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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Microsoft Corp., economic profit calculation

US$ in millions

12 months ended:	Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019
Net operating profit after taxes (NOPAT)¹	90,364)	71,055)	71,024)	65,443)	46,746)	36,908)
Cost of capital²	12.67%	12.64%	12.57%	12.53%	12.38%	12.12%
Invested capital³	351,567)	247,490)	194,094)	143,637)	107,630)	96,412)

Economic profit⁴	45,819)	39,770)	46,619)	47,443)	33,419)	25,227)

Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 90,364 – 12.67% × 351,567 = 45,819

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Microsoft Corp. economic profit decreased from 2022 to 2023 but then increased from 2023 to 2024 not reaching 2022 level.

Microsoft Corp., NOPAT calculation

US$ in millions

12 months ended:	Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019
Net income	88,136)	72,361)	72,738)	61,271)	44,281)	39,240)
Deferred income tax expense (benefit)¹	(4,738)	(6,059)	(5,702)	(150)	11)	(6,463)
Increase (decrease) in allowance for doubtful accounts²	180)	17)	(118)	(37)	377)	34)
Increase (decrease) in unearned revenue³	6,371)	5,405)	4,267)	4,961)	1,974)	4,486)
Increase (decrease) in equity equivalents⁴	1,813)	(637)	(1,553)	4,774)	2,362)	(1,943)
Interest expense	2,935)	1,968)	2,063)	2,346)	2,591)	2,686)
Interest expense, operating lease liability⁵	630)	439)	288)	255)	251)	231)
Adjusted interest expense	3,565)	2,407)	2,351)	2,601)	2,842)	2,917)
Tax benefit of interest expense⁶	(749)	(505)	(494)	(546)	(597)	(613)
Adjusted interest expense, after taxes⁷	2,816)	1,902)	1,857)	2,055)	2,245)	2,305)
(Gain) loss on marketable securities	118)	(260)	(461)	(1,232)	(32)	(648)
Interest and dividends income	(3,157)	(2,994)	(2,094)	(2,131)	(2,680)	(2,762)
Investment income, before taxes	(3,039)	(3,254)	(2,555)	(3,363)	(2,712)	(3,410)
Tax expense (benefit) of investment income⁸	638)	683)	537)	706)	570)	716)
Investment income, after taxes⁹	(2,401)	(2,571)	(2,018)	(2,657)	(2,142)	(2,694)
Net operating profit after taxes (NOPAT)	90,364)	71,055)	71,024)	65,443)	46,746)	36,908)

Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for doubtful accounts.

³ Addition of increase (decrease) in unearned revenue.

⁴ Addition of increase (decrease) in equity equivalents to net income.

⁵ 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 19,077 × 3.30% = 630

⁶ 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 3,565 × 21.00% = 749

⁷ Addition of after taxes interest expense to net income.

⁸ 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 3,039 × 21.00% = 638

⁹ Elimination of after taxes investment income.

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Microsoft Corp. NOPAT increased from 2022 to 2023 and from 2023 to 2024.

Microsoft Corp., cash operating taxes calculation

US$ in millions

12 months ended:	Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019
Provision for income taxes	19,651)	16,950)	10,978)	9,831)	8,755)	4,448)
Less: Deferred income tax expense (benefit)	(4,738)	(6,059)	(5,702)	(150)	11)	(6,463)
Add: Tax savings from interest expense	749)	505)	494)	546)	597)	613)
Less: Tax imposed on investment income	638)	683)	537)	706)	570)	716)
Cash operating taxes	24,499)	22,831)	16,637)	9,821)	8,771)	10,807)

Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Microsoft Corp. cash operating taxes increased from 2022 to 2023 and from 2023 to 2024.

Microsoft Corp., invested capital calculation (financing approach)

US$ in millions

	Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019
Short-term debt	6,693)	—)	—)	—)	—)	—)
Current portion of long-term debt	2,249)	5,247)	2,749)	8,072)	3,749)	5,516)
Current finance lease liabilities	2,349)	1,197)	1,060)	791)	540)	317)
Long-term debt, excluding current portion	42,688)	41,990)	47,032)	50,074)	59,578)	66,662)
Long-term finance lease liabilities	24,796)	15,870)	13,842)	11,750)	8,956)	6,257)
Operating lease liability¹	19,077)	15,137)	13,717)	11,591)	9,287)	7,703)
Total reported debt & leases	97,852)	79,441)	78,400)	82,278)	82,110)	86,455)
Stockholders’ equity	268,477)	206,223)	166,542)	141,988)	118,304)	102,330)
Net deferred tax (assets) liabilities²	(19,652)	(19,730)	(13,285)	(6,983)	(6,201)	(7,303)
Allowance for doubtful accounts³	830)	650)	633)	751)	788)	411)
Unearned revenue⁴	60,184)	53,813)	48,408)	44,141)	39,180)	37,206)
Equity equivalents⁵	41,362)	34,733)	35,756)	37,909)	33,767)	30,314)
Accumulated other comprehensive (income) loss, net of tax⁶	5,590)	6,343)	4,678)	(1,822)	(3,186)	340)
Adjusted stockholders’ equity	315,429)	247,299)	206,976)	178,075)	148,885)	132,984)
Investments⁷	(61,714)	(79,250)	(91,282)	(116,716)	(123,365)	(123,027)
Invested capital	351,567)	247,490)	194,094)	143,637)	107,630)	96,412)

Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of unearned revenue.

⁵ Addition of equity equivalents to stockholders’ equity.

⁶ Removal of accumulated other comprehensive income.

⁷ Subtraction of investments.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Microsoft Corp. invested capital increased from 2022 to 2023 and from 2023 to 2024.

Microsoft Corp., cost of capital calculations

Jun 30, 2024

	Capital (fair value)¹	Weights					Cost of capital
Equity²	3,143,581)	3,143,581)	÷	3,238,796)	=	0.97	0.97	×	12.95%	=	12.57%
Debt and finance lease liabilities³	76,138)	76,138)	÷	3,238,796)	=	0.02	0.02	×	4.43% × (1 – 21.00%)	=	0.08%
Operating lease liability⁴	19,077)	19,077)	÷	3,238,796)	=	0.01	0.01	×	3.30% × (1 – 21.00%)	=	0.02%
Total:	3,238,796)					1.00					12.67%

Based on: 10-K (reporting date: 2024-06-30).

¹ US$ in millions

² Equity. See details »

³ Debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Jun 30, 2023

	Capital (fair value)¹	Weights					Cost of capital
Equity²	2,457,171)	2,457,171)	÷	2,535,575)	=	0.97	0.97	×	12.95%	=	12.55%
Debt and finance lease liabilities³	63,267)	63,267)	÷	2,535,575)	=	0.02	0.02	×	3.75% × (1 – 21.00%)	=	0.07%
Operating lease liability⁴	15,137)	15,137)	÷	2,535,575)	=	0.01	0.01	×	2.90% × (1 – 21.00%)	=	0.01%
Total:	2,535,575)					1.00					12.64%

Based on: 10-K (reporting date: 2023-06-30).

¹ US$ in millions

² Equity. See details »

³ Debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Jun 30, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	2,061,436)	2,061,436)	÷	2,140,955)	=	0.96	0.96	×	12.95%	=	12.47%
Debt and finance lease liabilities³	65,802)	65,802)	÷	2,140,955)	=	0.03	0.03	×	3.73% × (1 – 21.00%)	=	0.09%
Operating lease liability⁴	13,717)	13,717)	÷	2,140,955)	=	0.01	0.01	×	2.10% × (1 – 21.00%)	=	0.01%
Total:	2,140,955)					1.00					12.57%

Based on: 10-K (reporting date: 2022-06-30).

¹ US$ in millions

² Equity. See details »

³ Debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Jun 30, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	2,153,016)	2,153,016)	÷	2,247,148)	=	0.96	0.96	×	12.95%	=	12.41%
Debt and finance lease liabilities³	82,541)	82,541)	÷	2,247,148)	=	0.04	0.04	×	3.83% × (1 – 21.00%)	=	0.11%
Operating lease liability⁴	11,591)	11,591)	÷	2,247,148)	=	0.01	0.01	×	2.20% × (1 – 21.00%)	=	0.01%
Total:	2,247,148)					1.00					12.53%

Based on: 10-K (reporting date: 2021-06-30).

¹ US$ in millions

² Equity. See details »

³ Debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Jun 30, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	1,551,445)	1,551,445)	÷	1,647,328)	=	0.94	0.94	×	12.95%	=	12.20%
Debt and finance lease liabilities³	86,596)	86,596)	÷	1,647,328)	=	0.05	0.05	×	4.09% × (1 – 21.00%)	=	0.17%
Operating lease liability⁴	9,287)	9,287)	÷	1,647,328)	=	0.01	0.01	×	2.70% × (1 – 21.00%)	=	0.01%
Total:	1,647,328)					1.00					12.38%

Based on: 10-K (reporting date: 2020-06-30).

¹ US$ in millions

² Equity. See details »

³ Debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Jun 30, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	1,054,145)	1,054,145)	÷	1,147,322)	=	0.92	0.92	×	12.95%	=	11.90%
Debt and finance lease liabilities³	85,474)	85,474)	÷	1,147,322)	=	0.07	0.07	×	3.36% × (1 – 21.00%)	=	0.20%
Operating lease liability⁴	7,703)	7,703)	÷	1,147,322)	=	0.01	0.01	×	3.00% × (1 – 21.00%)	=	0.02%
Total:	1,147,322)					1.00					12.12%

Based on: 10-K (reporting date: 2019-06-30).

¹ US$ in millions

² Equity. See details »

³ Debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Microsoft Corp., economic spread ratio calculation, comparison to benchmarks

	Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019
Selected Financial Data (US$ in millions)
Economic profit¹	45,819)	39,770)	46,619)	47,443)	33,419)	25,227)
Invested capital²	351,567)	247,490)	194,094)	143,637)	107,630)	96,412)
Performance Ratio
Economic spread ratio³	13.03%	16.07%	24.02%	33.03%	31.05%	26.17%
Benchmarks
Economic Spread Ratio, Competitors⁴
Accenture PLC	4.84%	5.63%	8.48%	10.32%	10.88%	9.61%
Adobe Inc.	—	5.20%	10.64%	13.05%	5.32%	3.43%
Autodesk Inc.	-10.63%	1.73%	-2.84%	-3.00%	4.64%	-16.38%
Cadence Design Systems Inc.	—	10.41%	9.79%	10.02%	10.82%	5.30%
CrowdStrike Holdings Inc.	-2.67%	0.98%	-2.28%	-4.55%	6.33%	—
International Business Machines Corp.	—	-1.57%	-9.42%	-4.43%	-4.15%	-0.43%
Intuit Inc.	-4.40%	-6.46%	-5.39%	2.34%	5.68%	19.34%
Oracle Corp.	-0.31%	-1.36%	-1.05%	7.01%	1.33%	4.01%
Palo Alto Networks Inc.	8.56%	14.57%	6.43%	-2.25%	-3.27%	-0.05%
Salesforce Inc.	-10.04%	-12.32%	-9.89%	-7.59%	-10.63%	-6.61%
ServiceNow Inc.	—	8.74%	4.20%	5.41%	7.04%	6.45%
Synopsys Inc.	—	-3.88%	2.70%	-3.32%	-3.14%	-6.13%

Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 45,819 ÷ 351,567 = 13.03%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Microsoft Corp. economic spread ratio deteriorated from 2022 to 2023 and from 2023 to 2024.

Microsoft Corp., economic profit margin calculation, comparison to benchmarks

	Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019
Selected Financial Data (US$ in millions)
Economic profit¹	45,819)	39,770)	46,619)	47,443)	33,419)	25,227)

Revenue	245,122)	211,915)	198,270)	168,088)	143,015)	125,843)
Add: Increase (decrease) in unearned revenue	6,371)	5,405)	4,267)	4,961)	1,974)	4,486)
Adjusted revenue	251,493)	217,320)	202,537)	173,049)	144,989)	130,329)
Performance Ratio
Economic profit margin²	18.22%	18.30%	23.02%	27.42%	23.05%	19.36%
Benchmarks
Economic Profit Margin, Competitors³
Accenture PLC	2.74%	2.90%	4.08%	5.29%	5.54%	4.44%
Adobe Inc.	—	6.51%	12.39%	16.26%	7.63%	5.15%
Autodesk Inc.	-15.03%	2.21%	-4.02%	-4.14%	6.13%	-26.70%
Cadence Design Systems Inc.	—	10.37%	9.77%	10.18%	10.90%	5.14%
CrowdStrike Holdings Inc.	-4.20%	1.31%	-3.56%	-9.45%	5.56%	—
International Business Machines Corp.	—	-2.79%	-16.36%	-8.44%	-7.22%	-0.73%
Intuit Inc.	-6.76%	-10.58%	-10.38%	2.96%	6.39%	12.88%
Oracle Corp.	-0.59%	-2.63%	-1.93%	13.86%	3.02%	7.31%
Palo Alto Networks Inc.	9.08%	14.47%	7.50%	-3.03%	-5.30%	-0.06%
Salesforce Inc.	-23.22%	-31.38%	-27.46%	-17.40%	-26.15%	-13.01%
ServiceNow Inc.	—	7.03%	3.38%	4.68%	5.74%	4.72%
Synopsys Inc.	—	-5.47%	3.81%	-5.28%	-5.39%	-10.59%

Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).

¹ Economic profit. See details »

² 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × 45,819 ÷ 251,493 = 18.22%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Microsoft Corp. economic profit margin deteriorated from 2022 to 2023 and from 2023 to 2024.

Microsoft Corp. (NASDAQ:MSFT)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin