Microsoft Corp. (NASDAQ:MSFT)

The solvency ratios presented demonstrate a consistent, generally decreasing trend in leverage over the observed period spanning from September 2020 to December 2025. This suggests a strengthening financial position with a reduced reliance on debt financing. The inclusion of operating lease liabilities consistently results in higher leverage ratios compared to those calculated excluding these liabilities, highlighting the impact of lease accounting on the company’s reported debt levels.

Debt to Equity

The debt to equity ratio exhibits a steady decline from 0.52 in September 2020 to 0.10 in December 2025. This indicates a decreasing proportion of debt relative to shareholder equity, signifying reduced financial risk. A slight increase is observed in September 2023 to 0.32, but the ratio resumes its downward trajectory in subsequent periods.

Debt to Equity (Including Operating Lease Liability)

Similar to the standard debt to equity ratio, this metric also shows a consistent downward trend, moving from 0.58 in September 2020 to 0.15 in December 2025. The inclusion of operating lease liabilities results in higher values throughout the period, but the overall trend remains consistent with the standard debt to equity ratio.

Debt to Capital

The debt to capital ratio mirrors the trend observed in debt to equity, decreasing from 0.34 in September 2020 to 0.09 in December 2025. This indicates a decreasing reliance on debt as a proportion of the company’s total capital structure. A minor increase is noted in September 2023, but the ratio continues to decline thereafter.

Debt to Capital (Including Operating Lease Liability)

This ratio also demonstrates a declining trend, starting at 0.37 in September 2020 and reaching 0.13 in December 2025. As with the other ratios, incorporating operating lease liabilities results in higher values, but the overall trend remains consistent.

Debt to Assets

The debt to assets ratio shows a decrease from 0.21 in September 2020 to 0.06 in December 2025. This suggests a decreasing proportion of the company’s assets financed by debt. A noticeable increase to 0.16 is observed in September 2023, followed by a return to the declining trend.

Debt to Assets (Including Operating Lease Liability)

This metric also exhibits a downward trend, declining from 0.24 in September 2020 to 0.09 in December 2025. The inclusion of operating lease liabilities consistently results in higher values, but the overall trend remains consistent with the standard debt to assets ratio.

Financial Leverage

Financial leverage, measured as total assets to total equity, generally decreased from 2.44 in September 2020 to 1.70 in December 2025. There are some fluctuations within the period, including a slight increase to 2.02 in September 2023, but the overall trend indicates a reduction in the company’s financial leverage.

In summary, the observed trends across all solvency ratios indicate a strengthening financial position characterized by decreasing leverage. The consistent inclusion of operating lease liabilities highlights their material impact on reported debt levels, but does not alter the overall trend of decreasing financial risk.

The debt to equity ratio for the analyzed period demonstrates a consistent downward trend overall, indicating a strengthening of the company’s financial position with respect to its leverage. Initially, the ratio exhibited values above 0.50, but progressively decreased over the observed timeframe.

Initial Phase (Sep 30, 2020 – Dec 31, 2021)

From September 30, 2020, to December 31, 2021, the debt to equity ratio decreased from 0.52 to 0.33. This suggests a reduction in the relative proportion of debt financing compared to equity financing during this period. The decline, while consistent, was more pronounced in the initial stages.

Continued Decline (Mar 31, 2022 – Jun 30, 2023)

The downward trend continued through June 30, 2023, with the ratio reaching a low of 0.23. This period reflects a continued strengthening of the equity base relative to debt. The rate of decline appeared to moderate during this phase.

Recent Fluctuations (Sep 30, 2023 – Dec 31, 2025)

A slight increase was observed in the ratio from 0.23 to 0.32 as of September 30, 2023, followed by a stabilization around 0.31 in December 2023. Subsequently, the ratio resumed its downward trajectory, reaching 0.10 by March 31, 2025, and further decreasing to 0.09 by December 31, 2025. This recent phase indicates a renewed focus on reducing debt or a significant increase in equity.

Throughout the entire period, stockholders’ equity consistently increased, contributing to the overall decline in the debt to equity ratio. Total debt experienced fluctuations, including a notable increase between June 30, 2023, and December 31, 2023, but ultimately decreased over the long term. The consistent reduction in the debt to equity ratio suggests a decreasing reliance on debt financing and an improved ability to meet long-term obligations.

The observed trend suggests a conservative financial strategy focused on maintaining a strong equity position. The company appears to be effectively managing its debt levels relative to its equity base, which is generally viewed favorably by investors and creditors.

The debt to equity ratio, including operating lease liability, demonstrates a consistent downward trend over the observed period, with some fluctuations. Initially, the ratio decreased from 0.58 in September 2020 to 0.33 in December 2022. A notable increase occurred in September 2023, rising to 0.39, before resuming a downward trajectory and reaching 0.15 in December 2025. This indicates a strengthening of the company’s financial position over time, with a decreasing reliance on debt financing relative to equity.

Initial Decline (Sep 2020 – Dec 2022)

From September 2020 through December 2022, the debt to equity ratio experienced a steady decline. This suggests a period of successful debt reduction, increased equity, or a combination of both. The ratio moved from 0.58 to 0.33, representing a significant improvement in the company’s solvency. The rate of decline was most pronounced between June 2021 and December 2022.

Temporary Increase (Sep 2023)

An increase in the ratio to 0.39 was observed in September 2023. This was likely due to an increase in total debt, as stockholders’ equity also increased during this period. The increase in debt could be attributed to strategic investments, acquisitions, or other financing activities.

Subsequent Decline (Dec 2023 – Dec 2025)

Following the increase in September 2023, the ratio resumed its downward trend, reaching 0.15 by December 2025. This indicates that the company effectively managed its debt levels relative to equity in the subsequent periods. The decline was particularly noticeable between March 2024 and December 2025.

Stockholders’ Equity Growth

Throughout the period, stockholders’ equity consistently increased, moving from US$123,392 million in September 2020 to US$390,875 million in December 2025. This growth in equity contributed significantly to the overall decrease in the debt to equity ratio. The growth rate of equity accelerated in the later part of the observed period.

Total Debt Fluctuation

Total debt, including operating lease liability, exhibited more fluctuation than stockholders’ equity. While generally decreasing from US$71,305 million in September 2020 to US$57,607 million in December 2025, there were temporary increases, most notably between September 2023 and December 2023. These fluctuations suggest active debt management and potential strategic borrowing.

The debt to capital ratio for the analyzed period demonstrates a consistent downward trend overall, indicating a decreasing reliance on debt financing relative to the company’s capital structure. Initial values show a ratio of 0.34 in September 2020, which gradually declined to 0.09 by March 2025.

Initial Decline (Sep 2020 – Dec 2022)

From September 2020 through December 2022, the debt to capital ratio experienced a steady decrease, moving from 0.34 to 0.21. This suggests a period of proactive debt management or increased equity contributions. The rate of decline was relatively consistent during this timeframe.

Fluctuation and Increase (Mar 2023 – Sep 2023)

A notable deviation from the established trend occurred between March 2023 and September 2023. The ratio increased from 0.20 to 0.24. This increase coincides with a substantial rise in total debt, from US$48,210 million to US$71,502 million, while total capital also increased, but at a slower pace. This suggests a deliberate decision to increase leverage, potentially for strategic investments or acquisitions.

Subsequent Decline (Dec 2023 – Dec 2025)

Following the increase in the ratio, a renewed downward trend was observed from December 2023 to December 2025. The ratio decreased from 0.24 to 0.09. This decline is attributable to a more significant reduction in total debt, from US$74,219 million to US$40,262 million, coupled with a continued increase in total capital. This indicates a subsequent focus on deleveraging and strengthening the capital base.

Magnitude of Change

The largest single-period decrease in the ratio occurred between June 2024 and March 2025, with a drop from 0.11 to 0.09. This suggests a particularly aggressive debt reduction strategy during that period. Conversely, the largest single-period increase occurred between March 2023 and June 2023, with a rise from 0.19 to 0.24.

In summary, the company demonstrated a generally conservative approach to debt financing over the analyzed period, with a long-term trend towards reduced leverage. The temporary increase in the ratio during 2023 appears to be an exception to this trend, followed by a return to deleveraging. The most recent values indicate a significantly lower debt to capital ratio compared to the beginning of the period.

The debt to capital ratio, including operating lease liability, demonstrates a consistent downward trend over the observed period, with some fluctuations. Initially, the ratio decreased from 0.37 in September 2020 to 0.23 in June 2023. A notable increase occurred in September 2023, rising to 0.28, followed by a further increase to 0.27 in December 2023. Subsequently, the ratio continued its decline, reaching 0.13 by December 2025.

Overall Trend

The overarching pattern indicates a strengthening of the company’s capital structure relative to its debt obligations. The ratio’s decline suggests a decreasing reliance on debt financing compared to equity and other capital sources. The recent decline from 0.27 to 0.13 is particularly pronounced.

Initial Decline (Sep 2020 – Jun 2023)

From September 2020 through June 2023, the debt to capital ratio experienced a steady decrease. This suggests a period of either debt reduction, capital increases, or a combination of both. The rate of decline was relatively consistent during this timeframe.

Temporary Increase (Sep 2023 – Dec 2023)

The increase in the ratio during the latter half of 2023 warrants attention. This could be attributed to new debt issuance, a decrease in capital, or a revaluation of operating lease liabilities. The magnitude of the increase, while noticeable, was not substantial enough to reverse the overall downward trend.

Accelerated Decline (Mar 2024 – Dec 2025)

Following December 2023, the ratio resumed its downward trajectory, with an accelerated rate of decline. This suggests a more aggressive approach to debt management or a significant increase in capital during this period. The ratio reached its lowest point of 0.13 in December 2025.

Capital and Debt Values

Total debt, including operating lease liability, fluctuated throughout the period, peaking at 88,374 US$ in millions in December 2023. Total capital consistently increased, reaching 448,482 US$ in millions by December 2025. The growth in capital appears to outpace the fluctuations in debt, contributing to the observed ratio decline.

The debt to assets ratio for the analyzed period demonstrates a consistent, generally decreasing trend, punctuated by a notable increase in later periods. Initially, the ratio exhibited a gradual decline from 0.21 in September 2020 to 0.13 by December 2022. This suggests a strengthening of the company’s financial position, with a decreasing reliance on debt financing relative to its asset base. However, a subsequent increase to 0.16 in September 2023 indicates a shift in capital structure, potentially due to increased borrowing or a decrease in asset value. The ratio then decreased again, reaching a low of 0.06 in December 2025.

Overall Trend

From September 2020 through December 2022, a clear downward trend in the debt to assets ratio is observed. This indicates a reduction in financial leverage and improved solvency. The period from September 2023 to December 2025 shows more volatility, with an initial increase followed by a substantial decline.

Initial Decline (Sep 2020 – Dec 2022)

The ratio decreased from 0.21 to 0.13 over this period, representing a 38.1% reduction. This suggests the company was effectively managing its debt levels, potentially through debt repayment or asset growth outpacing debt accumulation.

Mid-Term Fluctuation (Sep 2023 – Jun 2025)

An increase to 0.16 in September 2023 was followed by a significant decrease to 0.06 by December 2025. This fluctuation could be attributed to strategic financing decisions, acquisitions, or changes in asset valuation. The substantial decline in the latter part of this period suggests a renewed focus on reducing debt or a significant increase in asset value.

Recent Performance (Dec 2024 – Dec 2025)

The ratio moved from 0.08 in December 2024 to 0.06 in December 2025, continuing the downward trend observed in the latter half of the analyzed period. This indicates continued improvement in the company’s solvency position.

In conclusion, the company generally demonstrated a conservative approach to debt financing throughout most of the analyzed period. While a temporary increase in the debt to assets ratio was observed in September 2023, the overall trend indicates a strengthening financial position and decreasing reliance on debt.

The debt to assets ratio, including operating lease liability, demonstrates a generally decreasing trend over the observed period, with a notable increase in the latter half of the timeframe. Initially, the ratio declined from 0.24 in September 2020 to a low of 0.16 by December 2022. Subsequently, the ratio increased to 0.19 in September 2023, before declining again to 0.09 by December 2025.

Overall Trend

From September 2020 through December 2022, a consistent downward trend in the debt to assets ratio is evident. This suggests a decreasing reliance on debt financing relative to the company’s asset base. However, this trend reverses in the latter portion of the period, indicating a potential shift in financing strategies or increased investment funded by debt.

Initial Decline (Sep 2020 – Dec 2022)

The ratio decreased from 0.24 to 0.16 over this period, representing a 33.3% reduction. This suggests improved solvency as the proportion of assets financed by debt diminished. The consistent decline indicates a deliberate strategy to reduce leverage or strong operational performance enabling debt repayment.

Subsequent Fluctuation (Dec 2022 – Jun 2025)

Following the low of 0.16 in December 2022, the ratio experienced volatility. It rose to 0.19 by September 2023, potentially due to new debt issuance or a decrease in asset value. A subsequent decline to 0.09 by December 2025 suggests a renewed focus on deleveraging or significant asset growth outpacing debt accumulation. The increase in total debt in September 2023 is a key driver of the initial rise in the ratio.

Recent Performance (Sep 2024 – Dec 2025)

The most recent data points show a continued decline, with the ratio decreasing from 0.12 in September 2024 to 0.09 in December 2025. This suggests a strengthening financial position in the short term, with assets growing at a faster rate than debt. The ratio reached its lowest point in the observed period at the end of December 2025.

In summary, the company initially demonstrated a strengthening solvency position through a reduction in its debt to assets ratio. However, a recent increase followed by a subsequent decline indicates a more dynamic financial strategy, potentially influenced by investment opportunities or broader economic conditions. The latest figures suggest a return to a more conservative financial structure.

The financial leverage ratio for the period examined demonstrates a generally decreasing trend, indicating a reduction in the proportion of assets financed by equity over time. While fluctuations occur, the overall pattern suggests a strengthening of the company’s financial position with respect to debt reliance.

Overall Trend

The financial leverage ratio begins at 2.44 and generally declines to 1.70 over the observed period. This indicates a decreasing reliance on financial leverage. There is a slight increase in the most recent two periods, but the ratio remains significantly lower than the initial value.

Initial Period (Sep 30, 2020 – Dec 31, 2021)

From September 30, 2020, to December 31, 2021, the ratio experiences a consistent decrease from 2.44 to 2.13. This suggests a deliberate or responsive reduction in financial leverage during this timeframe, potentially through increased equity financing or debt repayment.

Period of Stability (Mar 31, 2022 – Jun 30, 2023)

Between March 31, 2022, and June 30, 2023, the ratio remains relatively stable, fluctuating between 2.12 and 2.02. This suggests a period of consolidation in the company’s capital structure, with no significant changes in the proportion of debt to equity.

Recent Trend (Sep 30, 2023 – Jun 30, 2025)

From September 30, 2023, to June 30, 2025, the ratio continues its downward trend, reaching 1.80. This indicates a continued effort to reduce financial leverage. The most recent two periods show a slight increase, from 1.75 to 1.80, but the ratio remains at a historically low level.

Asset and Equity Growth

Total assets increased substantially over the period, from US$301,001 million to US$619,003 million. Stockholders’ equity also experienced significant growth, rising from US$123,392 million to US$343,479 million. The growth in equity appears to be outpacing the growth in assets, contributing to the observed decline in the financial leverage ratio.

In conclusion, the observed trend in the financial leverage ratio suggests a strengthening financial position, characterized by a decreasing reliance on debt financing. The consistent growth in equity alongside asset expansion supports this interpretation.