Microsoft Corporation (MSFT)
Solvency ratios
| Jun 30, 2025 | Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Debt-to-capital ratio | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Debt-to-equity ratio | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Financial leverage ratio | 1.80 | 1.91 | 2.00 | 2.19 | 2.35 |
The analysis of Microsoft Corporation’s solvency ratios over the period from June 30, 2021, through June 30, 2025, indicates a consistent pattern of minimal reliance on debt financing. Specifically, the debt-to-assets ratio remains at 0.00 across all periods, reflecting that the company's total assets are financed entirely through equity, with no reported debt obligations impacting the asset base. Similarly, the debt-to-capital ratio and debt-to-equity ratio are also zero throughout the observed timeframe, further reinforcing the absence of leverage stemming from debt financing.
In contrast, the financial leverage ratio demonstrates a declining trend over the same period, decreasing from 2.35 in June 2021 to 1.80 in June 2025. This ratio, which measures the extent to which a company uses debt to finance its assets relative to equity, suggests that while Microsoft has historically employed some degree of leverage, its reliance on debt has diminished over time. The decreasing leverage ratio signifies an increasing equity cushion and a strengthening of the company's financial stability and solvent position.
Overall, these ratios collectively portray Microsoft as a highly solvent entity with negligible or nonexistent leverage, emphasizing a conservative capital structure predominantly financed through equity. The reduction in the financial leverage ratio over the analyzed period further posits an ongoing strategic move toward lower financial risk and enhanced long-term solvency.
Coverage ratios
| Jun 30, 2025 | Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | |
|---|---|---|---|---|---|
| Interest coverage | 52.84 | 37.72 | 46.38 | 41.58 | 31.31 |
The interest coverage ratios for Microsoft Corporation over the specified periods indicate a generally strong capacity to meet interest obligations through operating earnings. As of June 30, 2021, the ratio stood at 31.31, reflecting a high level of coverage, suggesting that operating income was more than sufficient to cover interest expenses by a wide margin. This figure increased significantly in the subsequent year, reaching 41.58 by June 30, 2022, which indicates an improvement in the company's ability to generate earnings relative to its interest obligations. The upward trend continued through June 30, 2023, with the ratio increasing further to 46.38, a sign of robust earnings and strong financial health.
While there was a decline observed in the interest coverage ratio for June 30, 2024, where it decreased to 37.72, the ratio remained at a comfortably high level, signaling that the company's earnings continued to be well above its interest costs, albeit with a slight reduction in coverage margin. This could suggest some temporary or strategic factors impacting operating earnings or interest expenses during that period.
By June 30, 2025, the ratio surged again to 52.84, reflecting an even stronger ability to service interest obligations in that year. Overall, the trend from 2021 to 2025 demonstrates Microsoft's consistent capacity to cover interest expenses multiple times over, with ratios remaining well above common thresholds for concern, thus indicating a solid financial position and prudent management of its leverage and earnings power.