Suppose MSFT issued bonds and bought back shares...

I have included the latest balance statement for MSFT below. The market capitalization of MSFT is now $296B. Their debt/equity (Dt/Eq) ratio is 0.00.

Suppose that MSFT issued $295B in bonds. Also, suppose that they started buying back all their shares - except $1B.

How would this alter their financial statements? Would this make the financial statements weaker or stronger?

I realize that the company would be much bigger, based on assets, since they have a huge liability. The equity would get reduced from $35B to $1B or so.

In Millions of USD (except for per share items) As of 2007-03-31 Cash & Equivalents 7,611.00 Short Term Investments 20,625.00 Cash and Short Term Investments 28,236.00 Accounts Receivable - Trade, Net 8,454.00 Receivables - Other - Total Receivables, Net 8,454.00 Total Inventory 1,750.00 Prepaid Expenses - Other Current Assets, Total 4,343.00 Total Current Assets 42,783.00

Property/Plant/Equipment, Total - Gross - Goodwill, Net 4,217.00 Intangibles, Net 699.00 Long Term Investments 9,624.00 Other Long Term Assets, Total 2,645.00 Total Assets 63,891.00

Accounts Payable 2,843.00 Accrued Expenses 1,878.00 Notes Payable/Short Term Debt 0.00 Current Port. of LT Debt/Capital Leases - Other Current liabilities, Total 16,906.00 Total Current Liabilities 21,627.00

Long Term Debt - Capital Lease Obligations - Total Long Term Debt 0.00

Total Debt 0.00

Deferred Income Tax - Minority Interest - Other Liabilities, Total 7,291.00 Total Liabilities 28,918.00

Redeemable Preferred Stock, Total - Preferred Stock - Non Redeemable, Net - Common Stock, Total 60,827.00 Additional Paid-In Capital - Retained Earnings (Accumulated Deficit) -25,854.00 Treasury Stock - Common - Other Equity, Total - Total Equity 34,973.00

Total Liabilities & Shareholders' Equity 63,891.00

Shares Outs - Common Stock Primary Issue - Total Common Shares Outstanding 9,572.00

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