Microsoft Financial Statements and Financial Ratios

Microsoft Financial Statements and Financial Ratios Analyzed

A Beginner's Guide to Microsoft Financial Analysis - 2021

$5.99
  • Included Easy to download PDF File.
  • Included Easy to use format.
  • Included Summarized Income Statements and Balance Sheets for the last 5 years..
  • Included Popular financial ratios for the last 5 years included... with calculations and formulas!
  • Included Expert tips to help with financial statements analysis.
  • Included Expert tips to help with financial ratios analysis.
  • NOT Included-Identify and discuss financial trends for the company..
  • NOT Included-Expert financial analysis done by Paul Borosky, MBA.
  • NOT Included- Analyst "Letter Grades" for the company's ratios.
  • NOT Included-Free Annual Reports Download for (5 Years)

Microsoft Financial Report by Paul Borosky, MBA. - 2020

$9.99
  • Included Easy to download PDF File.
  • Included Easy to use format.
  • Included Summarized Income Statements and Balance Sheets for the last 5 years..
  • Included Popular financial ratios for the last 5 years included... with calculations and formulas!
  • Included Expert tips to help with financial statements analysis.
  • Included Expert tips to help with financial ratios analysis.
  • Included Identify and discuss financial trends for the company.
  • Included Expert financial analysis done by Paul Borosky MBA.
  • Included Analyst "Letter Grades" for the company's ratios (Starting in 2021).
  • Included Free Annual Reports Download for the company (5 years).

Hey All,

Thanks for visiting my Microsoft Financial Report page. On this page, you will be able to find preliminary information about Microsoft's current financial performance as well as some historical track records and trends. 

For a more detailed examination of Microsoft financial performance, I offer two reports, which are "A Beginner's Guide to Microsoft Financial Analysis" and "Microsoft  Financial Report by Paul Borosky, MBA."  Both reports are written by myself, Paul Borosky, MBA., Doctoral Candidate, and published author, and include:

  • Summarized income statements for the last 5 years.
  • Summarized balance sheets for the last 5 years.
  • Five years’ worth of over twenty common financial ratios presented with formulas, calculations, and analysis tips for each ratio.
  • Line by line description, explanation, and analysis tip for most financial statement line items and financial ratios.
  • Professional financial analysis tips are provided in each section to help YOU conduct your OWN financial analysis!
  • Each section includes an “in other words” segment.  This is where I use plain English to explain concepts.

 

For a MORE in-depth review of the company's financial statements and ratios, make sure to buy my "Microsoft Financial Report".  The financial report includes all aspects of my "Beginner's Guide" plus a whole lot more...

  • Professional financial analysis of important income statements, balance sheets, and financial ratio trends.
  • "Letter Grade" is assigned to most financial statement line items and financial ratios to help you better understand their overall trends for the last 5 years (Starting in 2021).
  • Overall financial analysis summary for the company.

Enjoy the preliminary information and for a more detailed analysis, buy the financial report!

Sincerely,

Paul, MBA.

PDF/Downloadable Versions

Microsoft 2020 Financial Analysis and Report by Paul Borosky, MBA.
  • Included - Free Bonus Downloads: Annual Statements for the Last Five Years (10k reports)!
  • Included - Expert financial analysis done by Paul Borosky MBA.

Microsoft Beginner’s Guide 2021

Table of Contents

  • Disclaimer 3
  • Forward 4
  • Income Statement 6
  • Microsoft’s Summarized Income Statements 6
  • Revenues 7
  • Cost of Goods Sold (COGS) 8
  • Selling, General, and Administrative Expenses (SG&A 8
  • Research and Development (R&D) 9
  • Operating Expenses 10
  • Earnings Before Interest and Taxes (EBIT 10
  • Interest Expense 11
  • Earnings Before Taxes (EBT) 12
  • Taxes 12
  • Net income 12
  • Tax Rate 13
  • Balance Sheet 15
  • Microsoft’s Summarized Balance Sheets 15
  • Cash 16
  • Short-Term Investments 17
  • Accounts Receivables 17
  • Inventory 18
  • Current Assets 19
  • Property, Plant, and Equipment (PP&E) 20
  • Total Assets 20
  • Accounts Payable 21
  • Accrued Expenses 22
  • Short-Term Debt 23
  • Total Current Liabilities 24
  • Long Term Debt (LT Debt) 25
  • Total Liabilities 26
  • Common Stock and Additional Paid-in Capital 27
  • Treasury 27
  • Retained Earnings 28
  • Total Equity 29
  • Financial Ratios 30
  • Microsoft’s Liquidity Ratios 31
  • Current Ratio 31
  • Quick Ratio 32
  • Cash Ratio 33
  • Microsoft’s Asset Ratios 35
  • Total Asset Turnover 36
  • Fixed Asset Turnover 37
  • Days Sales Outstanding 37
  • Inventory Turnover 38
  • Accounts Receivable Turnover 39
  • Accounts Payable Turnover 40
  • Other Asset Ratio Calculations 41
  • Working Capital Turnover 41
  • Average Days in Inventory 41
  • Average Days Payable 41
  • Microsoft’s Profitability Ratios 43
  • Return on Assets (ROA) 43
  • Return on Equity (ROE) 44
  • Net Profit Margin 45
  • Gross Profit Margin 46
  • Operating Profit Margin 46
  • Microsoft’s Debt Ratios 48
  • Debt Ratio 48
  • Debt to Equity Ratio 49
  • Times Interest Earned 50

Microsoft Financial Report 2020

Table of Contents

  • Disclaimer 3
  • Acknowledgments 4
  • Forward 5
  • About the Author 7
  • Company Summary 8
  • Financial Statement Introduction 10
  • Income Statement 11
  • Microsoft’s Income Statement – Summary Analysis 12
  • Income Statement Discussion 14
  • Balance Sheet 23
  • Balance Sheet – Summary Analysis 24
  • Balance Sheet Discussion 27
  • Financial Ratios 42
  • Liquidity Ratios 43
  • Liquidity Ratios - Summary Analysis 43
  • Liquidity Ratios Discussion 44
  • Current Ratio 44
  • Quick Ratio 45
  • Cash Ratio 46
  • Other Liquidity Ratios 47
  • Net Operating Working Capital 47
  • Asset Ratios 48
  • Asset Utilization Ratios - Summary Analysis 49
  • Asset Utilization Ratios Discussion 51
  • Total Asset Turnover 51
  • Fixed Asset Turnover 51
  • Days Sales Outstanding 52
  • Inventory Turnover 53
  • Accounts Receivable Turnover 54
  • Accounts Payable Turnover 55
  • Other Asset Ratio Calculations 55
  • Working Capital Turnover 55
  • Average Days in Inventory 56
  • Average Days Payable 56
  • Profitability Ratios 57
  • Profitability Ratios - Summary Analysis 58
  • Profitability Ratios Discussion 59
  • Return on Assets (ROA) 59
  • Return on Equity (ROE) 60
  • Profit Margin 61
  • Gross Profit Margin 61
  • Operating Profit Margin 62
  • Basic Earnings Power 63
  • ROCE 63
  • Capital Employed 63
  • Debt Ratios 65
  • Microsoft’s Debt Ratios - Summary Analysis 65
  • Debt Ratios Discussion 66
  • Long-Term Debt Ratio 66
  • Debt to Equity Ratio 67
  • Times Interest Earned 68
  • WACC 69
  • Book Value of WACC 69
  • Free Cash Flow (FCF) 71
  • Free Cash Flows – 2016 - 2020 71
  • Free Cash Flows – 5 Year Projections 72
  • Income Statement – Projections for 5 years 73
  • Income Statement – 5 Year Projections 73
  • Balance Sheet – Projections for 5 years 74
  • Balance Sheet – 5 Year Projections 74
  • Company Valuation and Intrinsic Stock Price 76
  • Appendix 1: Summarized Income Statement 77
  • Appendix 2: Income Statement – Percent of Sales    78
  • Appendix 3: Income Statement – Year over Year Growth   79
  • Appendix 4: Summarized Balance Sheet      80
  • Appendix 5: Balance Sheet as Percent of Total Assets         82
  • Appendix 6: Summarized Financial Ratios   83

Sample Financial Report

Sample Financial Report by Paul Borosky, MBA.
Financial Report Sample 2

Microsoft: Brief Summary

Microsoft's headquarters is located in Redmond, Washington.  The company competes in the software infrastructure sector—specifically, the technology industry.  At present, the organization employs approximately 160,000 individuals.  Microsoft sells its products on a global scale, with a heavy presence in the United States, Europe, Asia, and the Middle East.  Their main revenue generators are software license sales, game sales, hardware, and cloud computing services.

From a financial perspective, Microsoft's market capitalization is about $1.6 trillion.  Their beta is .82.  This indicates that the company's stock is slightly less risky as compared to the overall market.  Its stock price range for the last 52 weeks has been between $132.52 to $232.86.  In the last year, their dividend payout has increased moderately.  At present, the dividend yield is 1.06%.

Microsoft Financial Report Sources

“Microsoft 2020 Company Analysis: Financial Statements and Financial Ratios: Defined, Discussed, and Analyzed for 5 Years” was written by, Paul Borosky, MBA., and owner of Quality Business Plan.  In this book, the author selected Microsoft's 2018 10k, 2017 10k annual report, 2016 10k annual report, 2015 10k annual report, and Microsoft's 2019 10k annual report as the basis for information gathering. 

 

Section 1: Microsoft Income Statement Analyzed

Revenues:  

Microsoft ended 2016 with $85.3 billion in revenues.  In the next four years, the organization would continually grow its revenues ending in 2020 with $143 billion.  On average, this is approximately 13.9% annual revenue growth.

The sustained revenue growth over a five-year time span indicates that the organization is still in its expansion phase growth for its business model.  For an organization that is decades old, this is an impressive feat.  However, inevitably, the organization's sales growth will moderate.  For example, the company's sales growth from 2017 to 2018 was 22%.  In the next year, the company's sales growth fell to 14%, and finally, in 2020, its sales growth was 13.6%.  This shows that the firm's growth is starting to taper off.  Granted, double-digit sales growth is quite impressive, but it also shows that the company is starting to saturate the market with its software products.

Microsoft ended 2015 with $93.6 billion in revenues.  In 2016, this declined to 85.3 billion.  From 2017 to date, the organization has increased revenue steadily to about $25.8 billion in 2019.  This leads to an approximate 8.3% average growth over the last five years.

Microsoft’s Windows dominance has been lagging over the last several years.  This is because Apple has gained more users of their OS system.  However, Microsoft’s Office software package seems to have a loyal following.  From this, investors should expect moderate to modest revenue growth with little concern for market share loss.

COGS

Microsoft ended 2016 with the cost of goods at approximately $32.7 billion or 38.4% of revenues.  In the next four years, the organization's cost of goods would increase, ending 2020 at $46 billion.  However, their cost of goods as compared to revenues would continually fall, ending 2020 at 32.2%. 

The cost of goods sold has been increasing annually at about a 7% rate.  This is substantially lower than a revenue growth rate.  This shows that the company is keeping its raw material cost in line with its revenue growth.

Microsoft 2021 Summary Income Statement

Column1

2021

2020 2019 2018

2017

Revenues

                 168,088

                 143,015                  125,843                  110,360

                     89,950

COGS

                   52,232

                   46,078                    42,910                    38,353

                     34,261

Gross Profit

                 115,856

                   96,937                    82,933                    72,007

                     55,689

 
SG&A

                   25,224

                   24,709                    23,098                    22,223

                     20,020

Depreciation

                   11,686

                   12,796                    11,682                    10,261

                       8,778

R & D

                   20,716

                   19,269                    16,876                    14,726

                     13,037

Other                            -                            -                             -
Total Operating Expenses

                   46,585

                   56,774                    39,974                    36,949

                     33,057

EBIT

                   69,271

                   52,959                    42,959                    35,058

                     22,632

Other Income                            -                            -                            -                             -
Interest Expense

                     2,346

                     2,591                      2,686                      2,733

                       2,222

EBT

                   71,102

                   53,036                    43,688                    36,474

                     23,149

Taxes

                     9,831

                     8,755                      4,448                    19,903

                       1,945

Net Income

                  61,271

                  44,291                   39,240                   16,571

                   21,204

 

 

Section 2: Microsoft Balance Sheet Analyzed

For Microsoft Inc. balance sheet, I again go through each important line item from the balance sheet.  In reviewing each line item, I will define Microsoft’s balance sheet line item, such as cash, property, plant and equipment, and liabilities between 2016 to 2020.  Next, I then offer a summary analysis of Microsoft’s important balance sheet line items.

Cash: 

Microsoft's cash position ended 2016 at $6.5 billion.  In the next four years, the organization would increase its cash position ending 2020 at $13.5 billion.  As compared to sales, the company's cash position was 7.6% in 2016.  In the next two years, the organization's cash position would end at approximately 10.8% of sales.  However, in the last two years, the company would reduce its cash position as compared to sales ending 2020 at 9.5% of total sales.

The organization's cash trend indicates that the firm holds a cash level of approximately 9 to 10% of sales.  This strategy may indicate that the firm has identified an optimal cash level as compared to sales and has been exploiting this optimal level for the last two years.  From an investor's perspective, if the organization is able to stay close to the nine or 10% cash as compared to the sales range, then it means the company may be optimally using its cash position.  Shifts higher may indicate that the company is becoming inefficient with its cash holdings.  However, this is just not the case at this point in time.

Microsoft’s cash position and did 2015 at approximately $5.6 billion.  In 2019, their cash storage increased to about $11.3 billion.  The substantial cash amount may be better utilized as short-term assets as compared to idle cash.

Short-term investments

The organization's short-term investments ended 2016 at $106 billion.  In the next year, the organization's short-term investments would climb to $125.3 billion.  However, for the next three years, the organization would moderate its investment holdings ranging between $121 to $122.9 billion. 

The organization had about $122.4 billion in short-term investments.  This indicates a substantial cash reserve that could be used for company acquisitions or operational needs.  Also, the organization should consider increasing dividend payouts to reward shareholders.

Microsoft 2021 Summary Balance Sheet

Column1

2021

2020 2019 2018

2017

Cash

                     14,224

                 13,576                  11,356                  11,946

                   7,663

Short Term Investment

                   116,110

               122,951                122,463                121,822

               125,318

Account Receivable

                     38,043

                 32,011                  29,524                  26,481

                 19,792

Inventory

                       2,636

                   1,895                    2,063                    2,662

                   2,181

Other                              -                         -                         -                         -                         -
Current Assets

                 184,406

             181,915              175,552              169,662

             159,851

Net PPE

                     59,715

                 52,904                  43,856                  36,146

                 23,734

Goodwill

                     49,711

                 43,351                  42,026                  35,683

                 35,122

Other                              -                         -                         -                         -                         -
Total Assets

                 333,779

             301,311              286,556              258,848

             241,086

Accounts Payable

                     15,163

                 12,530                    9,382                    8,617

                   7,390

Accrued Expense

                     10,057

                   7,874                    6,830                    6,103

                   5,819

Accrued Taxes

                       2,174

                   2,130                    5,665                    2,121

                      718

Notes Payable                         -                         -

                        -

                   9,072

LT Debt - Current

                       8,072

                   3,749                    5,516                    3,998

                   6,280

Other                              -                         -                         -                         -                         -
Total Current Liabilities

                     88,657

                 72,310                  69,420                  58,488

                 64,527

LT Debt

                     50,074

                 59,578                  66,662                  72,242

                 76,073

Other                              -                         -                         -                         -                         -
Total Liabilities

                 191,791

             183,007              184,226              176,130

             168,692

Common Stock

                     83,111

                 80,552                  78,520                  71,223

                 69,315

Treasury                              -                         -                         -                         -                         -
Retained Earnings

                     57,055

                 34,566                  24,150                  13,682

                   2,648

Other                              -                         -                         -                         -                         -
Total Equity

                 141,988

             118,304              102,330                82,718

               72,394

Total Equity & Liability

                 333,779

             301,311              286,556              258,848

             241,086

 

Section 3: Microsoft Financial Ratios Analyzed

For this section, I have chosen several different financial ratios to review for Microsoft from 2016 to 2020.  In reviewing each of Microsoft’s financial ratios, I first start with defining the financial ratio.  Next, I supply the financial formula for calculating the specific ratio.  Finally, I offer a brief analysis of Microsoft’s Important Financial ratios. 

Microsoft Current Ratio

Microsoft's current ratio in 2016 was 2.3.  In the next two years, the organization's current ratio would gradually increase to 2.9 ending in 2018.  However, in the next two years, the firm would moderate its current ratio and achieve a 2.5 ratio for both 2019 as well as 2020.

A ratio of 2.0 and above indicates that Microsoft has more than twice the amount of current assets as compared to current liabilities.  For most organizations, a 1.0 ratio is adequate for achieving optimal usage of current assets as compared to current liabilities.  A 2.0 and above current ratio indicates that the firm is not managing its current assets in an optimal manner.  A better strategy would be for the company to use up cash by repurchasing stock from the open market, increasing dividends, or investing excess cash in new business projects.  Locking up significant current assets as compared to current liability is a poor strategic move by the organization.

Microsoft’s current ratio has held steady at about 2.5.  Industry-standard dictates that a well-funded company has a current ratio of approximately 1.0.  The substantial cash reserve may be better suited in their short-term investment account as compared to holding such a substantial cash reserve.

Microsoft Total Asset Turnover

The company's total asset turnover ended in 2016 at .44.  In the next year, the organization's total asset turnover would fall slightly to .37.  However, in the next three years, the organization would take steps to gradually improve its total asset turnover and end 2020 at .47.

In the last five years, Microsoft’s total asset turnover has ranged from .53 to .37 with 2019 ending at .44.  The industry average for this ratio is .62.  This shows that the firm is utilizing its assets less efficiently as compared to other competitors.

Microsoft Return on Assets

Microsoft's return on assets in 2016 was 8.6%.  In the next year, the organization's return on assets would increase slightly to 8.8%.  However, in 2018, the company's return on assets would fall moderately, ending the year at 6.4%.  In the next two years, the organization would take steps to better utilize its assets, which resulted in a 14.7% return on assets in 2020.

Microsoft’s return on assets has increased from 6.9 in 2015 to 13.7 in 2019.  This shows that the company is making more money per dollar of asset held.  Also, the industry average is 9.4. This also shows that the company is doing better than industry competitors.  To further improve upon this ratio, Microsoft should consider increasing its dividend payout.  This will lower their total assets, which is the denominator for the ratio.  As a result, the return on assets will inevitably increase.

Microsoft 2021 Liquidity Ratios

Ratios

2021

2020

Current Ratio                           2.08                    2.52
Cash Ratio                           1.47                    1.89
Quick Ratio                           2.05                    2.49
Net Working Capital                       95,749              109,605

Microsoft 2021 Asset Utilization

Ratios

2021

2020

Total Asset Turnover                           0.50                    0.47
Fixed Asset Turnover                           2.81                    2.70
Days Sales Outstanding                         76.06                  78.52
Inventory Turnover (Using Sales)                         74.19                  72.27
Inventory Turnover (Using COGS)                         23.06                  23.28
Accounts Receivable Turnover                           4.80                    4.65
Working Capital Turnover                           1.76                    1.30
AP Turnover                           3.83                    4.19
Average Days Inventory                         15.83                  15.68
Average Days Payable                         95.41                  87.10

Microsoft 2021 Profitability Ratios

Ratios

2021

2020

Return on Assets

18.36%

14.70%

Return on Equity

43.15%

37.44%

Net Profit Margin

36.45%

30.97%

Gross Profit Margin

68.93%

67.78%

Operating Profit Margin

41.21%

37.03%

Basic Earning Power

20.75%

17.58%

ROCE

28.26%

23.13%

Capital Employed                     245,122              229,001
ROIC

29.83%

24.34%

Microsoft 2021 Debt Ratios

Ratios

2021

2020

Debt Ratio

17.42%

21.02%

Debt/Equity

40.95%

53.53%

Times Interest Earned                         29.53                  20.44