Microsoft Corporation (MSFT)
Solvency ratios
| Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.10 | 0.13 | 0.15 | 0.20 | 0.23 |
| Debt-to-capital ratio | 0.17 | 0.22 | 0.26 | 0.33 | 0.39 |
| Debt-to-equity ratio | 0.20 | 0.28 | 0.35 | 0.50 | 0.65 |
| Financial leverage ratio | 2.00 | 2.19 | 2.35 | 2.55 | 2.80 |
The solvency ratios of Microsoft Corporation provide valuable insights into the company's long-term financial stability and its ability to meet its long-term obligations. Let's analyze the trends in the solvency ratios from 2019 to 2023.
Debt-to-assets ratio measures the proportion of the company's assets that are financed by debt. The trend shows a decline from 0.25 in 2019 to 0.11 in 2023, indicating that Microsoft has been reducing its reliance on debt to finance its assets, which is a positive sign for solvency.
The debt-to-capital ratio reflects the proportion of the company's capital that is financed through debt. Similar to the debt-to-assets ratio, the decline from 0.41 in 2019 to 0.19 in 2023 suggests that Microsoft has been reducing its debt relative to its total capital, which is favorable for long-term solvency.
The debt-to-equity ratio measures the proportion of the company's financing that comes from creditors versus shareholders. The decreasing trend from 0.71 in 2019 to 0.23 in 2023 indicates that Microsoft has been reducing its reliance on debt in comparison to equity, signifying an improvement in its solvency position.
The financial leverage ratio, which indicates the extent to which the company is using debt to finance its assets, has also shown a declining trend from 2.80 in 2019 to 2.00 in 2023. This suggests that Microsoft has been decreasing its reliance on debt for asset financing, which is a positive signal for long-term financial health.
Overall, the downward trends in these solvency ratios demonstrate Microsoft's efforts to strengthen its long-term financial position by reducing its reliance on debt financing and improving its capital structure. This indicates a positive trajectory for the company's solvency and ability to meet its long-term obligations.
Coverage ratios
| Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | |
|---|---|---|---|---|---|
| Interest coverage | 46.38 | 41.58 | 31.31 | 21.47 | 17.27 |
The interest coverage ratio measures a company's ability to meet its interest obligations using its earnings before interest and taxes (EBIT). A higher ratio indicates that the company is more capable of meeting its interest payments from its operating profits.
Looking at Microsoft Corporation's interest coverage ratio over the past five years, we observe a consistent and significant increase, reflecting a stronger ability to cover its interest expenses from its operating earnings. In 2019, the interest coverage ratio was 15.99, and this ratio has steadily increased to 44.98 in 2023.
This improvement signals that Microsoft has been generating substantial earnings relative to its interest obligations, which is a positive indicator for creditors and investors. The substantial increase in the ratio over the years demonstrates the company's growing ability to comfortably fulfill its interest payment obligations without straining its operational performance.
Overall, this trend implies that Microsoft has been effectively managing its debt and interest obligations, and its growing interest coverage ratio suggests a healthy financial position and stronger financial flexibility.