Next, using the Cash Conversion Cycle formula (CCC): Days Inventory Outstanding + Days Sales Outstanding - Days Payable Outstanding we can determine which company is more efficient. For MSFT the Cash Conversion Cycle calculates is 3.85 or 4 days. For NVDA calculated Cash Conversion Cycle is 79.82 days 04 80. Based on the calculations, we can see that MSFT is more efficient in managing its cash conversion cycle. More specifically, MSFT takes less time to generate cash and effectively make the conversion.  In contrast, NVDA has a longer CCC and takes roughly 80 days. Clearly, MSFT is able to convert inventory and sales more quickly. Therefore, MSFT is more efficient in collecting receivables, payments, and inventory.  

As far as comparing how easy it is for both companies to meet their long-term obligations we must take a look at their debt-to-equity ratio, interest coverage ratio, and operating income. First, NVDA has a debt-to-equity ratio of .41 for the year 2021, and MSFT’s was 1.35. Also, taking a look at both companies' times interest earned (TIE) for the same year, NVDA had a TIE of 24.63. MSFT had a TIE of 30.31. From what I have gathered, both companies are able to pay their interest expenses accordingly. In fact, both companies would be able to grow and reinvest because they have a high TIE for 2021. Furthermore, to determine which company is likely to sustain itself can also take a look at their operating incomes before interest and taxes or EBIT. Undoubtedly, both companies are profitable and will find it easy in the long run. However, MSFT has a higher TIE and EBIT which means it is more efficient long-term.

Not only are both companies profitable, but have increased their revenue every year. For example, NVDA from the year 2020 to 2021 had a revenue increase of about $5,757 million or $5.757B. Also, MSFT from 2020 to 2021 saw revenue growth of $25,073 million or $25.073 billion. There was a significant increase during the pandemic which skyrocketed both companies to see growth. The trend here can be explained by the companies expanding their cloud, gaming, and software products. As more people stayed home during 2020, these companies saw a dramatic increase in consumer spending. Given that both companies are able to innovate and effectively adapt. According to NASDAQ, in the last 6 months of 2023, NVDA has seen an increase of 104.58% and had a share price of $296.56 on April 26, 2023. MSFT has seen an increase of 7.24% in the last 6 months and has a share price of $295.37 on April 26th, 2023. Without a doubt, their future earning potential has a positive outlook. As highlighted earlier, both companies are well-equipped to perform and see success.

In summary, Nivida and Microsoft are both great companies and have positively contributed to the market. I would invest in Microsoft because it has remained consistent and would be a great investment in the long run. Indeed, NVDA was more liquid in the short term, MSFT is able to effectively manage its cash conversion cycle in only 4 days and has seen greater returns and profit. More specifically, MSFT saw an increase of $25, 073 billion from 2020 to 2021. Additionally, Microsoft's debt-to-equity ratio was 1.35, and times interest earned of 30.31 clearly highlights their ability to sustain manage payments, debts, and inventory effectively. Especially,  the company's revenue growth in the last 6 months indicates that it is well for many years. It should be noted, during the pandemic it saw a dramatic increase in EBIT which would suggest that the company is able to effectively produce cash cow products. After comparing which company has a higher dividend yield for 2021, NVDA had a yield of 0.12% and MSFT had a yield of 1.03%. I have used and enjoyed products offered by both companies and in the long term, Microsoft is the stronger investment opportunity and has the potential to consistently provide profits.  

Disclaimer: The content of this research is for educational purposes only and does not constitute financial advice. The information provided is based on my own research and analysis, and may not be accurate, complete, or up-to-date. You should always do your own due diligence before making any financial decisions and seek a professional. I am not responsible for any losses or damages that may arise from your use of this content.