Microsoft Corp. (NASDAQ:MSFT)

The analysis of the financial ratios over the six-year period reveals several notable trends in operational efficiency, liquidity, leverage, profitability, and returns.

Asset Turnover

Both the reported and adjusted total asset turnover ratios show an overall upward trend from 2019 to 2022, peaking at 0.54 and 0.58 respectively. This increase indicates improving efficiency in using assets to generate revenue during this period. However, from 2022 to 2024, both measures exhibit a decline, suggesting a slight reduction in asset utilization efficiency in the most recent years.

Current Ratio

The reported current ratio declines steadily from 2.53 in 2019 to 1.27 in 2024, indicating a decrease in short-term liquidity. The adjusted current ratio follows a similar trajectory but remains higher throughout, starting at 4.79 and decreasing to 2.37 by 2024. Despite the decline, the adjusted figures suggest the company retains a stronger liquidity position when adjustments are considered.

Debt to Equity and Debt to Capital

Both reported and adjusted debt to equity ratios show a consistent downward trend from 2019 through 2024, dropping from 0.77 to 0.29 (reported) and 0.65 to 0.32 (adjusted), respectively. This indicates a deliberate reduction in financial leverage. Similarly, the debt to capital ratios decrease over the period, reflecting a conservative financing approach and less reliance on debt funding.

Financial Leverage

Financial leverage ratios, both reported and adjusted, decline steadily from 2.80 and 2.11 respectively in 2019 to 1.91 and 1.58 by 2024. This decrease aligns with the observed reduction in debt levels, further supporting a strategy of deleveraging and potentially reducing financial risk.

Net Profit Margin

The reported net profit margin shows an initial slight decline from 31.18% in 2019 to 30.96% in 2020, then an improvement peaking at 36.69% in 2022. It subsequently decreases again in 2023 before rising to 35.96% in 2024. The adjusted net profit margin exhibits more variability, with a notable peak at 37.37% in 2021, a dip to 31.94% in 2022, and recovery to 36.07% in 2024. These fluctuations reflect changing profitability dynamics possibly influenced by operational or market conditions.

Return on Equity (ROE)

Reported ROE increases from 38.35% in 2019 to a high of 43.68% in 2022 but then decreases significantly to 32.83% by 2024. Adjusted ROE follows a similar but more moderate pattern, peaking at 35.95% in 2021 and declining to around 29.27% in 2024. The downward trend in recent years may indicate decreasing efficiency in generating returns on shareholders’ equity.

Return on Assets (ROA)

Reported ROA improves notably from 13.69% in 2019 to 19.94% in 2022, followed by a decline to approximately 17.21% by 2024. Adjusted ROA displays a generally upward trend, reaching 19.76% in 2021 and stabilizing close to 18.48% in 2024. These figures suggest that despite some recent volatility, the company maintains strong asset profitability overall.

In summary, the company exhibits progressive improvements in asset utilization efficiency and profitability until approximately 2022, followed by certain declines in these metrics thereafter. Liquidity has diminished over time, albeit still maintaining a reasonable position when adjustments are made. The company’s financial leverage has been consistently reduced, which could reflect a strategic focus on lowering financial risk. Profitability ratios show variability, with some recent decreases indicating potential challenges in maintaining previously high return levels.

The financial data over the analyzed years exhibit notable growth and evolving efficiency in asset utilization.

Revenue Trends

Revenue demonstrated consistent year-over-year growth, increasing from US$125,843 million in 2019 to US$245,122 million in 2024. This represents a near doubling over the six-year span, indicating strong sales expansion and market demand.

Total Assets

Total assets also increased steadily, rising from US$286,556 million in 2019 to US$512,163 million in 2024. This upward trend reflects ongoing investments in assets, possibly to support growth initiatives and scale operations.

Reported Total Asset Turnover

The reported total asset turnover ratio started at 0.44 in 2019, peaked at 0.54 in 2022, and then slightly declined to 0.48 by 2024. This pattern suggests improved efficiency in utilizing assets to generate revenue until 2022, followed by a mild decrease in asset turnover efficiency in the most recent years.

Adjusted Revenue and Adjusted Total Assets

Adjusted revenue followed a similar growth trajectory as reported revenue, rising from US$130,329 million in 2019 to US$251,493 million in 2024. Adjusted total assets increased from US$279,431 million to US$490,723 million during the same period. These adjusted figures generally mirror the trends seen in reported data, likely accounting for non-operational adjustments.

Adjusted Total Asset Turnover

The adjusted total asset turnover ratio improved steadily from 0.47 in 2019, reaching a high of 0.58 in 2022, before declining slightly to 0.51 in 2024. This indicates that the company was increasingly effective in generating revenue per unit of asset until 2022, with a minor efficiency loss in recent periods.

In summary, the data illustrate robust revenue growth supported by significant asset increases. Asset turnover ratios reveal that the company enhanced its capacity to generate sales from its assets through 2022, but experienced some reduction in efficiency afterwards. The trends suggest a period of effective expansion with some potential challenges in maintaining asset utilization efficiency in the most recent years.

The analysis of the presented financial data over the six-year period reveals distinct trends in the company's liquidity and working capital management.

Current Assets and Liabilities

Current assets exhibit a fluctuating trend, rising from 175,552 million USD in mid-2019 to a peak of 184,406 million USD in mid-2021, followed by a decline to 159,734 million USD by mid-2024. Conversely, current liabilities show a continuous increase throughout the period, from 69,420 million USD in mid-2019 to 125,286 million USD in mid-2024. This steady growth in liabilities outpaces the growth in assets, indicating increasing short-term financial obligations.

Reported Current Ratio

The reported current ratio decreases consistently over the period, starting at 2.53 in mid-2019 and dropping to 1.27 by mid-2024. This decline suggests a weakening position in meeting short-term liabilities with current assets, reflecting reduced liquidity under standard accounting measures.

Adjusted Current Assets and Liabilities

Adjusted current assets experience a similar pattern to reported current assets, with an initial rise to 185,157 million USD in mid-2021 and then a decrease to 160,564 million USD by mid-2024. Adjusted current liabilities also increase, but at a slower rate than reported current liabilities, moving from 36,744 million USD to 67,704 million USD over the same timeframe. The adjustments imply a refined calculation for both assets and liabilities, potentially excluding certain non-liquid or non-operating components.

Adjusted Current Ratio

The adjusted current ratio commences at 4.79 in mid-2019, rising slightly to 5.03 in mid-2020, then declining gradually to 2.37 by mid-2024. Although there is a decline, the adjusted ratio remains significantly above the reported current ratio, indicating a stronger liquidity position when adjustments are considered. This suggests that underlying liquid assets relative to adjusted liabilities provide a more favorable short-term financial stability perspective.

Overall Insights

Over the duration analyzed, the company's liquidity as measured by both reported and adjusted current ratios has weakened, primarily driven by a steady rise in current liabilities alongside fluctuating current assets. The sharper decrease in the reported current ratio compared to the adjusted ratio highlights the importance of considering adjustments to asset and liability bases when evaluating liquidity. Despite the decline, the adjusted ratios suggest the company maintains a buffer above the critical threshold of 1, which may mitigate immediate liquidity concerns. However, the downward trend calls for careful monitoring of short-term financial obligations and working capital management strategies going forward.

Total Debt

The total debt exhibits a generally declining trend from June 2019 to June 2023, decreasing from $78,752 million to $64,304 million. However, in the most recent year, June 2024, there is a notable increase bringing the debt back up to $78,775 million, nearly matching the 2019 level.

Stockholders’ Equity

There is a consistent and substantial growth in stockholders’ equity across the entire period. Starting at $102,330 million in June 2019, equity increases each year, reaching $268,477 million by June 2024. This reflects strengthening in the company's net worth and capital base over time.

Reported Debt to Equity Ratio

The reported debt to equity ratio declines steadily from 0.77 in June 2019 to 0.29 in June 2024. This indicates a gradual reduction in the company's leverage relative to its equity, implying a stronger equity position in relation to its reported debt liabilities.

Adjusted Total Debt

The adjusted total debt follows a pattern similar to the reported total debt but at higher absolute values. It trends downward from $86,455 million in June 2019 to $79,441 million in June 2023, then increases markedly to $97,852 million in June 2024. This suggests that when accounting adjustments are made, the company's debt exposure is higher and has increased significantly in the most recent year.

Adjusted Stockholders’ Equity

Adjusted stockholders' equity grows consistently from $132,644 million in June 2019 to $309,839 million in June 2024, mirroring the upward trend observed in the reported stockholders' equity but at elevated levels, indicating a strong and improving adjusted equity base.

Adjusted Debt to Equity Ratio

The adjusted debt to equity ratio decreases from 0.65 in June 2019 to 0.32 in June 2024, showing a substantial reduction in leverage when adjustments are considered. The decline demonstrates the company's improved financial leverage position despite the recent increase in adjusted total debt.

The analysis of the annual financial data reveals several notable trends concerning the company's debt and capital structure over the six-year period.

Total Debt

The total debt exhibited a declining trend from 2019 to 2023, decreasing from 78,752 million USD to 64,304 million USD. However, in 2024, there was a significant increase, bringing the total debt back up to 78,775 million USD, slightly surpassing the 2019 level.

Total Capital

Total capital showed consistent growth throughout the period, increasing from 181,082 million USD in 2019 to 347,252 million USD in 2024. This trend indicates a strengthening capital base over the years.

Reported Debt to Capital Ratio

The reported debt to capital ratio steadily decreased from 0.43 in 2019 to 0.23 in 2024. This decline suggests an improving leverage position when considering reported figures, reflecting a lower proportion of debt relative to capital.

Adjusted Total Debt

The adjusted total debt figures follow a similar pattern to the reported total debt but with generally higher values. There was a decrease from 86,455 million USD in 2019 to 79,441 million USD in 2023, followed by a marked increase to 97,852 million USD in 2024.

Adjusted Total Capital

Adjusted total capital also steadily increased from 219,099 million USD in 2019 to 407,691 million USD in 2024. This consistent rise aligns with the trend in reported total capital, indicating growth in the company's overall capital when adjustments are considered.

Adjusted Debt to Capital Ratio

The adjusted debt to capital ratio decreased from 0.39 in 2019 to 0.24 in 2024. Despite the increase in adjusted total debt in the final year, the ratio's decline suggests that capital growth outpaced debt accumulation, improving the leverage profile when adjusted figures are analyzed.

Overall, the company has exhibited strong capital growth over the period while generally reducing its debt levels until a notable increase in debt occurred in 2024. The leverage ratios reflect an improving capital structure, with debt representing a progressively smaller fraction of the capital base, even with the latest rise in debt figures. This pattern indicates a strategic management of debt and capital to strengthen the financial position.

The financial data reveals consistent growth in both total assets and stockholders’ equity over the six-year period.

Total Assets

Total assets increased steadily from US$286,556 million in 2019 to US$512,163 million in 2024, indicating a significant expansion in the company’s asset base.

Stockholders’ Equity

Stockholders’ equity rose from US$102,330 million in 2019 to US$268,477 million in 2024, reflecting ongoing strengthening of the company’s net worth and capacity to absorb losses.

Reported Financial Leverage

The reported financial leverage ratio declined from 2.8 in 2019 to 1.91 in 2024, suggesting a gradual reduction in the company’s reliance on debt financing relative to equity, implying an improvement in financial stability.

Adjusted Total Assets

Adjusted total assets also increased from US$279,431 million in 2019 to US$490,723 million in 2024, closely mirroring the trend seen in the reported total assets, signaling consistent asset growth after adjustments.

Adjusted Stockholders’ Equity

Adjusted stockholders’ equity grew from US$132,644 million in 2019 to US$309,839 million in 2024, a steady upward trend indicating enhanced equity strength when adjusted for specific factors.

Adjusted Financial Leverage

The adjusted financial leverage ratio steadily decreased from 2.11 in 2019 to 1.58 in 2024, further confirming a decline in leverage when evaluated on an adjusted basis, reflecting a conservative capital structure over time.

Overall, the data suggests continuous growth in asset size supported by a strengthening equity base, alongside a deliberate reduction in financial leverage, which collectively portray a improving financial condition and potentially lower financial risk exposure over the observed period.

The financial data demonstrates a general positive trajectory in both income and revenue over the observed periods.

Net Income

Net income has shown consistent growth from 39,240 million US dollars in mid-2019 to 88,136 million US dollars by mid-2024. This reflects a substantial increase, more than doubling over five years, indicating improved profitability and operational efficiency.

Revenue

Revenue figures also exhibit a steady upward trend, rising from 125,843 million US dollars in mid-2019 to 245,122 million US dollars by mid-2024. This nearly twofold increase highlights robust sales growth and positive market expansion.

Reported Net Profit Margin

The reported net profit margin primarily fluctuated within a range, beginning at 31.18% in mid-2019, peaking at 36.69% in mid-2022, then stabilizing around 35% in the most recent period. This suggests an overall efficient conversion of revenue into profit, with slight variability potentially due to changes in cost structure or market conditions.

Adjusted Net Income

The adjusted net income mirrors the net income pattern but shows smoother progression, increasing from 39,211 million US dollars in mid-2019 to 90,702 million US dollars in mid-2024. The adjustments likely remove non-recurring items, revealing consistent underlying profitability growth.

Adjusted Revenue

Adjusted revenue figures follow a similar growth curve to reported revenue, increasing from 130,329 million US dollars in mid-2019 to 251,493 million US dollars by mid-2024. This suggests that adjustments account for certain revenue recognition variations yet confirm a sustained positive sales trajectory.

Adjusted Net Profit Margin

The adjusted net profit margin saw an increase from 30.09% in mid-2019 to a peak of 37.37% in mid-2021, followed by a decline to approximately 32% in mid-2022 and mid-2023, and recovering to 36.07% in mid-2024. This pattern indicates some variability in profitability efficiency but an overall strong margin in recent periods.

In summary, the data reflects strong financial growth with increases in both income and revenue over the timeframe. Profit margins remain relatively high and stable, with slight fluctuations that may be attributed to external factors or internal adjustments. The consistent improvements in adjusted metrics underscore the sustained operational performance and profitability of the entity.

The financial data reveals significant growth and evolving profitability metrics over the six-year period. Net income has shown an overall upward trend, increasing from 39,240 million US dollars in mid-2019 to 88,136 million US dollars by mid-2024. This suggests strong earnings performance and growth in profitability over time. Notably, there is a consistent rise each year, with a substantial jump between 2023 and 2024.

Stockholders’ equity has also expanded considerably, starting at 102,330 million US dollars in mid-2019 and growing to 268,477 million US dollars in mid-2024. This indicates robust capitalization and value creation for shareholders, with equity more than doubling over the period. The steady increase in equity emphasizes the company’s ability to retain earnings and possibly raise capital to support growth.

The reported return on equity (ROE) exhibits a less uniform pattern. While it started strong at 38.35% in 2019, it slightly declined to 37.43% in 2020, increased again to peak at 43.68% in 2022, and then experienced a downward trend toward 32.83% in 2024. Despite the decrease in the last two years, the reported ROE remains relatively high, reflecting efficient use of equity over the longer term.

Adjusted figures provide additional perspective. Adjusted net income follows a growth trajectory similar to the reported net income, rising from 39,211 million US dollars in 2019 to 90,702 million US dollars in 2024. Adjusted stockholders’ equity mirrors the upward movement of reported equity but starts from a higher base of 132,644 million US dollars in 2019 and reaches 309,839 million US dollars by 2024. This adjustment likely accounts for certain one-time factors or non-operational items, providing a clearer picture of ongoing profitability and capital levels.

The adjusted ROE shows a moderate rise from 29.56% in 2019 to 35.95% in 2021, followed by a decline to around 29% in the subsequent years, ending at 29.27% in 2024. Although slightly lower than reported ROE figures, adjusted ROE appears more stable and reflects a moderate return on equity after adjusting for specific factors. This stability suggests consistent profitability relative to the adjusted equity base despite some recent softening.

Key Observations:

1. Strong upward trend in both net income and stockholders’ equity indicates robust financial growth and capital accumulation.

2. Reported ROE peaked around 2021-2022 but has been declining since, suggesting reduced efficiency in generating profit from equity in recent years.

3. Adjusted net income and equity values consistently surpass reported figures, highlighting adjustments that affect net profitability and equity makeup.

4. Adjusted ROE provides a steadier profitability metric, despite a slight downward trend after 2021, maintaining levels near 29%.

5. The company's ability to grow earnings and equity substantially over the period reflects strong operational performance and possibly effective capital management strategies.

Overall, the data illustrates a company experiencing considerable growth in income and equity, with profitability metrics showing some recent softening in returns relative to shareholder equity, particularly in the last two years. Adjusted figures provide a more stable assessment of ongoing earnings power, confirming sustained solid financial performance.

Net Income

The net income demonstrates a general upward trajectory over the six-year period, starting at $39,240 million in 2019 and reaching $88,136 million in 2024. There is a noticeable jump from 2020 to 2021, with net income increasing by almost 38%, and despite a slight dip in 2023, the figure rises significantly in 2024, suggesting strong profitability growth overall.

Total Assets

Total assets have steadily increased each year, more than doubling from $286,556 million in 2019 to $512,163 million in 2024. This consistent growth indicates significant asset accumulation and expansion over time.

Reported Return on Assets (ROA)

The reported ROA peaks at 19.94% in 2022, indicating efficient asset utilization during that year. However, it declines thereafter to 17.21% in 2024, despite total assets and net income continuing to grow. This decrease suggests that asset growth outpaced income generation efficiency in the later years.

Adjusted Net Income

Adjusted net income trends upward similarly to reported net income, but at a slightly different pace. It increases from $39,211 million in 2019 to $90,702 million in 2024. The adjustment causes a sharper rise between 2019 and 2020, and though growth slows in 2022, it accelerates significantly by 2024, indicating improvements when accounting for specified adjustments.

Adjusted Total Assets

Adjusted total assets also show steady growth, from $279,431 million in 2019 to $490,723 million in 2024. The growth pattern mirrors that of unadjusted total assets but is slightly lower in magnitude, maintaining a consistent expansion trend.

Adjusted Return on Assets (ROA)

Adjusted ROA peaks at 19.76% in 2021, higher than the reported ROA peak, suggesting better efficiency once adjustments are considered. After a decline to 17.85% in 2023, the adjusted ROA increases again to 18.48% in 2024, indicating improved asset utilization efficiency compared to the reported figure in the same year.