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Microsoft Corp. (MSFT)

DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin

Beginner level

Decomposing ROE involves expressing net income divided by shareholders’ equity as the product of component ratios.

Two-Component Disaggregation of ROE

Microsoft Corp., decomposition of ROE

Microsoft Excel LibreOffice Calc
ROE = ROA × Financial Leverage
Jun 30, 2019 38.35% = 13.69% × 2.80
Jun 30, 2018 20.03% = 6.40% × 3.13
Jun 30, 2017 29.29% = 8.80% × 3.33
Jun 30, 2016 23.33% = 8.67% × 2.69
Jun 30, 2015 15.23% = 6.92% × 2.20
Jun 30, 2014 24.59% = 12.81% × 1.92

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).

The primary reason for the increase in return on equity ratio (ROE) over 2019 year is the increase in profitability measured by return on assets ratio (ROA).

Three-Component Disaggregation of ROE

Microsoft Corp., decomposition of ROE

Microsoft Excel LibreOffice Calc
ROE = Net Profit Margin × Asset Turnover × Financial Leverage
Jun 30, 2019 38.35% = 31.18% × 0.44 × 2.80
Jun 30, 2018 20.03% = 15.02% × 0.43 × 3.13
Jun 30, 2017 29.29% = 23.57% × 0.37 × 3.33
Jun 30, 2016 23.33% = 19.69% × 0.44 × 2.69
Jun 30, 2015 15.23% = 13.03% × 0.53 × 2.20
Jun 30, 2014 24.59% = 25.42% × 0.50 × 1.92

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).

The primary reason for the increase in return on equity ratio (ROE) over 2019 year is the increase in profitability measured by net profit margin ratio.

Five-Component Disaggregation of ROE

Microsoft Corp., decomposition of ROE

Microsoft Excel LibreOffice Calc
ROE = Tax Burden × Interest Burden × EBIT Margin × Asset Turnover × Financial Leverage
Jun 30, 2019 38.35% = 0.90 × 0.94 × 36.85% × 0.44 × 2.80
Jun 30, 2018 20.03% = 0.45 × 0.93 × 35.53% × 0.43 × 3.13
Jun 30, 2017 29.29% = 0.92 × 0.91 × 28.21% × 0.37 × 3.33
Jun 30, 2016 23.33% = 0.85 × 0.94 × 24.61% × 0.44 × 2.69
Jun 30, 2015 15.23% = 0.66 × 0.96 × 20.61% × 0.53 × 2.20
Jun 30, 2014 24.59% = 0.79 × 0.98 × 32.73% × 0.50 × 1.92

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).

The primary reason for the increase in return on equity ratio (ROE) over 2019 year is the increase in effect of taxes measured by tax burden ratio.

Two-Component Disaggregation of ROA

Microsoft Corp., decomposition of ROA

Microsoft Excel LibreOffice Calc
ROA = Net Profit Margin × Asset Turnover
Jun 30, 2019 13.69% = 31.18% × 0.44
Jun 30, 2018 6.40% = 15.02% × 0.43
Jun 30, 2017 8.80% = 23.57% × 0.37
Jun 30, 2016 8.67% = 19.69% × 0.44
Jun 30, 2015 6.92% = 13.03% × 0.53
Jun 30, 2014 12.81% = 25.42% × 0.50

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).

The primary reason for the increase in return on assets ratio (ROA) over 2019 year is the increase in profitability measured by net profit margin ratio.

Four-Component Disaggregation of ROA

Microsoft Corp., decomposition of ROA

Microsoft Excel LibreOffice Calc
ROA = Tax Burden × Interest Burden × EBIT Margin × Asset Turnover
Jun 30, 2019 13.69% = 0.90 × 0.94 × 36.85% × 0.44
Jun 30, 2018 6.40% = 0.45 × 0.93 × 35.53% × 0.43
Jun 30, 2017 8.80% = 0.92 × 0.91 × 28.21% × 0.37
Jun 30, 2016 8.67% = 0.85 × 0.94 × 24.61% × 0.44
Jun 30, 2015 6.92% = 0.66 × 0.96 × 20.61% × 0.53
Jun 30, 2014 12.81% = 0.79 × 0.98 × 32.73% × 0.50

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).

The primary reason for the increase in return on assets ratio (ROA) over 2019 year is the increase in effect of taxes measured by tax burden ratio.

Disaggregation of Net Profit Margin

Microsoft Corp., decomposition of net profit margin ratio

Microsoft Excel LibreOffice Calc
Net Profit Margin = Tax Burden × Interest Burden × EBIT Margin
Jun 30, 2019 31.18% = 0.90 × 0.94 × 36.85%
Jun 30, 2018 15.02% = 0.45 × 0.93 × 35.53%
Jun 30, 2017 23.57% = 0.92 × 0.91 × 28.21%
Jun 30, 2016 19.69% = 0.85 × 0.94 × 24.61%
Jun 30, 2015 13.03% = 0.66 × 0.96 × 20.61%
Jun 30, 2014 25.42% = 0.79 × 0.98 × 32.73%

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).

The primary reason for the increase in net profit margin ratio over 2019 year is the increase in effect of taxes measured by tax burden ratio.