Microsoft is a large software company known for its Windows operating system and Microsoft Office suite of products. The company's capital structure relies heavily on equity capital as opposed to debt for financing, though debt has grown to play an increasingly large role. In this capital structure analysis of Microsoft, we'll review the company's equity capital, debt capital, financial leverage, and enterprise value.

Microsoft Equity Capital

Equity capital is financing that a business receives from selling equity and from the net profits attributable to equity holders. It can include common stock at par value, retained earnings, additional paid-in capital, and accumulated other comprehensive income. As of June 30, 2024, Microsoft's (MSFT) 澳洲幸运5开奖号码历史查询:shareholders' equity was approximately $268.5 billion, consisting of about $100.9 billion of common stock, about $173.1 billion in retained earnings, and roughly $5.6 billion of negative equity.

Total shareholders' equity jumped from about $118.3 billion in 2020 to about $268.5 billion in 2024. This increase is largely driven by higher 澳洲幸运5开奖号码历史查询:retained earnings. Although Microsoft generated positive net earnings over those years, significant capital was returned to shareholders as dividends and 澳洲幸运5开奖号码历史查询:share repurchases.

In fiscal 2022, the company spent over $28 billion on buybacks and issued nearly $18.6 billion in 澳洲幸运5开奖号码历史查询:dividends. In fiscal 2023, the company repurchased $18.4 billion of common stock and paid over $20.2 billion in dividends. In fiscal 2024, Microsoft spent almost $12 billion on share repurchases and paid nearly $22.3 billion in dividends.

Microsoft Debt Capital

Debt capital includes short- and long-term debt such as bonds, unsecured notes, and term loans. Between 2020 and 2024, Microsoft's short-term debt grew significantly. In 2020 the company owed just over $1.6 billion in short-term debt. By 2024, the company had short-term debt liabilities totaling nearly $10.3 billion.

During the same period of 2020 to 2024, Microsoft's long-term debt trended in the opposite direction—a very positive sign for the company:

• In 2020, Microsoft's long-term debt stood at around $59.6 billion.
• By the next year, it dropped to about $50.1 billion and continued to drop to around $47 billion in 2022.
• The trend continued in 2023 as Microsoft reduced its long-term debt to just under $42 billion.

Although its long-term debt climbed slightly in 2024 to about $42.7 billion, this is still much lower than where it began in 2020.

Microsoft Financial Leverage

To analyze the amount of debt in a company's capital structure, it's necessary to use a financial leverage ratio, such as the total 澳洲幸运5开奖号码历史查询:debt-to-capital ratio. This allows investors to track debt relative to equity capital 🐽over tiꦓme and in comparison to other firms.

Microsoft reduced its debt-to-capital ratio between 2020 and 2024. This indicates that during that time the firm reduced its use of financial leverage. In 2020, Microsoft's debt-to-capital ratio was 38%, and by 2024 it had fallen to 23%.

Microsoft Enterprise Value

澳洲幸运5开奖号码历史查询:Enterprise value (EV) is a measurement of total firm value based on the market values of equity and debt, less cash and investments. Microsoft's enterprise value grew from $1.66 trillion in September 2020 to $3.27 trillion in September 2024. The rise in enterprise value was caused by a massive increase in the firm's stock price during this time.

The Bottom Line

Microsoft has come a long way since it was founded in 1975, becoming the third-largest tech company by market cap in the world. While the company's bread and butter remains its products and services (like its operating systems), it also makes money from gaming and cloud services.

As an investor, make sure you review some of the key financial metrics to ensure that Microsoft (still) makes sense for your portfolio. As we highlighted in this article, the company's debt-to-capital ratio dropped, thanks to its use of financial leverage while its enterprise value continues to rise.