Microsoft Corporation (MSFT)

Liquidity ratios

Dec 31, 2024 Sep 30, 2024 Mar 31, 2024 Dec 31, 2023 Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022 Dec 31, 2021 Sep 30, 2021 Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 Dec 31, 2019
Current ratio 1.35 1.30 1.24 1.22 1.66 1.77 1.91 1.93 1.84 1.78 1.99 2.25 2.16 2.08 2.29 2.58 2.53 2.52 2.90 2.80
Quick ratio 1.10 1.06 1.05 1.02 1.45 1.54 1.66 1.66 1.59 1.58 1.79 2.06 1.97 1.91 2.11 2.37 2.31 2.33 2.73 2.65
Cash ratio 0.66 0.68 0.68 0.67 1.15 1.07 1.22 1.22 1.23 1.10 1.35 1.62 1.62 1.47 1.74 1.96 1.97 1.89 2.34 2.25

Microsoft Corporation's liquidity ratios show a mixed performance over the past few years.

The current ratio, which measures the company's ability to cover its short-term obligations with its current assets, has seen a declining trend. It decreased from 2.80 in December 2019 to 1.22 in December 2023, before slightly recovering to 1.35 in December 2024. This downward trend suggests that Microsoft's ability to meet its current liabilities with its current assets has weakened over time.

The quick ratio, a more stringent measure of liquidity as it excludes inventory from current assets, also shows a decreasing pattern. It went down from 2.65 in December 2019 to 1.02 in December 2023, before rising slightly to 1.10 in December 2024. This indicates that Microsoft may have had difficulties covering its short-term obligations with its most liquid assets.

The cash ratio, which is the strictest liquidity ratio, declined from 2.25 in December 2019 to 0.67 in December 2023, and remained relatively stable at 0.66 in December 2024. This suggests that Microsoft's ability to pay off its current liabilities with its cash and cash equivalents has weakened significantly over the years.

In conclusion, Microsoft's liquidity ratios have shown a deteriorating trend, indicating potential challenges in meeting its short-term obligations with its current assets and highly liquid resources. This may necessitate a closer examination of the company's working capital management and cash flow position to ensure adequate liquidity levels in the future.

See also:

Microsoft Corporation Liquidity Ratios (Quarterly Data)

Additional liquidity measure

Dec 31, 2024 Sep 30, 2024 Mar 31, 2024 Dec 31, 2023 Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022 Dec 31, 2021 Sep 30, 2021 Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 Dec 31, 2019
Cash conversion cycle days 2.55 -2.91 12.21 13.16 4.06 28.28 22.36 20.15 11.21 24.58 12.65 17.19 9.04 28.61 10.32 15.12 11.60 29.75 21.04 27.80

The cash conversion cycle of Microsoft Corporation has shown fluctuations over the reporting periods. It measures the number of days it takes for the company to convert its investments in inventory and other resources into cash inflows from sales.

On December 31, 2019, the cash conversion cycle was 27.80 days, indicating that Microsoft took around 28 days to convert its investments into cash. The cycle decreased to 21.04 days by March 31, 2020, before increasing to 29.75 days by June 30, 2020. The cycle then significantly improved to 11.60 days on September 30, 2020.

Throughout the subsequent quarters, Microsoft effectively managed its working capital, with the cash conversion cycle ranging from a low of -2.91 days on September 30, 2024, indicating a negative cycle where Microsoft generated cash before paying its suppliers, to a high of 28.61 days on June 30, 2021. This suggests that Microsoft efficiently turned its investments into cash during this period.

However, a negative cash conversion cycle might indicate potential issues with the company's cash management practices. It is important to monitor the cash conversion cycle consistently to ensure the company is effectively utilizing its working capital and managing its cash flows efficiently.