Microsoft Corp. (NASDAQ:MSFT)

Inventory Turnover

The inventory turnover ratio exhibits noticeable fluctuations over the periods analyzed. Starting at 17.25, it rises to a peak of 25.21 early in the period, followed by a gradual decline reaching as low as 15.1 before rebounding to exceptionally high levels between 42.63 and 98.47 in later periods, and then moderates slightly down to 81.22. This suggests increased efficiency in inventory management in recent periods, with faster inventory cycles.

Receivables Turnover

Receivables turnover has shown a generally stable yet somewhat volatile pattern, ranging mostly between 4.03 and 6.49. Periods with lower turnover, closer to 4, suggest longer collection times, whereas values around 6 indicate more rapid collection of receivables. There is no steady trend upward or downward, but periodic dips correspond to higher average collection periods noted elsewhere.

Payables Turnover

The payables turnover ratio remains relatively consistent, fluctuating in a narrow band between approximately 2.82 and 4.28. The ratio shows a slight declining tendency toward the end of the period, suggesting the company is taking longer to pay its suppliers over time, as the turnover ratio decreases.

Working Capital Turnover

Working capital turnover shows an increasing trend from 1.37 early in the timeline to a peak near 2.77, indicating improving efficiency in using working capital. However, a sharp increase is observed later, with ratios jumping to as high as 8.63 before stabilizing around 5 to 7, signaling significantly more effective deployment of working capital in that phase.

Average Inventory Processing Period

Days inventory outstanding starts relatively low around 21 days, decreases to a low of 14 days multiple times, then fluctuates between 14 and 24 days early on. In the latest periods, the processing time drops dramatically to around 4 to 9 days, indicating a much faster inventory turnover and possibly improved supply chain or sales velocity.

Average Receivable Collection Period

The average collection period remains fairly stable but shows periodic spikes, fluctuating between approximately 56 to 91 days. The variability suggests cyclical changes in customer payment behavior, with no sustained trend toward improvement or deterioration but some indication of lengthening collection periods in certain quarters.

Operating Cycle

The operating cycle, calculated as the sum of inventory processing and receivable collection periods, mostly ranges between 70 and 103 days. It demonstrates consistent variability with some spikes around 100 days, indicating fluctuations in how long it takes to convert inventory into cash through sales and collection processes.

Average Payables Payment Period

The payables payment period shows a mild upward trend, particularly in later periods where days outstanding rise from around 90 to as high as 130 days. This suggests the company has extended its payment terms or is delaying payments to suppliers more in recent quarters, potentially impacting cash flow management.

Cash Conversion Cycle

The cash conversion cycle is predominantly negative, ranging from roughly -60 to -2 days. Negative values indicate that the company collects cash from customers and turns over inventory before paying its suppliers, which is a positive sign of liquidity management. The magnitude of negativity increases in the later periods, signaling enhanced cash management efficiency.

The analysis of the financial data reveals several notable trends in cost of revenue, inventories, and inventory turnover ratios over the observed periods.

Cost of Revenue

The cost of revenue displays a generally increasing trend across the quarters. Initial values around 11,000 million USD gradually rise, peaking at over 24,000 million USD in the later periods under review. While there are fluctuations within individual quarters, the overall trajectory indicates growing costs associated with revenue generation, which may be reflective of expanded operations, increased sales volume, or rising input costs.

Inventories

Inventories demonstrate a more volatile pattern. Starting near 2,700 million USD, inventory levels dip to approximately 1,600 million USD in later periods before slightly rebounding toward 1,100 million USD. Notable is the peak at around 4,200 million USD in earlier years, followed by a general decline. This indicates fluctuations in stock management and possible changes in supply chain or demand forecasting.

Inventory Turnover Ratio

The inventory turnover ratio exhibits a significant upward trend. Beginning at around 17 times initially, it rises dramatically, surpassing 80 times and even close to 100 times in later quarters. High turnover ratios suggest improved efficiency in managing inventory levels relative to cost of goods sold, indicating faster movement of stock and potentially stronger sales performance or leaner inventory policies.

Overall, the data points to an expanding scale of operations with rising cost of revenue, accompanied by effective inventory management practices as evidenced by increasing turnover ratios despite fluctuating inventory balances. The elevated turnover ratios, particularly in recent quarters, highlight enhanced inventory efficiency, which may positively impact working capital utilization and operational liquidity.

The financial data reveals several notable trends concerning revenue, accounts receivable, and receivables turnover over the analyzed periods.

Revenue

The revenue exhibits a generally upward trajectory throughout the periods under review. Starting from approximately $37.2 billion in September 2020, revenue increased with fluctuations, reaching over $77.6 billion by September 2025. Notably, some periods show significant increases, such as from December 2023 ($62.0 billion) to December 2024 ($69.6 billion). Despite minor dips in some quarters, the overall momentum remains positive, signaling steady growth in sales or services rendered.

Accounts Receivable, Net of Allowance for Doubtful Accounts

The accounts receivable balances show substantial variation with a general upward trend in magnitude. Beginning at about $22.9 billion in September 2020, the value increased substantially in certain quarters, peaking notably in June 2025 at nearly $69.9 billion before slightly declining to approximately $52.9 billion by September 2025. There are clear periodic spikes that may reflect seasonal patterns or billing cycles. The fluctuations suggest varying credit sales volumes and collection periods, possibly influenced by operational or market conditions.

Receivables Turnover Ratio

Receivables turnover ratios fluctuate between periods with no consistent linear pattern but indicate some correlation with the changes in accounts receivable and revenue. Ratios range from a low of about 4.03 to a high near 6.49. Generally, higher turnovers correspond to quarters where accounts receivable is relatively lower or revenue is higher, implying more efficient collections during these periods. Conversely, lower ratios align with quarters exhibiting increased receivables, suggesting slower collections or extended credit terms.

In summary, the company demonstrates sustained revenue growth with varying efficiency in receivables management across quarters. The rising accounts receivable balances in some periods alongside fluctuating turnover ratios may warrant focused attention on credit policies and collection processes to optimize cash flow. Understanding the causes of seasonal or cyclical variations may enhance the predictability and management of working capital requirements.

The financial data exhibits several notable trends over the analyzed periods. Cost of revenue and accounts payable demonstrate a general upward trajectory, reflecting changes in operational scale and payment obligations. The payables turnover ratio shows varying fluctuations that provide insights into the company’s efficiency in managing its payables.

Cost of Revenue

The cost of revenue has generally increased from approximately 11 billion US dollars in late 2020 to over 24 billion US dollars by mid-2025. There are periods of moderate decline or stabilization, such as between late 2021 and late 2022, where costs slightly fluctuated but remained relatively elevated compared to early 2020 levels. The growth in cost of revenue suggests expanding operational activity or rising input costs over time, with notable acceleration from late 2023 onwards.

Accounts Payable

Accounts payable also trends upward, starting near 12.5 billion US dollars in September 2020 and increasing steadily to over 32 billion US dollars by September 2025. This consistent rise indicates that the company is either purchasing more goods and services on credit or extending payment cycles. Fluctuations are evident in several quarters, but the overall long-term increase aligns with growth in scale or changes in procurement practices.

Payables Turnover Ratio

The payables turnover ratio exhibits a variable pattern with a slight decline over the long term. Initially around 3.7 to 3.8, it experiences decreases and intermittent rebounds, reaching its peak near 4.28 in early 2023, then gradually declining to approximately 2.82 by mid-2025. A decreasing payables turnover ratio typically indicates slower payment to suppliers, which might suggest changing cash management policies or possibly stretched supplier payments.

This fluctuation in the turnover ratio, amid rising accounts payable and cost of revenue, indicates a trend toward longer payment periods or increased credit terms extended by suppliers. The variations highlight alternating phases of tighter and more relaxed payment cycles over the quarters analyzed.

In summary, the data reveals a clear expansion in both cost structures and credit usage represented by accounts payable. The declining payables turnover ratio toward the latter periods suggests a strategic shift, potentially towards optimizing cash flows by delaying payments, despite increasing operational costs. These observations highlight the company’s dynamic approach to managing its working capital components amid changing business conditions.

The quarterly financial data reveals distinct trends in working capital, revenue, and working capital turnover over the reported periods.

Working Capital

Working capital demonstrates a fluctuating trend from September 2020 through September 2023, generally maintaining a value range between approximately 73 billion and 108 billion US dollars. Notably, from December 2023 onward, a sharp decline is observable, dropping to around 26 billion US dollars by December 2023. Following this significant dip, working capital gradually increases quarter-over-quarter through to September 2025, reaching a projected 54 billion US dollars. Despite this recovery, the post-2023 levels remain substantially below earlier reported figures.

Revenue

Revenue consistently grows throughout the entire period. Initial quarters show moderate increases, with revenue rising from about 37 billion US dollars in September 2020 to over 56 billion by September 2023. Beyond this point, revenue continues its upward trajectory at an accelerated pace, reaching approximately 77 billion US dollars by September 2025. This steady and sustained growth reflects an expanding business scale or enhanced sales performance, particularly pronounced in the latter half of the timeline.

Working Capital Turnover

The working capital turnover ratio remains relatively stable but gradually increasing from 1.37 in September 2020 to around 2.64 by September 2023, indicating improving efficiency in using working capital to generate revenue. This trend takes a dramatic turn in December 2023, where the ratio spikes sharply to 8.63. Subsequently, it declines gradually over the following quarters but stays elevated compared to pre-2024 levels, stabilizing around 5.43 by September 2025. The spike corresponds inversely with the sharp decrease in working capital, suggesting an unusual or non-recurring event affecting liquidity or asset management dynamics during this period.

In summary, the report highlights notable fluctuations in working capital with a significant drop and partial recovery starting late 2023, a consistent upward trend in revenue indicating business growth, and a heightened working capital turnover ratio post-2023 that suggests changes in operational efficiency or asset utilization. The interplay between these metrics signals a period of adjustment or restructuring that impacts the company's short-term asset management without impeding overall revenue expansion.

Inventory Turnover Ratio

The inventory turnover ratio demonstrates notable fluctuations throughout the analyzed periods. Beginning at 17.25 in September 2020, it rose sharply to 25.21 by December 2020, followed by a gradual decline to 15.10 by September 2022. A distinct upward trend emerges after this point, reaching a significant peak of 98.47 by June 2025, before slightly decreasing to 81.22 in September 2025. This pattern suggests periods of varying inventory efficiency, with particularly high turnover rates in the later periods, indicating accelerated sales or inventory management improvements.

Average Inventory Processing Period (Days)

The average inventory processing period inversely mirrors the inventory turnover trend, starting at 21 days in September 2020 and dropping to 14 days by December 2020. It then shows a gradual increase, peaking at 24 days in September 2022, followed by a distinct and sustained decline to 4 days starting from March 2025 onward. This reduction in processing time suggests enhanced operational efficiency and faster inventory cycles in the most recent quarters.

Overall Insights

The inverse relationship between the inventory turnover ratio and the average inventory processing period is evident, highlighting that as inventory turnover accelerates, the holding time for inventory decreases accordingly. The data indicates episodic volatility in inventory management efficiency from 2020 to 2022, followed by a strong and sustained improvement from late 2022 through mid-2025. This may reflect strategic initiatives to optimize inventory levels or respond to changing market demand dynamics.

The receivables turnover ratio exhibits a cyclical pattern over the analyzed quarters, fluctuating between higher and lower values. Generally, the ratio tends to peak approximately every alternate quarter, indicating periods of improved efficiency in collecting receivables. The lowest turnover ratios coincide with quarters where the average receivable collection period extends, suggesting slower collections.

The average receivable collection period, expressed in days, inversely mirrors the pattern observed in the receivables turnover ratio. Periods with elevated turnover ratios correspond to shorter collection days, reflecting quicker payment receipt from customers. Conversely, quarters with lower turnover ratios experience longer collection periods, indicating a delay in cash inflow.

Specifically, the receivables turnover fluctuates roughly between 4.03 and 6.49, while the average collection period ranges from approximately 56 to 91 days, further highlighting this inverse relationship. The cycles suggest some seasonality or recurring external factors impacting collection processes quarterly.

Overall, the company demonstrates variability in managing receivables efficiently over time, with notable recurring increases in collection periods potentially posing challenges to cash flow management during certain quarters. Monitoring and addressing the factors causing slower collections during these periods may contribute to stabilizing and improving the receivables turnover and the collection period.

Receivables Turnover Ratio

Fluctuates cyclically with peaks around alternate quarters; ranges roughly 4.03 to 6.49.

Average Receivable Collection Period

Inversely related to turnover ratio; ranges between 56 and 91 days, increasing when turnover decreases.

Observations

Consistent inverse relationship indicates efficiency in collections swings periodically. Variations may reflect seasonal or operational factors affecting receivables management.

The analysis of the quarterly financial data reveals several trends related to inventory processing, receivable collection, and the overall operating cycle over the observed period.

Average Inventory Processing Period

The average inventory processing period shows significant variation across quarters. Initially, it declined from 21 days to a low point of 14 days by December 2020, before rising gradually to a peak of 24 days in September 2022. Subsequently, there is a noticeable downward trend, reaching as low as 4 days by September 2024 through June 2025. This trend indicates improvements in inventory turnover efficiency towards the latter part of the period.

Average Receivable Collection Period

The receivable collection period fluctuates with a general pattern of periodic increases and decreases. Starting at 57 days in September 2020, it rises and falls throughout the quarters, with peaks around 83 to 91 days occurring intermittently in mid-2021, mid-2023, and mid-2025. Despite these fluctuations, the periods mostly hover between 56 and 70 days, suggesting variability in the collection efficiency but without a consistent long-term improvement or degradation trend.

Operating Cycle

The operating cycle, which sums inventory processing and receivable collection periods, broadly reflects the combined impact of these components. It begins at 78 days and exhibits spikes, such as 101 days in June 2021 and 103 days in June 2022, largely driven by increases in the receivable collection period and inventory days during those times. The latter quarters demonstrate a decline in the operating cycle, dropping to approximately 70 days by the middle of 2025, indicating an overall improvement in operational efficiency.

In summary, the data suggests a notable optimization in inventory management, as evidenced by the substantial reduction in inventory processing days toward the end of the period. However, the receivable collection period remains somewhat volatile without a clear directional trend. The operating cycle exhibits responsiveness to these underlying changes and ultimately trends downward, reflecting enhanced operational coordination and cycle time reduction.

The analysis of the payables turnover ratio and the average payables payment period over the observed quarters reveals several notable trends and fluctuations.

Payables Turnover Ratio

The payables turnover ratio exhibits a degree of variability across the time horizon. Initially, the ratio remains relatively stable around 3.7 to 3.8 from late 2020 to early 2021, suggesting consistent efficiency in settling payables. A decline is observed in the middle of 2021, reaching as low as 3.3, which indicates a slower turnover and potentially longer payment terms or delay in payments during that period. Thereafter, the ratio rebounds exceeding 4.2 by the end of 2022, reflecting accelerated payments to suppliers or improved management of payables. However, from early 2023 onwards, the ratio again declines, reaching its lowest levels near 2.82 by late 2025, implying a trend towards slower payment or increased credit terms. Overall, the pattern suggests fluctuating payment practices with a recent tendency towards lengthier payables settlement periods.

Average Payables Payment Period (in days)

The average number of days taken to settle payables generally mirrors the inverse trend of the turnover ratio. It starts near 96 to 98 days, then increases to a peak of 111 days mid-2021, aligning with the noted drop in payables turnover. Subsequently, the period shortens significantly to the mid-80s at the end of 2022, consistent with the improved turnover ratio observed during that interval. Beginning in early 2023, the payment period lengthens once more, reaching a maximum of 130 days by late 2025, the longest duration in the dataset. This increase corresponds with the declining payables turnover, indicating a strategic or operational shift towards extended payment terms or slower cash outflows towards suppliers.

In summary, the data demonstrates cyclical fluctuations in accounts payable management, with recently observable trends suggesting a deliberate extension of payment periods. Such behavior may be intended to optimize cash flow, but it also implies a decrease in the frequency of settling payables, which could affect supplier relationships or reflect changing credit conditions.

The financial data reveals notable trends in the company's working capital management over the examined periods. The analysis of inventory, receivables, payables, and the resulting cash conversion cycle reflects the company's operational efficiency and liquidity position.

Average Inventory Processing Period

The average inventory processing period showed fluctuations over the timeline, starting at 21 days and generally decreasing in later periods. Notably, the days decreased significantly in the most recent quarters to as low as 4 days, indicating improved inventory turnover and possibly more efficient inventory management practices.

Average Receivable Collection Period

The receivable collection period exhibited considerable variability, oscillating mainly between roughly 56 and 91 days. Peaks are observed periodically, indicating slower collections during certain quarters. Despite some reduction in recent quarters, the collection period remains relatively prolonged, which could impact cash inflows and liquidity.

Average Payables Payment Period

The payables payment period experienced moderate changes, with values mostly ranging from the mid-80s to around 130 days. There is an upward trend toward the later periods, reaching as high as 130 days. This suggests the company is extending its payment terms strategically to suppliers, potentially to preserve cash within the business.

Cash Conversion Cycle

The cash conversion cycle remained consistently negative throughout the timeline, which is generally positive as it indicates the company collects cash from sales before it needs to settle its payables. The cycle showed improvement in several quarters, reaching as low as -60 days, highlighting enhanced operational efficiency and strong working capital management in recent periods. However, some fluctuations imply intermittent inefficiencies or shifts in the balance between receivables, inventory, and payables.

Overall, the data suggests that the company has been increasingly effective in managing its inventory and payables while facing some challenges in receivables collection. The persistently negative cash conversion cycle reflects a favorable liquidity position, allowing the company to utilize supplier credit effectively while maintaining shorter inventory cycles. Continued attention to enhancing receivables collection could further improve financial flexibility.