Microsoft Corporation (MSFT)

Cash conversion cycle

		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
Cash conversion cycle	days	-20.75	-17.43	-2.56	-7.41	-4.93

June 30, 2025 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 3.90 + 90.57 – 115.21
= -20.75

The data provided illustrates the evolution of Microsoft Corporation’s cash conversion cycle (CCC) over a specified five-year period, from June 30, 2021, through June 30, 2025. The CCC values are presented in days and are consistently negative throughout this timeframe, indicating that Microsoft typically collects cash from its sales and disburses payments to suppliers after the receipt of cash from customers.

Initially, on June 30, 2021, the CCC was recorded at -4.93 days. Over the subsequent year, this negative value increased in magnitude, reaching -7.41 days by June 30, 2022. By June 30, 2023, the cycle narrowed slightly to -2.56 days, suggesting a partial unwinding or shortening of the cycle but remaining negative. The trend then accelerated notably in the following years, with the CCC reaching -17.43 days on June 30, 2024, and further extending to -20.75 days by June 30, 2025.

This consistent negative CCC indicates that Microsoft maintains a cash conversion cycle where the company’s cash inflows from customers precede or occur almost concurrently with cash outflows to suppliers. The increasing negative values over time suggest an improvement in cash flow efficiency, with Microsoft increasingly able to generate cash from its sales before settling its obligations to suppliers. A more negative CCC can reflect stronger operational cash flow management, possibly due to optimized receivables collection, efficient inventory management, or favorable payment terms negotiated with suppliers.

Overall, the trend demonstrates a strategic shift toward higher liquidity and operational efficiency, allowing the company to operate with a cushion of positive timing between cash inflows and outflows. This progression enhances the company's liquidity position, reduces reliance on external financing, and potentially allows for increased reinvestment or shareholder returns.