Microsoft Corporation (MSFT)

Short-term

Turnover ratios

Inventory Turnover Ratio Analysis:

- Microsoft's inventory turnover ratio has fluctuated over the past few years, ranging from a low of 22.49 (June 30, 2022) to a high of 132.02 (December 31, 2024).
- A higher inventory turnover ratio indicates that the company is selling its inventory more quickly, which can be a positive sign of efficient inventory management.

Receivables Turnover Ratio Analysis:

- Microsoft's receivables turnover ratio has shown variations, with a low of 4.25 (June 30, 2021) and a high of 6.28 (September 30, 2022).
- A higher receivables turnover ratio suggests that the company is collecting its receivables more efficiently.

Payables Turnover Ratio Analysis:

- The payables turnover ratio for Microsoft has ranged from 4.90 (September 30, 2024) to 7.82 (December 31, 2019).
- A higher payables turnover ratio indicates that the company is taking fewer days to pay its suppliers, which can be advantageous in managing its working capital effectively.

Working Capital Turnover Ratio Analysis:

- Microsoft's working capital turnover ratio has seen significant fluctuations, with a low of 1.22 (March 31, 2020) and a high of 8.53 (December 31, 2023).
- A high working capital turnover ratio signifies that the company is generating sales efficiently with the working capital available.

Overall, analyzing these activity ratios provides insight into Microsoft's operational efficiency and how well it is managing its inventory, receivables, payables, and working capital.

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Average number of days

Activity ratios provide insights into how efficiently a company manages its assets and liabilities to generate sales. Let's analyze the activity ratios of Microsoft Corporation based on the provided data:

1. Days of Inventory on Hand (DOH):
- Microsoft's DOH ranged from 2.76 days to 16.23 days over the observed period.
- The company effectively reduced its inventory days by almost 14 days from December 31, 2023, to March 31, 2024, indicating efficient inventory management.
- A decreasing DOH suggests that Microsoft is selling goods more quickly and managing inventory levels effectively.

2. Days of Sales Outstanding (DSO):
- Microsoft's DSO ranged between 58.14 days and 85.80 days from June 30, 2022, to June 30, 2021.
- The company experienced fluctuations in DSO, possibly due to changes in sales terms or collection efficiency.
- A lower DSO indicates that Microsoft is collecting receivables faster, which is positive for cash flow and working capital management.

3. Number of Days of Payables:
- Microsoft's payables days ranged from 46.68 days to 74.47 days from December 31, 2019, to September 30, 2024.
- There was a notable increase in payables days from June 30, 2022, to March 31, 2023, followed by a decrease thereafter.
- A longer payables period can indicate favorable payment terms with suppliers, but it could also suggest a strained relationship.

In summary, Microsoft Corporation demonstrated efficient inventory management and receivable collection over the analyzed period, with some fluctuations in payables days. Monitoring and optimizing these activity ratios are crucial for assessing operational efficiency and cash flow effectiveness.

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See also:

Microsoft Corporation Short-term (Operating) Activity Ratios (Quarterly Data)

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Long-term

The fixed asset turnover ratio of Microsoft Corporation has shown a decreasing trend over the years, indicating that the company is generating fewer revenues relative to its investment in fixed assets. This trend suggests that Microsoft may not be efficiently utilizing its fixed assets to generate sales.

On the other hand, the total asset turnover ratio has been relatively stable, fluctuating slightly over the years. This ratio measures how well a company is utilizing its total assets to generate revenue. A stable total asset turnover ratio could indicate that Microsoft is effectively utilizing its total assets to generate sales.

In summary, while the fixed asset turnover ratio for Microsoft has been decreasing, the total asset turnover ratio has remained relatively stable. This implies that Microsoft may need to focus on improving the efficiency of its fixed asset utilization to drive higher revenues in the long term.

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See also:

Microsoft Corporation Long-term (Investment) Activity Ratios (Quarterly Data)