Return on Capital (ROC)
Return on capital (ROC) is after tax rate of return on net business assets. ROIC is unaffected by changes in interest rates or company debt and equity structure. It measures business productivity performance.
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- Cash Flow Statement
- Analysis of Liquidity Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Price to FCFE (P/FCFE)
- Capital Asset Pricing Model (CAPM)
- Operating Profit Margin since 2005
- Price to Earnings (P/E) since 2005
- Analysis of Revenues
- Aggregate Accruals
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Return on Invested Capital (ROIC)
Microsoft Corp., ROIC calculation, comparison to benchmarks
| Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Net operating profit after taxes (NOPAT)1 | |||||||
| Invested capital2 | |||||||
| Performance Ratio | |||||||
| ROIC3 | |||||||
| Benchmarks | |||||||
| ROIC, Competitors4 | |||||||
| Accenture PLC | |||||||
| Adobe Inc. | |||||||
| Cadence Design Systems Inc. | |||||||
| CrowdStrike Holdings Inc. | |||||||
| Fair Isaac Corp. | |||||||
| International Business Machines Corp. | |||||||
| Intuit Inc. | |||||||
| Oracle Corp. | |||||||
| Palantir Technologies Inc. | |||||||
| Palo Alto Networks Inc. | |||||||
| Salesforce Inc. | |||||||
| ServiceNow Inc. | |||||||
| Synopsys Inc. | |||||||
| Workday Inc. | |||||||
Based on: 10-K (reporting date: 2024-06-30), 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).
1 NOPAT. See details »
2 Invested capital. See details »
3 2024 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes shows a consistent upward trend over the observed periods. Starting from 36,908 million US dollars in 2019, it increased steadily each year, reaching 90,364 million US dollars by 2024. This suggests strong growth in the core profitability of the operations, with a particularly notable increase between 2023 and 2024.
- Invested Capital
- The invested capital has expanded significantly throughout the years. It increased from 96,412 million US dollars in 2019 to 351,567 million US dollars in 2024. This growth indicates a substantial increase in the capital employed by the company, reflecting investments in assets or growth initiatives.
- Return on Invested Capital (ROIC)
- The return on invested capital exhibits a declining trend over the period. The ROIC peaked at 45.56% in 2021 but has since decreased, falling to 25.7% by 2024. Despite the rise in NOPAT, the return on new investments appears to be diminishing, likely due to the rapid increase in invested capital outpacing the profit growth rate.
Decomposition of ROIC
Microsoft Corp., decomposition of ROIC
| ROIC | = | OPM1 | × | TO2 | × | 1 – CTR3 | |
|---|---|---|---|---|---|---|---|
| Jun 30, 2024 | = | × | × | ||||
| Jun 30, 2023 | = | × | × | ||||
| Jun 30, 2022 | = | × | × | ||||
| Jun 30, 2021 | = | × | × | ||||
| Jun 30, 2020 | = | × | × | ||||
| Jun 30, 2019 | = | × | × |
Based on: 10-K (reporting date: 2024-06-30), 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).
1 Operating profit margin (OPM). See calculations »
2 Turnover of capital (TO). See calculations »
3 Effective cash tax rate (CTR). See calculations »
- Operating Profit Margin (OPM)
- The operating profit margin exhibited a generally upward trend from June 30, 2019, through June 30, 2024. It started at 36.61% in 2019, increased steadily to 43.49% by 2021, and despite minor fluctuations remained above 43% in the following years, culminating in 45.67% in 2024. This indicates improving operational efficiency and profitability over the period.
- Turnover of Capital (TO)
- Turnover of capital showed a consistent downward trajectory across the years examined. Beginning at a ratio of 1.35 in 2019 and 2020, it declined each year to 0.72 by mid-2024. This suggests that the company is generating less revenue per unit of capital employed, indicating potential capital inefficiency or increased capital investment without proportionate revenue gains.
- 1 – Effective Cash Tax Rate (CTR)
- The effective cash tax rate, expressed as 1 minus the CTR ratio, displayed variability but remained relatively high throughout the period. It peaked at 86.95% in 2021 before declining to a low of 75.68% in 2023 and then slightly increasing again to 78.67% in 2024. The fluctuations suggest changes in tax policy, tax planning strategies, or earnings composition impacting cash taxes paid.
- Return on Invested Capital (ROIC)
- The return on invested capital showed a declining trend from 38.28% in 2019, reaching a peak of 45.56% in 2021, followed by a sharp decrease to 25.7% in 2024. The initial increase signals effective capital deployment and profitability, but the subsequent steady decline points to diminishing returns on invested capital, possibly due to lower operational returns, increased capital base, or both.
Operating Profit Margin (OPM)
Microsoft Corp., OPM calculation, comparison to benchmarks
| Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Net operating profit after taxes (NOPAT)1 | |||||||
| Add: Cash operating taxes2 | |||||||
| Net operating profit before taxes (NOPBT) | |||||||
| Revenue | |||||||
| Add: Increase (decrease) in unearned revenue | |||||||
| Adjusted revenue | |||||||
| Profitability Ratio | |||||||
| OPM3 | |||||||
| Benchmarks | |||||||
| OPM, Competitors4 | |||||||
| Accenture PLC | |||||||
| Adobe Inc. | |||||||
| Cadence Design Systems Inc. | |||||||
| CrowdStrike Holdings Inc. | |||||||
| Fair Isaac Corp. | |||||||
| International Business Machines Corp. | |||||||
| Intuit Inc. | |||||||
| Oracle Corp. | |||||||
| Palantir Technologies Inc. | |||||||
| Palo Alto Networks Inc. | |||||||
| Salesforce Inc. | |||||||
| ServiceNow Inc. | |||||||
| Synopsys Inc. | |||||||
| Workday Inc. | |||||||
Based on: 10-K (reporting date: 2024-06-30), 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).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2024 Calculation
OPM = 100 × NOPBT ÷ Adjusted revenue
= 100 × ÷ =
4 Click competitor name to see calculations.
- Net Operating Profit Before Taxes (NOPBT)
- There is a consistent upward trend in net operating profit before taxes over the six-year period. Starting at 47,715 million US dollars in 2019, the figure increased annually, reaching 114,864 million US dollars in 2024. This represents more than a doubling of the profit, indicating strong profitability growth.
- Adjusted Revenue
- Adjusted revenue demonstrates a clear and steady increase each year, rising from 130,329 million US dollars in 2019 to 251,493 million US dollars in 2024. The growth rate suggests an expanding business scale and increasing sales volume or pricing power over the periods reviewed.
- Operating Profit Margin (OPM)
- The operating profit margin shows an improving efficiency and profitability trend, increasing from 36.61% in 2019 to 45.67% in 2024. Despite some fluctuations in the intermediate years, the overall margin enhancement implies better cost management or more profitable operations.
Turnover of Capital (TO)
Microsoft Corp., TO calculation, comparison to benchmarks
| Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Revenue | |||||||
| Add: Increase (decrease) in unearned revenue | |||||||
| Adjusted revenue | |||||||
| Invested capital1 | |||||||
| Efficiency Ratio | |||||||
| TO2 | |||||||
| Benchmarks | |||||||
| TO, Competitors3 | |||||||
| Accenture PLC | |||||||
| Adobe Inc. | |||||||
| Cadence Design Systems Inc. | |||||||
| CrowdStrike Holdings Inc. | |||||||
| Fair Isaac Corp. | |||||||
| International Business Machines Corp. | |||||||
| Intuit Inc. | |||||||
| Oracle Corp. | |||||||
| Palantir Technologies Inc. | |||||||
| Palo Alto Networks Inc. | |||||||
| Salesforce Inc. | |||||||
| ServiceNow Inc. | |||||||
| Synopsys Inc. | |||||||
| Workday Inc. | |||||||
Based on: 10-K (reporting date: 2024-06-30), 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).
1 Invested capital. See details »
2 2024 Calculation
TO = Adjusted revenue ÷ Invested capital
= ÷ =
3 Click competitor name to see calculations.
- Adjusted Revenue
- Adjusted revenue exhibited a steady upward trend over the six-year period. Starting at 130,329 million US dollars in mid-2019, revenue increased consistently each year, reaching 251,493 million US dollars by mid-2024. This signifies a cumulative increase of approximately 93% over the period, indicating strong growth in the company's core business operations.
- Invested Capital
- Invested capital also demonstrated a pronounced upward trajectory across the analyzed years. Beginning at 96,412 million US dollars in mid-2019, invested capital expanded substantially, reaching 351,567 million US dollars by mid-2024. This represents an approximate increase of 264%, reflecting significant reinvestment or expansion activities within the company.
- Turnover of Capital (TO)
- The turnover of capital ratio showed a clear declining trend over the period. Starting at 1.35 in both mid-2019 and mid-2020, the ratio decreased gradually to 0.72 by mid-2024. This decline suggests that the company is generating less revenue per unit of invested capital each year, which may imply reduced efficiency in utilizing its capital base despite increasing revenue and capital levels.
- Overall Insights
- While both revenue and invested capital have grown substantially, the decreasing capital turnover ratio indicates a diminishing return on the investments made. The company's capacity to convert capital into revenue has weakened, potentially highlighting changes in asset utilization efficiency or shifts in business strategy that require more capital investment relative to income produced.
Effective Cash Tax Rate (CTR)
Microsoft Corp., CTR calculation, comparison to benchmarks
| Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Net operating profit after taxes (NOPAT)1 | |||||||
| Add: Cash operating taxes2 | |||||||
| Net operating profit before taxes (NOPBT) | |||||||
| Tax Rate | |||||||
| CTR3 | |||||||
| Benchmarks | |||||||
| CTR, Competitors4 | |||||||
| Accenture PLC | |||||||
| Adobe Inc. | |||||||
| Cadence Design Systems Inc. | |||||||
| CrowdStrike Holdings Inc. | |||||||
| Fair Isaac Corp. | |||||||
| International Business Machines Corp. | |||||||
| Intuit Inc. | |||||||
| Oracle Corp. | |||||||
| Palantir Technologies Inc. | |||||||
| Palo Alto Networks Inc. | |||||||
| Salesforce Inc. | |||||||
| ServiceNow Inc. | |||||||
| Synopsys Inc. | |||||||
| Workday Inc. | |||||||
Based on: 10-K (reporting date: 2024-06-30), 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).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2024 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × ÷ =
4 Click competitor name to see calculations.
- Cash Operating Taxes
- The cash operating taxes increased significantly over the period analyzed. Starting at $10,807 million in 2019, the figure declined in 2020 to $8,771 million but subsequently showed a steady and marked upward trend, reaching $24,499 million by 2024. This indicates a growing tax expense in cash terms, particularly notable from 2021 onward.
- Net Operating Profit Before Taxes (NOPBT)
- Net operating profit before taxes demonstrated consistent growth throughout the years. From $47,715 million in 2019, this figure increased annually, with a substantial rise of over 140% by 2024, when it reached $114,864 million. The trend reflects strengthening operational profitability over the period under review.
- Effective Cash Tax Rate (CTR)
- The effective cash tax rate displayed fluctuations rather than a steady trend. It began at 22.65% in 2019, dropped notably to a low of 13.05% in 2021, then rose again to 24.32% in 2023 before a slight decline to 21.33% in 2024. This variability suggests changes in the tax environment, tax planning strategies, or shifts in taxable income composition.
- Overall Analysis
- The data portrays a company with robust growth in operating profits alongside an increasing cash tax burden. Although the effective cash tax rate varies year to year, the general increase in cash taxes corresponds with the rise in operating profit. This reflects an expanding taxable income base, while the fluctuations in tax rate suggest adjustments in tax management or regulatory factors affecting tax liabilities. The decline in tax rate around 2020-2021 may have temporarily boosted net profitability after tax during those years.