Microsoft Corporation (MSFT)

Activity ratios

Short-term

Turnover ratios

	Jun 30, 2025	Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021
Inventory turnover	93.64	59.48	26.35	16.74	19.81
Receivables turnover	4.03	4.31	4.35	4.48	4.42
Payables turnover	3.17	3.37	3.64	3.30	3.44
Working capital turnover	5.64	7.12	2.65	2.66	1.76

The activity ratios of Microsoft Corporation over the period from June 30, 2021, to June 30, 2025, reveal notable trends in inventory management, receivables collection, payables payments, and overall working capital efficiency.

Inventory Turnover:
The inventory turnover ratio exhibits significant fluctuation over the period. It decreased from 19.81 times in 2021 to 16.74 times in 2022, indicating a slight slowdown in inventory sales or increased inventory holding during that year. Subsequently, there is a marked increase to 26.35 times in 2023, suggesting an improvement in inventory management and a faster turnover rate. The ratios then escalate sharply to 59.48 in 2024 and further to 93.64 in 2025, reflecting extraordinary efficiencies in inventory utilization or possibly changes in product mix or supply chain practices that reduce inventory levels relative to sales.

Receivables Turnover:
The receivables turnover ratio remains relatively stable, with minor fluctuations around the 4.3 to 4.5 range. It slightly increased from 4.42 in 2021 to 4.48 in 2022, then decreased marginally to 4.35 in 2023, and further to 4.31 in 2024. The ratio dips to 4.03 in 2025. These figures indicate a consistent pattern in receivables collection, with only a slight elongation in the collection period in recent years, potentially reflecting minor changes in credit terms or customer payment behaviors.

Payables Turnover:
The payables turnover ratio shows modest variation. It rose from 3.44 in 2021 to 3.64 in 2023, suggesting the company was paying its suppliers somewhat more quickly during this period. However, the ratio declines slightly back to 3.37 in 2024 and down to 3.17 in 2025, indicating a slight lengthening in the period taken to settle payables, which could be a strategic decision to optimize cash flow.

Working Capital Turnover:
The working capital turnover ratio demonstrates considerable growth over the analyzed timeframe. Starting at 1.76 in 2021, it progresses to 2.66 in 2022 and stabilizes around 2.65 in 2023. A dramatic increase occurs in 2024 to 7.12, suggesting a significant improvement in utilizing working capital to generate sales or operational efficiency gains. Although it decreases to 5.64 in 2025, it remains substantially higher than prior years, pointing toward continued enhanced asset utilization.

Summary:
Overall, Microsoft exhibits a pattern of increasing inventory turnover efficiency, especially notable from 2023 onwards, reaching very high levels in 2024 and 2025. Receivables collection remains stable with slight elongation, potentially reflecting a minor shift in customer credit terms. Payables management shows a trend towards slightly delayed payments, likely optimizing cash flow without severely impacting supplier relations. The significant surge in working capital turnover indicates improved operational efficiency, successfully translating asset investments into higher sales or profits over time.

Average number of days

		Jun 30, 2025	Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021
Days of inventory on hand (DOH)	days	3.90	6.14	13.85	21.80	18.42
Days of sales outstanding (DSO)	days	90.57	84.76	83.86	81.48	82.61
Number of days of payables	days	115.21	108.33	100.28	110.69	105.96

The activity ratios for Microsoft Corporation, including Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Days of Payables (DOP), exhibit notable trends over the five-year period from June 30, 2021, to June 30, 2025.

Days of Inventory on Hand (DOH):
The DOH ratio experienced significant fluctuations over the period. It peaked at approximately 21.80 days in June 2022, indicating that inventory was held for nearly three weeks. Subsequently, the ratio decreased markedly to 13.85 days in June 2023 and further declined sharply to 6.14 days in June 2024. By June 2025, this ratio further reduced to approximately 3.90 days. The declining trend suggests increasingly efficient inventory management, leading to quicker inventory turnover and reduced holding periods.

Days of Sales Outstanding (DSO):
The DSO figures remained relatively stable across the observed years, fluctuating modestly between 81.48 days and 90.57 days. Notably, there was a slight increase in DSO from about 82.61 days in June 2021 to 83.86 days in June 2023, followed by a gradual rise to 84.76 days in June 2024, and reaching 90.57 days by June 2025. This upward trend indicates a lengthening of the collection period, suggesting that it has taken progressively longer to convert receivables into cash.

Number of Days of Payables (DOP):
The DOP ratio shows a general increasing trend over the period. It moved from approximately 105.96 days in June 2021 to about 110.69 days in June 2022, then varied slightly but remained relatively high. After a slight dip to 100.28 days in June 2023, the ratio increased again to 108.33 days in June 2024 and reached 115.21 days in June 2025. The extension of payables duration suggests that the company has been increasingly delaying payment obligations over time.

Overall Summary:
The activity ratios indicate that Microsoft has enhanced its inventory turnover efficiency over the years, as evidenced by the substantial decrease in DOH. However, the steady lengthening of DSO and DOP indicates a potential shift in the cash conversion cycle, with customers taking longer to pay and the company extending payment terms to suppliers. This combination of activities could imply strategic changes in working capital management, possibly aiming to optimize cash flow and liquidity, but may also signal increased credit risk or shifts in supplier and customer terms.

Long-term

	Jun 30, 2025	Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021
Fixed asset turnover	1.23	1.59	1.93	2.26	2.37
Total asset turnover	0.46	0.48	0.51	0.54	0.50

The analysis of Microsoft Corporation's long-term activity ratios over the period from June 30, 2021, to June 30, 2025, reveals notable trends in asset utilization efficiency. The Fixed Asset Turnover ratio, which measures how effectively the company utilizes its fixed assets to generate sales, has shown a consistent decline. It decreased from 2.37 in 2021 to 1.23 in 2025, indicating a relative reduction in sales generated per dollar of fixed assets over this period.

Similarly, the Total Asset Turnover ratio has remained relatively stable but exhibited a slight downward trend, declining from 0.50 in 2021 to 0.46 in 2025. This suggests a gradual decrease in the overall efficiency with which Microsoft utilizes its total assets to produce revenue.

The decline in both ratios over the analyzed period may reflect strategic shifts such as increased investments in intangible assets, research and development, or other non-fixed assets that are not captured by fixed asset turnover but influence overall asset efficiency. It may also indicate slower asset utilization growth amidst expanding assets or changes in revenue generation dynamics.

Overall, the trend points to diminishing asset turnover efficiency, emphasizing the need for ongoing evaluation of asset management strategies to maintain optimal utilization in the context of Microsoft's evolving asset base.