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1991 1992 1993 1994 Assumptions:

7,181,000 9,030,000 39,540,000 83,886,000

0 0 0 0

0 0 0 07,929,000 13,486,000 26,477,000 36,056,000 Assumption: The current ass

3,990,000 7,118,000 7,770,000 124,640,000 Assumption: The net fixed as

0 0 0 0

19,100,000 29,634,000 73,787,000 244,582,000

7,160,000 12,289,000 24,543,000 58,759,000 Assumption: There was no d

0 0 0 0

0 0 0 0

11,940,000 17,345,000 49,244,000 185,823,000

19,100,000 29,634,000 73,787,000 244,582,000

1991 1992 1993 1994

44,539,000 83,793,000 121,372,000 194,126,000

15,535,000 29,085,000 39,160,000 69,499,000

22,623,000 46,854,000 68,981,000 261,273,000

6,381,000 7,854,000 13,231,000 (136,646,000)

0 0 0 40,412,000

6,381,000 7,854,000 13,231,000 -177,058,000

335,000 354000 624000 2507000 Assumption: The interest inc

0 0 0 0

65000 66000 100000 10000 Assumption: The interest exp

6,651,000 8,142,000 13,755,000 -174,561,000

2,353,000 2,866,000 5,344,000 1,752,000

4,298,000 5,276,000 8,411,000 -176,313,000

0 0 0 0

0 0 0 0

0 0 0 0

4,298,000 5,276,000 8,411,000 -176,313,000

1991 1992 1993 1994


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14.33% 9.37% 10.90% -70.39%

14.33% 9.37% 10.90% -91.21%

34.88% 34.71% 32.26% 35.80%

50.79% 55.92% 56.83% 134.59%

0.00% 0.00% 0.00% 0.00%0.00% 0.00% 0.00% 0.00%

18.76% 16.18% 22.70% 17.76%

0.00% 0.00% 0.00% 0.00%

0.00% 0.00% 0.00% 0.00%

16.12% 10.78% 32.58% 43.21%

37.60% 30.47% 53.59% 34.30%

8.96% 8.49% 6.40% 64.21%

0.00% 0.00% 0.00% 520.10%

-5.47% 78.40% 9.16% 2024.22%

0.00% 0.00% 0.00% 0.00%

0.00% 0.00% 0.00% 0.00%

8.87% 4.93% 6.91% 6.34%

0.00% 0.00% 0.00% 0.00%

0.00% 0.00% 0.00% 0.00%

35.38% 35.20% 38.85% -1.00%

100.29% 73.48% 161.10% 142.76%

100.29% 73.48% 161.10% 142.76%

211.03% 183.22% 268.99% 204.13%

0.00% 0.00% 0.00% 0.00%

98.17 119 132.31 -13664.6

34.73% 88.13% 44.85% 59.94%

16.10% 23.08% 68.46% -1132.77%

16.10% 23.08% 68.46% -1438.21%

20.76% 22.75% 59.42% -2196.22%

0.46 0.26 1.53 -18.90

0.46 0.26 1.53 -23.99

0.60 0.26 1.32 -36.64

90.07% 25.75% 337.87% 112.15%

-5.47% 78.40% 9.16% 1504.12%

0.00% 0.00% 0.00% 0.00%


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0.00% 0.00% 0.00% 0.00%

57.52% 45.27% 183.91% 277.35%

43.28% 55.15% 148.99% 231.47%

1991 1992 1993 1994

8017020 15082740 21846960 34942680

-836020 -6052740 17693040 48943320

0 0 0 0

0 0 0 0

7,929,000 13,486,000 26,477,000 36,056,000

3,990,000 7,118,000 7,770,000 124,640,000

0 0 0 0

19,100,000 29,634,000 73,787,000 244,582,000

7,160,000 12,289,000 24,543,000 58,759,000

0 0 0 0

0 0 0 0


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11,940,000 17,345,000 49,244,000 185,823,000

19,100,000 29,634,000 73,787,000 244,582,000

1991 1992 1993 199444,539,000 83,793,000 121,372,000 194,126,000

15,535,000 29,085,000 39,160,000 69,499,000

22,623,000 46,854,000 68,981,000 261,273,000

6,381,000 7,854,000 13,231,000 (136,646,000)

0 0 0 40,412,000

6,381,000 7,854,000 13,231,000 -177,058,000

527649 395213 1042262 1385188

-192649 -41213 -418262 1121812

335,000 354,000 624,000 2,507,000

0 0 0 0

65,000 66,000 100,000 10,000

6,651,000 8,142,000 13,755,000 -174,561,000

2,353,000 2,866,000 5,344,000 1,752,000

4,298,000 5,276,000 8,411,000 -176,313,000

0 0 0 0

0 0 0 0

0 0 0 0

4,298,000 5,276,000 8,411,000 -176,313,000

1991 1992 1993 1994

857,020 2,793,740 -2,696,040 -23,816,320

4,847,020 9,911,740 5,073,960 100,823,680

6,908,649 8,249,213 14,273,262 -175,672,812

4464497.54 5345473.86 8727910.60 -177435970.94

10.02% 6.38% 7.19% -91.40%

10.08 17.29 12.25 38.26

100.99% 110.28% 88.06% -3496.99%

4,038,098 280,754 13,565,691 -273,185,691

15% 15% 15% 15%

3801405 4618421 7241150 -178197065


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ompany Specifi Total

1% 15.00%

me that Intuit is not strong enough to consider the Aaa rate for it but Baa.rg/fred2/series/BAA?cid=119

nsidered for this company

% is considered

1991 1992 1993 1994

44,539,000 83,793,000 121,372,000 194,126,000

35% 88% 45% 60%

6,381,000 7,854,000 13,231,000 -136,646,000

4,464,498 5,345,474 8,727,911 -177,435,971

10% 6% 7% -91%

4,847,020 9,911,740 5,073,960 100,823,680

10% 104% -49% 1887%

10.08 17.29 12.25 38.26

101% 110% 88% -3497%

4,038,098 280,754 13,565,691 -273,185,691

15% 15% 15% 15%

3,801,405 4,618,421 7,241,150 -178,197,065

4,298,000 5,276,000 8,411,000 -176,313,000


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et for 1988, 1989, & 1990 weren't available and are calculated based on 1991 propertion of current asset

set for 1988, 1989, & 1990 weren't available and are calculated based on 1991 propertion of next asset a

ata for account payable in the case material, the current liability was treated as account payable.

ome for 1988 and 1989 are assumed based on 1990

ensefor 1988 and 1989 are assumed based on 1990


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2003 2004

15% 10%

7% 7%

8 8

12.00% 12.00%

4223547939 4645902732

295648356

580737842

242854006

0.360610

87575589

232295137

0.360610

83767955


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s an element of total asset

an element of total asset

microsoft intuit case solution

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