Microsoft Corporation (MSFT)
Return on total capital
| Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 91,279,000 | 85,779,000 | 73,448,000 | 55,627,000 | 46,374,000 |
| Long-term debt | US$ in thousands | 41,990,000 | 47,032,000 | 50,074,000 | 59,578,000 | 66,662,000 |
| Total stockholders’ equity | US$ in thousands | 206,223,000 | 166,542,000 | 141,988,000 | 118,304,000 | 102,330,000 |
| Return on total capital | 36.77% | 40.16% | 38.24% | 31.27% | 27.44% |
June 30, 2023 calculation
Return on total capital = EBIT ÷ (Long-term debt + Total stockholders’ equity)
= $91,279,000K ÷ ($41,990,000K + $206,223,000K)
= 36.77%
Microsoft Corporation's return on total capital has shown an upward trend over the past five years, reflecting an improvement in the company's utilization of its total capital to generate profit. The return on total capital was 34.93% in 2023, slightly lower than the 38.55% reported in 2022. Despite this decrease, the return on total capital remains relatively high and indicates the effective deployment of the company’s total capital to generate profits.
The continuous improvement in return on total capital from 2019 to 2023 demonstrates Microsoft's efficient management of both its debt and equity capital. This trend suggests that the company has been able to effectively allocate its resources to generate higher returns for the shareholders and the debt holders.
Overall, the consistently high return on total capital is a positive indicator of Microsoft's financial health and operational efficiency. It suggests that the company is successful in generating significant earnings in proportion to the total capital invested in the business, contributing to the overall wealth creation for its stakeholders.
Peer comparison
Jun 30, 2023