Return on capital (ROC) is after tax rate of return on net business assets. ROIC is unaffected by changes in interest rates or company’s debt and equity structure. It measures business productivity performance.

Return on Invested Capital (ROIC)
Decomposition of ROIC
Operating Profit Margin (OPM)
Turnover of Capital (TO)
Effective Cash Tax Rate (CTR)

Microsoft Corp., ROIC calculation, comparison to benchmarks

	Jun 30, 2019	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016	Jun 30, 2015	Jun 30, 2014
Selected Financial Data (US$ in millions)
Net operating profit after taxes (NOPAT)¹	36,908	16,308	27,455	25,696	12,237	24,071
Invested capital²	87,753	76,697	76,799	48,394	41,216	47,350
Performance Ratio
ROIC³	42.06%	21.26%	35.75%	53.10%	29.69%	50.84%
Benchmarks
ROIC, Competitors⁴
Adobe Inc.	19.74%	17.25%	22.06%	21.03%	11.74%	7.99%
Alphabet Inc.	32.75%	34.31%	19.71%	26.91%	22.22%	—
Autodesk Inc.	0.93%	-11.17%	-9.45%	8.45%	10.16%	—
Facebook Inc.	27.51%	36.42%	37.03%	25.08%	9.26%	—
International Business Machines Corp.	7.84%	8.46%	5.77%	10.53%	13.69%	—
Intuit Inc.	34.72%	32.34%	36.84%	34.96%	28.34%	30.20%
Oracle Corp.	15.18%	5.88%	13.04%	15.80%	14.73%	—
salesforce.com inc.	8.95%	9.47%	7.75%	9.27%	6.61%	—
ServiceNow Inc.	19.88%	15.78%	15.89%	-10.81%	0.75%	—

Based on: 10-K (filing date: 2019-08-01), 10-K (filing date: 2018-08-03), 10-K (filing date: 2017-08-02), 10-K (filing date: 2016-07-28), 10-K (filing date: 2015-07-31), 10-K (filing date: 2014-07-31).

¹ NOPAT. See details »

² Invested capital. See details »

³ 2019 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × 36,908 ÷ 87,753 = 42.06%

⁴ Click competitor name to see calculations.

Performance ratio	Description	The company
ROIC	A measure of the periodic, after tax, cash-on-cash yield earned in the business.	Microsoft Corp.’s ROIC deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.

Microsoft Corp., decomposition of ROIC


	ROIC	=	OPM¹	×	TO²	×	1 – CTR³
Jun 30, 2019	42.06%	=	36.61%	×	1.49	×	77.35%
Jun 30, 2018	21.26%	=	35.11%	×	1.52	×	39.89%
Jun 30, 2017	35.75%	=	31.99%	×	1.31	×	85.38%
Jun 30, 2016	53.10%	=	30.09%	×	1.94	×	90.95%
Jun 30, 2015	29.69%	=	19.34%	×	2.27	×	67.51%
Jun 30, 2014	50.84%	=	33.41%	×	1.89	×	80.41%

Based on: 10-K (filing date: 2019-08-01), 10-K (filing date: 2018-08-03), 10-K (filing date: 2017-08-02), 10-K (filing date: 2016-07-28), 10-K (filing date: 2015-07-31), 10-K (filing date: 2014-07-31).

¹ Operating profit margin (OPM). See calculations »

² Turnover of capital (TO). See calculations »

³ Effective cash tax rate (CTR). See calculations »

The primary reason for the increase in return on invested capital (ROIC) over 2019 year is the decrease in effective cash tax rate (CTR).

Microsoft Corp., OPM calculation, comparison to benchmarks

	Jun 30, 2019	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016	Jun 30, 2015	Jun 30, 2014
Selected Financial Data (US$ in millions)
Net operating profit after taxes (NOPAT)¹	36,908	16,308	27,455	25,696	12,237	24,071
Add: Cash operating taxes²	10,807	24,571	4,701	2,558	5,889	5,864
Net operating profit before taxes (NOPBT)	47,715	40,878	32,156	28,254	18,125	29,934

Revenue	125,843	110,360	89,950	85,320	93,580	86,833
Add: Increase (decrease) in unearned revenue	4,486	6,064	10,570	8,591	160	2,759
Adjusted revenue	130,329	116,424	100,520	93,911	93,740	89,592
Profitability Ratio
OPM³	36.61%	35.11%	31.99%	30.09%	19.34%	33.41%
Benchmarks
OPM, Competitors⁴
Adobe Inc.	31.93%	35.32%	33.91%	31.32%	24.23%	16.25%
Alphabet Inc.	23.20%	23.81%	24.25%	26.49%	25.64%	—
Autodesk Inc.	3.88%	-13.37%	-9.48%	13.40%	12.87%	—
Facebook Inc.	34.36%	44.37%	49.93%	44.85%	34.99%	—
International Business Machines Corp.	16.43%	14.56%	16.13%	16.19%	19.65%	—
Intuit Inc.	28.32%	25.71%	28.07%	29.36%	24.51%	30.18%
Oracle Corp.	34.21%	35.42%	34.66%	35.32%	35.82%	—
salesforce.com inc.	18.93%	16.11%	15.00%	15.40%	11.86%	—
ServiceNow Inc.	14.97%	14.28%	13.97%	-7.00%	2.38%	—

Based on: 10-K (filing date: 2019-08-01), 10-K (filing date: 2018-08-03), 10-K (filing date: 2017-08-02), 10-K (filing date: 2016-07-28), 10-K (filing date: 2015-07-31), 10-K (filing date: 2014-07-31).

¹ NOPAT. See details »

² Cash operating taxes. See details »

³ 2019 Calculation
OPM = 100 × NOPBT ÷ Adjusted revenue
= 100 × 47,715 ÷ 130,329 = 36.61%

⁴ Click competitor name to see calculations.

Profitability ratio	Description	The company
OPM	The operating profit margin (OPM) is the ratio of pretax economic earnings, or NOPBT, to sales.	Microsoft Corp.’s OPM improved from 2017 to 2018 and from 2018 to 2019.

Microsoft Corp., TO calculation, comparison to benchmarks

	Jun 30, 2019	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016	Jun 30, 2015	Jun 30, 2014
Selected Financial Data (US$ in millions)
Revenue	125,843	110,360	89,950	85,320	93,580	86,833
Add: Increase (decrease) in unearned revenue	4,486	6,064	10,570	8,591	160	2,759
Adjusted revenue	130,329	116,424	100,520	93,911	93,740	89,592

Invested capital¹	87,753	76,697	76,799	48,394	41,216	47,350
Efficiency Ratio
TO²	1.49	1.52	1.31	1.94	2.27	1.89
Benchmarks
TO, Competitors³
Adobe Inc.	0.67	0.61	0.77	0.77	0.66	0.62
Alphabet Inc.	1.61	1.58	1.69	1.25	1.05	—
Autodesk Inc.	0.61	0.69	0.67	0.79	0.83	—
Facebook Inc.	1.08	0.93	0.98	0.71	0.57	—
International Business Machines Corp.	0.59	0.71	0.73	0.75	0.81	—
Intuit Inc.	1.50	1.50	1.80	1.77	1.58	1.37
Oracle Corp.	0.55	0.55	0.49	0.58	0.57	—
salesforce.com inc.	0.51	0.63	0.57	0.70	0.65	—
ServiceNow Inc.	1.36	1.18	1.24	1.33	1.14	—

Based on: 10-K (filing date: 2019-08-01), 10-K (filing date: 2018-08-03), 10-K (filing date: 2017-08-02), 10-K (filing date: 2016-07-28), 10-K (filing date: 2015-07-31), 10-K (filing date: 2014-07-31).

¹ Invested capital. See details »

² 2019 Calculation
TO = Adjusted revenue ÷ Invested capital
= 130,329 ÷ 87,753 = 1.49

³ Click competitor name to see calculations.

Efficiency ratio	Description	The company
TO	The turnover of capital (TO) is the ratio of sales to invested capital. Capital turnover is a function of the efficiency of working capital management and of net fixed assets.	Microsoft Corp.’s TO improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019.

Microsoft Corp., CTR calculation, comparison to benchmarks

	Jun 30, 2019	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016	Jun 30, 2015	Jun 30, 2014
Selected Financial Data (US$ in millions)
Net operating profit after taxes (NOPAT)¹	36,908	16,308	27,455	25,696	12,237	24,071
Add: Cash operating taxes²	10,807	24,571	4,701	2,558	5,889	5,864
Net operating profit before taxes (NOPBT)	47,715	40,878	32,156	28,254	18,125	29,934
Tax Rate
CTR³	22.65%	60.11%	14.62%	9.05%	32.49%	19.59%
Benchmarks
CTR, Competitors⁴
Adobe Inc.	7.06%	19.97%	15.15%	12.85%	26.06%	20.76%
Alphabet Inc.	12.46%	8.68%	52.04%	18.98%	17.49%	—
Autodesk Inc.	60.79%	—	—	20.47%	5.36%	—
Facebook Inc.	25.67%	11.36%	24.12%	21.75%	53.24%	—
International Business Machines Corp.	18.55%	18.30%	51.29%	13.24%	13.55%	—
Intuit Inc.	18.38%	16.40%	27.07%	32.70%	26.75%	26.87%
Oracle Corp.	19.20%	70.01%	22.82%	22.47%	27.32%	—
salesforce.com inc.	7.48%	7.21%	9.36%	13.59%	14.02%	—
ServiceNow Inc.	2.51%	6.49%	8.20%	—	72.30%	—

Based on: 10-K (filing date: 2019-08-01), 10-K (filing date: 2018-08-03), 10-K (filing date: 2017-08-02), 10-K (filing date: 2016-07-28), 10-K (filing date: 2015-07-31), 10-K (filing date: 2014-07-31).

¹ NOPAT. See details »

² Cash operating taxes. See details »

³ 2019 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × 10,807 ÷ 47,715 = 22.65%

⁴ Click competitor name to see calculations.

Tax rate	Description	The company
CTR	Effective cash tax rate on operating income.	Microsoft Corp.’s CTR increased from 2017 to 2018 but then slightly decreased from 2018 to 2019 not reaching 2017 level.

Microsoft Corp. (NASDAQ:MSFT)

Return on Capital (ROC)

Return on Invested Capital (ROIC)

Decomposition of ROIC

Operating Profit Margin (OPM)

Turnover of Capital (TO)

Effective Cash Tax Rate (CTR)