Microsoft Corporation (MSFT)
Liquidity ratios
| Jun 30, 2025 | Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | |
|---|---|---|---|---|---|
| Current ratio | 1.35 | 1.27 | 1.77 | 1.78 | 2.08 |
| Quick ratio | 1.16 | 1.06 | 1.54 | 1.57 | 1.90 |
| Cash ratio | 0.67 | 0.60 | 1.07 | 1.10 | 1.47 |
The analysis of Microsoft's liquidity ratios over the specified periods indicates a declining trend in the company's short-term liquidity position from June 30, 2021, through June 30, 2024, with a slight recovery observed in June 30, 2025.
The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, decreased from 2.08 in 2021 to 1.78 in 2022, further declining to 1.77 in 2023. A significant reduction was observed in 2024, with the ratio dropping to 1.27, before marginally increasing to 1.35 in 2025. Despite this downward trend, the current ratio consistently remained above 1.0, indicating that current assets generally exceeded current liabilities, although the narrowing margins suggest a tightening liquidity cushion.
Similarly, the quick ratio, which excludes inventories from current assets to assess immediate liquidity, fell from 1.90 in 2021 to 1.57 in 2022 and to 1.54 in 2023. The decrease continued more steeply in 2024, reaching 1.06, and showed a slight improvement to 1.16 in 2025. The declining quick ratio further emphasizes the reducing capacity for immediate liquidity, raising potential concerns about the company's ability to meet short-term obligations without relying on inventory sales.
The cash ratio, which considers only cash and cash equivalents relative to current liabilities, reflected a consistent decline from 1.47 in 2021 to 1.10 in 2022, and down to 1.07 in 2023. The ratio experienced a notable decrease in 2024 to 0.60, indicating a significant reduction in cash holdings available for immediate liabilities. A modest recovery was observed in 2025, with the ratio increasing slightly to 0.67. The cash ratio consistently remained below 1.0 after 2021, suggesting a decreasing cash cushion to cover current liabilities solely with liquid assets.
Overall, the data indicates that Microsoft's liquidity position has been gradually weakening over the analyzed period, particularly in terms of cash and immediate liquidity measures. While the ratios still generally indicate that current assets exceed current liabilities, the downward trends reflect increasing pressures on the company's capacity to meet short-term obligations promptly without additional liquidity.
See also:
Additional liquidity measure
| Jun 30, 2025 | Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | -20.75 | -17.43 | -2.56 | -7.41 | -4.93 |
The data indicates that Microsoft Corporation's cash conversion cycle (CCC) has exhibited notable fluctuations over the specified period from June 30, 2021, to June 30, 2025.
Initially, as of June 30, 2021, the company maintained a slightly negative CCC at -4.93 days. This negative value suggests that Microsoft was effectively able to convert its investments in inventory and accounts receivable into cash before or concurrent with the settlement of its accounts payable, reflecting efficient working capital management. The negative cycle became more pronounced by June 30, 2022, reaching -7.41 days, indicating an improvement in operational efficiency or supply chain management.
However, by June 30, 2023, the CCC decreased in negativity to -2.56 days, implying a slight erosion in cash conversion efficiency. Nevertheless, the trend reversed substantially afterward, as evidenced by the data for June 30, 2024, where the CCC widened significantly to -17.43 days, and further extended to -20.75 days by June 30, 2025. This extension indicates that Microsoft is, on average, able to generate cash from its operations considerably earlier relative to its outgoing payments, thereby enhancing liquidity and working capital position.
Overall, the persistent negative and increasingly negative CCC figures over the five-year span reflect a strategic operational stance where Microsoft benefits from a robust working capital cycle, with the company managing to receive payments from customers well before settling its own obligations, and improving this efficiency over time. The sharpening of the negative cycle suggests ongoing improvements in receivables collection, inventory management, or payables deferral policies, which collectively serve to bolster the company's short-term liquidity profile.