Microsoft Corp. (NASDAQ:MSFT)

Inventory Turnover

The inventory turnover ratio shows substantial fluctuations over the analyzed period. It started at 20.8 in 2019, dipped close to 16.74 by 2022, then surged abruptly to 59.48 in 2024, indicating much faster inventory movement in the latest year compared to previous years.

Receivables Turnover

The receivables turnover ratio remained relatively stable, with a slight decrease from 4.47 in 2020 to 4.31 in 2024, suggesting a consistent pace in collecting receivables over the years.

Payables Turnover

The payables turnover ratio declined moderately from 4.57 in 2019 to 3.37 in 2024, indicating the company is taking progressively longer to pay its suppliers, reflecting extended payment periods.

Working Capital Turnover

The working capital turnover ratio exhibited a general upward trend, moving from 1.19 in 2019 to a significant increase at 7.12 in 2024. This suggests an improving efficiency in utilizing working capital to generate sales, especially pronounced in the latest year.

Average Inventory Processing Period

The average inventory processing period fluctuated throughout the years, with an initial decline from 18 days in 2019 to 14 days in 2023, followed by a sharp decrease to 6 days in 2024. This aligns with the high inventory turnover in the final year, illustrating faster inventory handling.

Average Receivable Collection Period

This metric remained steady around the low to mid-80 days range over the years, slightly varying between 81 and 86 days, reinforcing stability in receivables management and customer payment behavior.

Operating Cycle

The operating cycle showed mild volatility, ranging from 91 to 104 days, with no clear trend but a slight decrease towards 2024, indicative of a marginally shorter time from inventory purchase to cash collection.

Average Payables Payment Period

The average payables payment period increased from 80 days in 2019 to over 100 days in subsequent years, with fluctuations around 100-111 days. This points to a lengthening in the time taken to pay suppliers, consistent with the declining payables turnover ratio.

Cash Conversion Cycle

The cash conversion cycle decreased steadily from 24 days in 2019 to a negative 17 days in 2024. Negative cash conversion cycles in recent years suggest the company is effectively managing its payables and receivables such that cash is collected before payments are due, enhancing liquidity.

Cost of Revenue

The cost of revenue exhibits a consistent upward trend over the six-year period, increasing from $42,910 million in 2019 to $74,114 million in 2024. This reflects a significant growth, suggesting higher expenses related to producing goods or services. The increase is steady each year, indicating expanding operations or rising input costs.

Inventories

Inventory levels show variability rather than a clear trend. Initially, inventories decreased slightly from $2,063 million in 2019 to $1,895 million in 2020, then rose to a peak of $3,742 million in 2022. After this peak, inventories dropped sharply to $1,246 million by 2024. This fluctuation might indicate changes in inventory management strategies, supply chain adjustments, or shifts in demand forecasting.

Inventory Turnover Ratio

The inventory turnover ratio fluctuated notably during the period. Starting at 20.8 in 2019, it increased to 24.32 in 2020, then declined steadily to 16.74 in 2022. Subsequently, the ratio jumped significantly to 59.48 by 2024, which is the highest value in the reviewed span. This sudden increase suggests a much faster turnover of inventories in the latest year, likely driven by the sharp decline in inventory levels combined with increased cost of revenue. Such a change implies enhanced efficiency in managing inventory or possibly a leaner inventory approach.

Revenue

The revenue demonstrates a consistent upward trend over the period from June 30, 2019 to June 30, 2024. Starting at 125,843 million USD in 2019, it steadily increased each year, reaching 245,122 million USD by 2024. This reflects a strong growth trajectory with a notable acceleration particularly between 2022 and 2024, where annual increases appear more pronounced.

Accounts Receivable, Net of Allowance for Doubtful Accounts

Accounts receivable also show a continuous increase through the years, rising from 29,524 million USD in 2019 to 56,924 million USD in 2024. The pace of growth is relatively consistent, with the balance nearly doubling over the five-year span. This upward movement corresponds with the rising revenue, suggesting increased sales on credit.

Receivables Turnover Ratio

The receivables turnover ratio remains relatively stable, fluctuating slightly between 4.26 and 4.48 over the years. It peaked near 4.48 in 2022 but has gradually declined to 4.31 in 2024. This stability combined with a slight downward tendency indicates that while accounts receivable are growing, the efficiency in collecting receivables is maintained close to prior levels without significant deterioration.

The financial data reveals several notable trends over the six-year period ending June 30, 2024.

Cost of Revenue

The cost of revenue displayed a continuous upward trajectory, beginning at $42,910 million in mid-2019 and reaching $74,114 million by mid-2024. This represents a significant increase, indicative of expanding operations or rising input costs over the timeframe analyzed.

Accounts Payable

Accounts payable also increased overall, starting at $9,382 million in 2019 and increasing to $21,996 million by 2024. There was a consistent growth trend, although the value dipped slightly between 2021 and 2023 before rising sharply again in 2024. This suggests the company’s obligations to suppliers and creditors rose substantially, but with some fluctuations likely due to payment management or operational cycles.

Payables Turnover Ratio

The payables turnover ratio experienced a declining trend from 4.57 in 2019 to 3.37 in 2024. The ratio showed the most notable decrease between 2019 and 2022, indicating the company was taking longer on average to pay its suppliers. Minor variations occurred in 2023 and 2024, but the overall lower ratio compared to 2019 suggests a lengthening in payment terms or delayed payments relative to purchasing activity.

In summary, the data highlights that the company's cost of revenue and accounts payable have increased markedly over the six-year period. Simultaneously, the decreasing payables turnover ratio points to a trend toward extended payment periods, which may reflect strategic working capital management amidst growing operational scale.

Working Capital

The working capital shows a generally declining trend over the observed periods. Starting at 106,132 million US dollars in mid-2019, it peaks slightly in mid-2020 at 109,605 million US dollars before consistently falling in the subsequent years. By mid-2024, the working capital sharply declines to 34,448 million US dollars, indicating a significant reduction in current assets relative to current liabilities.

Revenue

Revenue demonstrates a consistent upward trajectory throughout all periods. From 125,843 million US dollars in mid-2019, it increases steadily each year, reaching 245,122 million US dollars by mid-2024. This growth reflects strong business expansion or improved sales performance over the years.

Working Capital Turnover

The working capital turnover ratio shows a clear increasing trend across the time span. Initially, the ratio is 1.19 in mid-2019 and gradually rises year-over-year, reaching a value of 7.12 in mid-2024. This sharp increase indicates a significantly higher efficiency in utilizing working capital to generate revenue, particularly in the last year where turnover more than doubles compared to mid-2023. This change may be related to the substantial decrease in working capital combined with continuing revenue growth.

Inventory Turnover

The inventory turnover ratio demonstrates significant fluctuations over the analyzed period. Initially, there was an increase from 20.8 in mid-2019 to 24.32 in mid-2020, indicating improved efficiency in inventory management. This was followed by a decline to 19.81 in mid-2021 and further decreased to 16.74 by mid-2022, suggesting a reduction in how quickly inventory was sold or used. However, a sharp rise occurred thereafter, reaching 26.35 in mid-2023 and dramatically increasing to 59.48 in mid-2024, implying a notable acceleration in inventory turnover.

Average Inventory Processing Period

The average inventory processing period, which represents the number of days to process inventory, showed an inverse relationship with inventory turnover. The period shortened from 18 days in mid-2019 to 15 days in mid-2020, indicating faster inventory processing during that time. It then lengthened to 18 days in mid-2021 and further to 22 days by mid-2022, reflecting slower processing. Subsequently, this period sharply declined to 14 days in mid-2023, and further to only 6 days by mid-2024, corroborating the observation of increased inventory turnover efficiency in the later years.

Overall Trends and Insights

The data reveals cyclical patterns in inventory management efficiency, with deterioration from mid-2020 to mid-2022 followed by significant improvement thereafter. The extraordinary increase in inventory turnover and corresponding decrease in processing days in the most recent year suggest enhanced operational efficiency and potentially better demand forecasting or inventory control mechanisms. This positive trend may contribute to improved liquidity and reduced holding costs.

Receivables Turnover

The receivables turnover ratio shows a relatively stable trend over the six-year period, fluctuating slightly between 4.26 and 4.48. The ratio increased from 4.26 in 2019 to a peak of 4.48 in 2022, indicating a marginal improvement in the efficiency of collecting receivables during this period. However, there is a minor decline observed after 2022, with the ratio decreasing to 4.35 in 2023 and further to 4.31 in 2024. This suggests a slight softening in collection efficiency in the most recent years.

Average Receivable Collection Period

The average receivable collection period, expressed in days, generally correlates inversely with the receivables turnover ratio, as expected. It decreased from 86 days in 2019 to a low of 81 days in 2022, reflecting faster collection practices during this timeframe. After reaching this low point, the collection period increased to 84 days in 2023 and 85 days in 2024, indicating a slight lengthening in the time taken to collect receivables in the last two years.

Overall Insight

Over the six-year span, the data illustrates a pattern where efficiency in receivables management improved gradually until 2022 but slightly weakened after that. The fluctuations in receivables turnover and average collection period are relatively modest, suggesting consistent management of receivables with minor variations possibly due to changing market conditions, credit policies, or customer payment behaviors.

Average Inventory Processing Period

The average inventory processing period shows a fluctuating but overall declining trend over the six-year span. Starting at 18 days in June 2019, it dropped to 15 days in 2020, rose again to 18 days in 2021, increased further to 22 days in 2022, then sharply decreased to 14 days in 2023 and reached a low of 6 days in 2024. This indicates an improvement in inventory management efficiency particularly notable in the last two years.

Average Receivable Collection Period

The average receivable collection period remained relatively stable throughout the period, fluctuating narrowly between 81 and 86 days. It began at 86 days in 2019, declined slightly to 82 days in 2020, followed by minor fluctuations around the low 80s, ending at 85 days in 2024. This consistency suggests a steady credit policy and collection efficiency without significant changes.

Operating Cycle

The operating cycle, representing the total time from inventory acquisition to cash collection, exhibits a moderate downward trend. Starting at 104 days in 2019, it decreased to 97 days in 2020, rose slightly to 101 days in 2021, then to 103 days in 2022, before declining more noticeably to 98 days in 2023 and further to 91 days in 2024. The reduction in the operating cycle, especially in recent years, reflects improved operational efficiency, likely driven by the substantial decrease in the inventory processing period while receivable collection remained stable.

Payables Turnover

The payables turnover ratio shows a general downward trend over the observed periods, starting at 4.57 in June 2019 and declining to 3.37 by June 2024. This indicates a decrease in the frequency with which the company settles its payables within a year. The ratio experienced its lowest point in June 2022 at 3.30, followed by a slight increase in June 2023 before decreasing again in June 2024.

Average Payables Payment Period

The average payables payment period exhibits an upward trend from 80 days in June 2019 to 108 days in June 2024. This suggests that the company is taking progressively longer to pay its suppliers, with the payment period peaking at 111 days in June 2022. Although there was a slight reduction to 100 days in June 2023, the period increased again in June 2024.

Overall Analysis

The inverse relationship between the payables turnover ratio and the average payables payment period is evident. As the number of days to pay suppliers has increased, the turnover ratio has correspondingly decreased. This trend may reflect strategic decisions to extend payment terms or changes in working capital management practices. The extended payment periods could impact supplier relationships and the company's liquidity position in subsequent periods.

The financial data reveals several trends related to the company's working capital management over the observed periods from June 30, 2019, to June 30, 2024.

Average Inventory Processing Period

This metric exhibits variability with an overall declining trend by the end of the period. Initially fluctuating between 18 and 22 days, it drops sharply to 6 days in the final year. This significant reduction indicates improved efficiency in managing inventory, suggesting faster turnover and potentially better inventory control.

Average Receivable Collection Period

The receivable collection period remains relatively stable, fluctuating narrowly between 81 and 86 days throughout the entire timeframe. This steadiness implies consistent credit policies and collection processes, with no significant deterioration or improvement in the ability to collect payments from customers.

Average Payables Payment Period

The payables payment period shows a general upward trend from 80 days in 2019 to a peak of 111 days in 2022, followed by a slight decrease and then an increase again toward 108 days in 2024. This pattern indicates that the company has progressively extended the time taken to pay its suppliers over the years, potentially optimizing cash outflows or leveraging better payment terms.

Cash Conversion Cycle

The cash conversion cycle (CCC) displays a notable improvement, moving from a positive 24 days in 2019 to negative values in subsequent years, reaching -17 days by 2024. A negative CCC suggests that the company collects cash from customers faster than it pays its suppliers, which enhances liquidity and reduces the need for external financing. The increasing negativity of the CCC over time reflects strengthened working capital efficiency.

Overall, the data indicates enhanced efficiency in inventory management and working capital utilization, stable receivables management, and a strategic extension in payable periods, collectively contributing to a shortened and negative cash conversion cycle. This suggests that the company is effectively managing its cash flow and operational cycle to improve liquidity and financial flexibility.