Microsoft Bonds

MSFT Stock

USD 328.39 2.82 0.85%

Microsoft's financial leverage is the degree to which the firm utilizes its fixed-income securities and uses equity to finance projects. Companies with high leverage are usually considered to be at financial risk. Microsoft's financial risk is the risk to Microsoft stockholders that is caused by an increase in debt. In other words, with a high degree of financial leverage come high-interest payments, which usually reduce Earnings Per Share (EPS).

Check out the analysis of Microsoft Fundamentals Over Time. For more information on how to buy Microsoft Stock please use our How to Invest in Microsoft guide.

Microsoft Debt Current is comparatively stable at the moment as compared to the past year. Microsoft reported Debt Current of 3.16 Billion in 2022. Long Term Debt to Equity is likely to gain to 0.31 in 2023, whereas Issuance Repayment of Debt Securities is likely to drop (8.3 B) in 2023.

Microsoft Current Financial Burden

Microsoft's liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Microsoft's cash, liquid assets, total liabilities, and shareholder equity can be utilized to evaluate how much leverage the company is using to sustain its current operations. For traders, higher-leverage indicators usually imply a higher risk to shareholders. In addition, it helps Microsoft Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Microsoft's stakeholders.

Asset vs Debt

Equity vs Debt

For most companies, including Microsoft, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running Microsoft the most critical issue when dealing with liquidity needs is whether the current assets are properly aligned with its current liabilities. If not, management will need to obtain alternative financing to ensure that there are always enough cash equivalents on the balance sheet in reserve to pay for obligations.

Price Book

11.0473

Other Assets

21.9 B

Liabilities And Stockholders Equity

364.8 B

Total Assets

364.8 B

Operating Margin

0.4142

Given that Microsoft's debt-to-equity ratio measures a company's obligations relative to the value of its net assets, it is usually used by traders to estimate the extent to which Microsoft is acquiring new debt as a mechanism of leveraging its assets. A high debt-to-equity ratio is generally associated with increased risk, implying that it has been aggressive in financing its growth with debt. Another way to look at debt-to-equity ratios is to compare the overall debt load of Microsoft to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Microsoft is said to be less leveraged. If creditors hold a majority of Microsoft's assets, the company is said to be highly leveraged.

Microsoft Quarterly Debt to Equity Ratio

0.952

Microsoft Valuation Risk

Given the importance of Microsoft's capital structure, the first step in the capital decision process is for the management of Microsoft to decide how much external capital it will need to raise to operate in a sustainable way. Once the amount of financing is determined, management needs to examine the financial markets to determine the terms in which the company can boost capital. This move is crucial to the process because the market environment may reduce the ability of Microsoft to issue bonds at a reasonable cost.

Microsoft Bond Ratings

Microsoft bond ratings play a critical role in determining how much Microsoft have to pay to access credit markets, i.e., the amount of interest on their issued debt. The threshold between investment-grade and speculative-grade ratings has important market implications for Microsoft's borrowing costs.

Piotroski F Score

4 Poor

Beneish M Score

-2.55 Unlikely Manipulator

Microsoft Debt to Cash Allocation

As Microsoft follows its natural business cycle, the capital allocation decisions will not magically go away. Microsoft's decision-makers have to determine if most of the cash flows will be poured back into or reinvested in the business, reserved for other projects beyond operational needs, or paid back to stakeholders and investors. Many companies eventually find out that there is only so much market out there to be conquered, and adding the next product or service is only half as profitable per unit as their current endeavors. Eventually, the company will reach a point where cash flows are strong, and extra cash is available but not fully utilized. In this case, the company may start buying back its stock from the public or issue more dividends.

The company currently holds 47.03 B in liabilities with Debt to Equity (D/E) ratio of 0.44, which is about average as compared to similar companies. Microsoft has a current ratio of 1.8, which is within standard range for the sector. Debt can assist Microsoft until it has trouble settling it off, either with new capital or with free cash flow. So, Microsoft's shareholders could walk away with nothing if the company can't fulfill its legal obligations to repay debt. However, a more frequent occurrence is when companies like Microsoft sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Microsoft to invest in growth at high rates of return. When we think about Microsoft's use of debt, we should always consider it together with cash and equity.

Microsoft Inventories Over Time

Microsoft Assets Financed by Debt

The debt-to-assets ratio shows the degree to which Microsoft uses debt to finance its assets. It includes both long-term and short-term borrowings maturing within one year. It also includes both tangible and intangible assets, such as goodwill.

Microsoft Debt Ratio

19.06

It appears most of the Microsoft's assets are financed through equity. Typically, companies with high debt-to-asset ratios are said to be highly leveraged. The higher the ratio, the greater risk will be associated with the Microsoft's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Microsoft, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a Microsoft debt ratio should be compared their industry average or other competing firms.

Microsoft Corporate Bonds Issued

Microsoft issues bonds to finance its operations. Corporate bonds make up one of the most significant components of the U.S. bond market and are considered the world's largest securities market. Microsoft uses the proceeds from bond sales for a wide variety of purposes, including financing ongoing mergers and acquisitions, buying new equipment, investing in research and development, buying back their own stock, paying dividends to shareholders, and even refinancing existing debt. Most Microsoft bonds can be classified according to their maturity, which is the date when Microsoft has to pay back the principal to investors. Maturities can be short-term, medium-term, or long-term (more than ten years). Longer-term bonds usually offer higher interest rates but may entail additional risks.

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Microsoft Historical Liabilities

While analyzing the current debt level is an essential aspect of forecasting the current year budgeting needs of Microsoft, understanding its historical liability is critical in projecting Microsoft's future earnings, especially during periods of low and high inflation and deflation. Many analysts look at the trend in assets and liabilities and evaluate how Microsoft uses its financing power over time.

In order to fund their growth, businesses such as Microsoft widely use Financial Leverage. For most companies, financial capital is raised by issuing debt securities and by selling common stock. The debt and equity that make up Microsoft's capital structure have many risks and return implications. Leverage is an investment strategy of using borrowed money to increase the potential return of an investment. Please note, the concept of leverage is common in the business world. It is mostly used to boost the returns on equity capital of a company, especially when the business is unable to increase its operating efficiency and returns on total investment. Because earnings on borrowing are higher than the interest payable on debt, the company's total earnings will increase, ultimately boosting stockholders' profits.

Understaning Microsoft Use of Financial Leverage

Microsoft financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Microsoft's total debt position, including all of outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of Microsoft assets, the company is considered highly leveraged. Understanding the composition and structure of overall Microsoft debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business and if it is worth investing in it.

	Last Reported	Projected for 2023
Total Debt	70.5 B	68.2 B
Debt Current	3.2 B	4.9 B
Debt Non Current	67.3 B	63.3 B
Issuance Repayment of Debt Securities	-8.1 B	-8.3 B
Long Term Debt to Equity	0.25	0.31
Debt to Equity Ratio	1.37	1.53

Please read more on our technical analysis page.

Microsoft Investors Sentiment

The influence of Microsoft's investor sentiment on the probability of its price appreciation or decline could be a good factor in your decision-making process regarding taking a position in Microsoft. The overall investor sentiment generally increases the direction of a stock movement in a one-year investment horizon. However, the impact of investor sentiment on the entire stock market does not have solid backing from leading economists and market statisticians.

Investor biases related to Microsoft's public news can be used to forecast risks associated with an investment in Microsoft. The trend in average sentiment can be used to explain how an investor holding Microsoft can time the market purely based on public headlines and social activities around Microsoft. Please note that most equities that are difficult to arbitrage are affected by market sentiment the most.

Microsoft's market sentiment shows the aggregated news analyzed to detect positive and negative mentions from the text and comments. The data is normalized to provide daily scores for Microsoft's and other traded tickers. The bigger the bubble, the more accurate is the estimated score. Higher bars for a given day show more participation in the average Microsoft's news discussions. The higher the estimated score, the more favorable is the investor's outlook on Microsoft.

Microsoft Implied Volatility

26.62

Microsoft's implied volatility exposes the market's sentiment of Microsoft stock's possible movements over time. However, it does not forecast the overall direction of its price. In a nutshell, if Microsoft's implied volatility is high, the market thinks the stock has potential for high price swings in either direction. On the other hand, the low implied volatility suggests that Microsoft stock will not fluctuate a lot when Microsoft's options are near their expiration.

Some investors attempt to determine whether the market's mood is bullish or bearish by monitoring changes in market sentiment. Unlike more traditional methods such as technical analysis, investor sentiment usually refers to the aggregate attitude towards Microsoft in the overall investment community. So, suppose investors can accurately measure the market's sentiment. In that case, they can use it for their benefit. For example, some tools to gauge market sentiment could be utilized using contrarian indexes, Microsoft's short interest history, or implied volatility extrapolated from Microsoft options trading.

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Check out the analysis of Microsoft Fundamentals Over Time. For more information on how to buy Microsoft Stock please use our How to Invest in Microsoft guide. Note that the Microsoft information on this page should be used as a complementary analysis to other Microsoft's statistical models used to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

Complementary Tools for Microsoft Stock analysis

When running Microsoft's price analysis, check to measure Microsoft's market volatility, profitability, liquidity, solvency, efficiency, growth potential, financial leverage, and other vital indicators. We have many different tools that can be utilized to determine how healthy Microsoft is operating at the current time. Most of Microsoft's value examination focuses on studying past and present price action to predict the probability of Microsoft's future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Microsoft's price. Additionally, you may evaluate how the addition of Microsoft to your portfolios can decrease your overall portfolio volatility.

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Is Microsoft's industry expected to grow? Or is there an opportunity to expand the business' product line in the future? Factors like these will boost the valuation of Microsoft. If investors know Microsoft will grow in the future, the company's valuation will be higher. The financial industry is built on trying to define current growth potential and future valuation accurately. All the valuation information about Microsoft listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.

Quarterly Earnings Growth

0.104

Dividend Share

2.66

Earnings Share

9.22

Revenue Per Share

27.844

Quarterly Revenue Growth

0.071

The market value of Microsoft is measured differently than its book value, which is the value of Microsoft that is recorded on the company's balance sheet. Investors also form their own opinion of Microsoft's value that differs from its market value or its book value, called intrinsic value, which is Microsoft's true underlying value. Investors use various methods to calculate intrinsic value and buy a stock when its market value falls below its intrinsic value. Because Microsoft's market value can be influenced by many factors that don't directly affect Microsoft's underlying business (such as a pandemic or basic market pessimism), market value can vary widely from intrinsic value.

Please note, there is a significant difference between Microsoft's value and its price as these two are different measures arrived at by different means. Investors typically determine if Microsoft is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Microsoft's price is the amount at which it trades on the open market and represents the number that a seller and buyer find agreeable to each party. Check out the analysis of Microsoft Fundamentals Over Time. For more information on how to buy Microsoft Stock please use our How to Invest in Microsoft guide.

What is Financial Leverage?

Financial leverage is the use of borrowed money (debt) to finance the purchase of assets with the expectation that the income or capital gain from the new asset will exceed the cost of borrowing. In most cases, the debt provider will limit how much risk it is ready to take and indicate a limit on the extent of the leverage it will allow. In the case of asset-backed lending, the financial provider uses the assets as collateral until the borrower repays the loan. In the case of a cash flow loan, the general creditworthiness of the company is used to back the loan. The concept of leverage is common in the business world. It is mostly used to boost the returns on equity capital of a company, especially when the business is unable to increase its operating efficiency and returns on total investment. Because earnings on borrowing are higher than the interest payable on debt, the company's total earnings will increase, ultimately boosting stockholders' profits.

Leverage and Capital Costs

The debt to equity ratio plays a role in the working average cost of capital (WACC). The overall interest on debt represents the break-even point that must be obtained to profitability in a given venture. Thus, WACC is essentially the average interest an organization owes on the capital it has borrowed for leverage. Let's say equity represents 60% of borrowed capital, and debt is 40%. This results in a financial leverage calculation of 40/60, or 0.6667. The organization owes 10% on all equity and 5% on all debt. That means that the weighted average cost of capital is (.4)(5) + (.6)(10) - or 8%. For every $10,000 borrowed, this organization will owe $800 in interest. Profit must be higher than 8% on the project to offset the cost of interest and justify this leverage.

Benefits of Financial Leverage

Leverage provides the following benefits for companies:

Leverage is an essential tool a company's management can use to make the best financing and investment decisions.
It provides a variety of financing sources by which the firm can achieve its target earnings.
Leverage is also an essential technique in investing as it helps companies set a threshold for the expansion of business operations. For example, it can be used to recommend restrictions on business expansion once the projected return on additional investment is lower than the cost of debt.

By borrowing funds, the firm incurs a debt that must be paid. But, this debt is paid in small installments over a relatively long period of time. This frees funds for more immediate use in the stock market. For example, suppose a company can afford a new factory but will be left with negligible free cash. In that case, it may be better to finance the factory and spend the cash on hand on inputs, labor, or even hold a significant portion as a reserve against unforeseen circumstances.

The Risk of Financial Leverage

The most obvious and apparent risk of leverage is that if price changes unexpectedly, the leveraged position can lead to severe losses. For example, imagine a hedge fund seeded by $50 worth of investor money. The hedge fund borrows another $50 and buys an asset worth $100, leading to a leverage ratio of 2:1. For the investor, this is neither good nor bad -- until the asset price changes. If the asset price goes up 10 percent, the investor earns $10 on $50 of capital, a net gain of 20 percent, and is very pleased with the increased gains from the leverage. However, if the asset price crashes unexpectedly, say by 30 percent, the investor loses $30 on $50 of capital, suffering a 60 percent loss. In other words, the effect of leverage is to increase the volatility of returns and increase the effects of a price change on the asset to the bottom line while increasing the chance for profit as well.

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Microsoft Bonds

Microsoft Current Financial Burden

Asset vs Debt

Equity vs Debt

Microsoft Quarterly Debt to Equity Ratio

0.952

Microsoft Bond Ratings

Microsoft Debt to Cash Allocation

Microsoft Inventories Over Time

Microsoft Assets Financed by Debt

Microsoft Debt Ratio

Microsoft Corporate Bonds Issued

Microsoft Historical Liabilities

Understaning Microsoft Use of Financial Leverage

Microsoft Investors Sentiment

Microsoft Implied Volatility

Becoming a Better Investor with Macroaxis

Build Optimal Portfolios

Align your risk with return expectations

Complementary Tools for Microsoft Stock analysis

What is Financial Leverage?

Leverage and Capital Costs

Benefits of Financial Leverage

The Risk of Financial Leverage

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