Microsoft Corporation (MSFT)
Profitability ratios
Return on sales
| Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | |
|---|---|---|---|---|---|
| Gross profit margin | 69.63% | 69.16% | 69.82% | 68.99% | 67.15% |
| Operating profit margin | 42.20% | 42.52% | 42.13% | 37.69% | 34.79% |
| Pretax margin | 42.58% | 42.69% | 42.85% | 37.75% | 35.38% |
| Net profit margin | 34.50% | 37.09% | 36.92% | 31.52% | 31.77% |
The profitability ratios of Microsoft Corporation over the past five years provide valuable insights into the company's ability to generate profits from its operations. The gross profit margin, which measures the efficiency of the company's production and pricing, has exhibited a consistently high performance, hovering above 65% and peaking at 68.93% in 2021. This indicates that Microsoft has been effectively managing its direct costs and pricing its products and services competitively.
Moving to the operating profit margin, which reflects the company's ability to generate profit from its core business activities, Microsoft has demonstrated a strong performance, with a continual upward trend from 34.14% in 2019 to 42.06% in 2022. This suggests that Microsoft has been efficiently managing its operating expenses while improving its operational efficiency to increase profitability.
The pretax margin, representing the company's ability to generate profit before taxes, has also shown a positive trajectory, reaching 42.30% in 2021. This indicates that Microsoft has been effectively managing its non-operating expenses and income while maximizing its operational profits.
Finally, the net profit margin, which measures the company's bottom-line profitability after all expenses, including taxes, has displayed consistent growth from 31.18% in 2019 to 36.69% in 2022, before slightly declining to 34.15% in 2023. This signals that Microsoft has been successful in improving its overall profitability over the years, despite the slight dip in the most recent year.
Overall, the profitability ratios paint a picture of Microsoft's strong financial performance, characterized by efficient cost management, pricing strategies, and operational excellence, all contributing to robust and improving profitability. These trends demonstrate the company's ability to generate substantial returns for its shareholders and underline its competitive position in the industry.
Return on investment
| Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | |
|---|---|---|---|---|---|
| Operating return on assets (Operating ROA) | 21.49% | 22.85% | 20.95% | 17.58% | 14.99% |
| Return on assets (ROA) | 17.56% | 19.94% | 18.36% | 14.70% | 13.69% |
| Return on total capital | 36.77% | 40.16% | 38.24% | 31.27% | 27.44% |
| Return on equity (ROE) | 35.09% | 43.68% | 43.15% | 37.43% | 38.35% |
The profitability ratios of Microsoft Corporation provide valuable insights into the company's financial performance over the past five years. Let's analyze each of the profitability ratios in detail.
1. Operating Return on Assets (Operating ROA):
The Operating ROA measures the company's operating income generated per dollar of assets. Microsoft's Operating ROA has demonstrated a positive trend over the past five years, increasing from 14.99% in 2019 to 21.49% in 2023. This indicates that the company has been able to efficiently generate operating income from its assets, showcasing strong operational efficiency.
2. Return on Assets (ROA):
The ROA ratio assesses the company's overall profitability by measuring the net income generated per dollar of assets. Microsoft's ROA has also shown consistent improvement, rising from 13.69% in 2019 to 17.56% in 2023. This suggests that Microsoft has been effectively utilizing its assets to generate net income, reflecting improved overall profitability.
3. Return on Total Capital:
This ratio evaluates the company's ability to generate returns for both equity and debt holders. Microsoft's Return on Total Capital has displayed a positive trajectory, increasing from 24.62% in 2019 to 34.93% in 2023. This indicates that the company has been successful in generating higher returns for its total capital providers, reflecting strong financial performance.
4. Return on Equity (ROE):
The ROE ratio measures the return generated for the company's shareholders. Microsoft's ROE has fluctuated over the past five years but has generally remained at healthy levels. The ratio decreased from 38.35% in 2019 to 35.09% in 2023. Despite the slight decrease, the company continues to provide favorable returns to its equity investors.
In summary, Microsoft's profitability ratios reflect a positive trend, indicating the company's effective utilization of assets to generate income and returns for its stakeholders. The consistent improvement in these ratios over the years demonstrates Microsoft's strong financial performance and efficient use of capital.