Stock Analysis on Net

Microsoft Corp. (NASDAQ:MSFT)

Analysis of Operating Leases

Microsoft Excel

Adjustments to Financial Statements for Operating Leases

Microsoft Corp., adjustments to financial statements

US$ in millions

Microsoft Excel
Jun 30, 2023 Jun 30, 2022 Jun 30, 2021 Jun 30, 2020 Jun 30, 2019 Jun 30, 2018
Adjustment to Total Assets
Total assets (as reported) 411,976 364,840 333,779 301,311 286,556 258,848
Add: Operating lease right-of-use asset (before adoption of FASB Topic 842)1
Total assets (adjusted) 411,976 364,840 333,779 301,311 286,556 258,848
Adjustment to Total Debt
Total debt (as reported) 64,304 64,683 70,687 72,823 78,752 80,541
Add: Operating lease liability (before adoption of FASB Topic 842)2
Add: Operating lease liabilities (included in Other current liabilities) 2,409 2,228 1,962 1,616 1,515 1,399
Add: Long-term operating lease liabilities 12,728 11,489 9,629 7,671 6,188 5,568
Total debt (adjusted) 79,441 78,400 82,278 82,110 86,455 87,508

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

1, 2 Equal to total present value of future operating lease payments.


Microsoft Corp., Financial Data: Reported vs. Adjusted


Adjusted Financial Ratios for Operating Leases (Summary)

Microsoft Corp., adjusted financial ratios

Microsoft Excel
Jun 30, 2023 Jun 30, 2022 Jun 30, 2021 Jun 30, 2020 Jun 30, 2019 Jun 30, 2018
Total Asset Turnover1
Reported total asset turnover 0.51 0.54 0.50 0.47 0.44 0.43
Adjusted total asset turnover 0.51 0.54 0.50 0.47 0.44 0.43
Debt to Equity2
Reported debt to equity 0.31 0.39 0.50 0.62 0.77 0.97
Adjusted debt to equity 0.39 0.47 0.58 0.69 0.84 1.06
Return on Assets3 (ROA)
Reported ROA 17.56% 19.94% 18.36% 14.70% 13.69% 6.40%
Adjusted ROA 17.56% 19.94% 18.36% 14.70% 13.69% 6.40%

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

Financial ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Microsoft Corp. adjusted total asset turnover ratio improved from 2021 to 2022 but then slightly deteriorated from 2022 to 2023 not reaching 2021 level.
Adjusted debt to equity A solvency ratio calculated as adjusted total debt divided by total shareholders’ equity. Microsoft Corp. adjusted debt to equity ratio improved from 2021 to 2022 and from 2022 to 2023.
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Microsoft Corp. adjusted ROA improved from 2021 to 2022 but then deteriorated significantly from 2022 to 2023.

Microsoft Corp., Financial Ratios: Reported vs. Adjusted


Adjusted Total Asset Turnover

Microsoft Excel
Jun 30, 2023 Jun 30, 2022 Jun 30, 2021 Jun 30, 2020 Jun 30, 2019 Jun 30, 2018
As Reported
Selected Financial Data (US$ in millions)
Revenue 211,915 198,270 168,088 143,015 125,843 110,360
Total assets 411,976 364,840 333,779 301,311 286,556 258,848
Activity Ratio
Total asset turnover1 0.51 0.54 0.50 0.47 0.44 0.43
Adjusted for Operating Leases
Selected Financial Data (US$ in millions)
Revenue 211,915 198,270 168,088 143,015 125,843 110,360
Adjusted total assets 411,976 364,840 333,779 301,311 286,556 258,848
Activity Ratio
Adjusted total asset turnover2 0.51 0.54 0.50 0.47 0.44 0.43

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

2023 Calculations

1 Total asset turnover = Revenue ÷ Total assets
= 211,915 ÷ 411,976 = 0.51

2 Adjusted total asset turnover = Revenue ÷ Adjusted total assets
= 211,915 ÷ 411,976 = 0.51

Activity ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Microsoft Corp. adjusted total asset turnover ratio improved from 2021 to 2022 but then slightly deteriorated from 2022 to 2023 not reaching 2021 level.

Adjusted Debt to Equity

Microsoft Excel
Jun 30, 2023 Jun 30, 2022 Jun 30, 2021 Jun 30, 2020 Jun 30, 2019 Jun 30, 2018
As Reported
Selected Financial Data (US$ in millions)
Total debt 64,304 64,683 70,687 72,823 78,752 80,541
Stockholders’ equity 206,223 166,542 141,988 118,304 102,330 82,718
Solvency Ratio
Debt to equity1 0.31 0.39 0.50 0.62 0.77 0.97
Adjusted for Operating Leases
Selected Financial Data (US$ in millions)
Adjusted total debt 79,441 78,400 82,278 82,110 86,455 87,508
Stockholders’ equity 206,223 166,542 141,988 118,304 102,330 82,718
Solvency Ratio
Adjusted debt to equity2 0.39 0.47 0.58 0.69 0.84 1.06

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

2023 Calculations

1 Debt to equity = Total debt ÷ Stockholders’ equity
= 64,304 ÷ 206,223 = 0.31

2 Adjusted debt to equity = Adjusted total debt ÷ Stockholders’ equity
= 79,441 ÷ 206,223 = 0.39

Solvency ratio Description The company
Adjusted debt-to-equity A solvency ratio calculated as adjusted total debt divided by total shareholders’ equity. Microsoft Corp. adjusted debt-to-equity ratio improved from 2021 to 2022 and from 2022 to 2023.

Adjusted Return on Assets (ROA)

Microsoft Excel
Jun 30, 2023 Jun 30, 2022 Jun 30, 2021 Jun 30, 2020 Jun 30, 2019 Jun 30, 2018
As Reported
Selected Financial Data (US$ in millions)
Net income 72,361 72,738 61,271 44,281 39,240 16,571
Total assets 411,976 364,840 333,779 301,311 286,556 258,848
Profitability Ratio
ROA1 17.56% 19.94% 18.36% 14.70% 13.69% 6.40%
Adjusted for Operating Leases
Selected Financial Data (US$ in millions)
Net income 72,361 72,738 61,271 44,281 39,240 16,571
Adjusted total assets 411,976 364,840 333,779 301,311 286,556 258,848
Profitability Ratio
Adjusted ROA2 17.56% 19.94% 18.36% 14.70% 13.69% 6.40%

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

2023 Calculations

1 ROA = 100 × Net income ÷ Total assets
= 100 × 72,361 ÷ 411,976 = 17.56%

2 Adjusted ROA = 100 × Net income ÷ Adjusted total assets
= 100 × 72,361 ÷ 411,976 = 17.56%

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Microsoft Corp. adjusted ROA improved from 2021 to 2022 but then deteriorated significantly from 2022 to 2023.