Microsoft Corporation (MSFT)

Financial leverage ratio

		Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019
Total assets	US$ in thousands	411,976,000	364,840,000	333,779,000	301,311,000	286,556,000
Total stockholders’ equity	US$ in thousands	206,223,000	166,542,000	141,988,000	118,304,000	102,330,000
Financial leverage ratio		2.00	2.19	2.35	2.55	2.80

June 30, 2023 calculation

Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $411,976,000K ÷ $206,223,000K
= 2.00

The financial leverage ratio, also known as the debt-to-equity ratio, indicates the extent to which a company relies on debt to finance its operations. A lower ratio suggests less reliance on debt, while a higher ratio indicates a higher level of financial leverage.

In the case of Microsoft Corporation, the financial leverage ratio has been declining over the past five years, which may indicate a reduction in its reliance on debt to finance its operations.

In 2019, the ratio stood at 2.80, indicating that for every dollar of equity, the company had $2.80 of debt. Over the subsequent years, the ratio has steadily decreased to 2.00 as of June 30, 2023.

This trend suggests that Microsoft has been reducing its debt relative to its equity, which could signify a more conservative approach to financing its operations. A lower financial leverage ratio generally indicates a lower financial risk and greater financial stability, as the company is relying less on borrowed money to support its business activities.

It's important to note that while a declining leverage ratio can be a positive sign, it's also essential to consider the overall financial health and performance of the company in conjunction with other financial ratios and metrics. This can provide a more comprehensive understanding of Microsoft Corporation's financial position and its ability to manage its capital structure effectively.