#Microsoft #cashflow #financials #profit #revenue
Hey there! π° Let’s dive into the world of Microsoft’s finances and see where all that money went! π
Understanding Microsoft’s Profit vs. Cash
When it comes to a company like Microsoft, it’s essential to distinguish between profit and cash. Profit refers to the amount of money a company earns before accounting for expenses, while cash is the actual liquid assets a company has on hand.
Profit Does Not Equal Cash
Just because Microsoft made $270 billion in profit over the last 3 years doesn’t mean they have all that money sitting in their bank account. Here are some reasons why their cash reserves might not reflect their profits:
1. **Investments and Acquisitions** π¦ Microsoft might have used some of its profits to invest in new technologies, acquire other companies, or expand its operations.
2. **Stock Buybacks and Dividends** πΈ The company could have returned some of its profits to shareholders through stock buybacks or dividends.
3. **Debt Payments** π³ Microsoft might have used some of its profits to pay off debts or loans.
Where Did the $190 Billion Go?
Now, let’s address the $190 billion gap between Microsoft’s profit and cash reserves. This difference could be due to a combination of the factors mentioned above. Additionally, Microsoft could have allocated some of its profits to:
– Research and Development for new products and innovations
– Marketing and advertising to promote their products
– Operating expenses such as salaries, utilities, and other day-to-day costs
In Conclusion
So, while Microsoft has made a significant profit over the last few years, the discrepancy between their profit and cash reserves is a result of various financial decisions and investments. It’s essential to consider the bigger picture of a company’s financial health beyond just looking at their profits. π‘
Feel free to reach out if you have any more questions or need further clarification! π¬ #Microsoft #financialstrategy #businessgrowth
Probably investments so they can write that off from taxable assets. Better to invest your money again, than give it to the government
Investments. No point in hoarding cash beyond what you need as liquid assets – it gets taxed.
Part of it is acquisitions. Eg: Activision Blizzard for $68 billion. Cash lΓΆses value over time while acquisitions should, in theory, make money, especially if they have synergy with the rest of the business.
Cash is an asset that goes on the balance sheet. Profit is revenue minus expenses, which go on the income statement. Profit doesnβt always equal increase in cash at the end.
For example, letβs say you built a table.
– Your cost to build the table was $50, and you sold it for $90. Your profit is $40, and you have now $90 in cash.
– Now you decide you want to upgrade your equipment, so you buy that for $80, leaving you with only $10 in cash.
– The $80 goes on the balance sheet as an asset, plus the $10 cash. And the profit on the income statement stays the same as $40 ($90 in revenue, $50 in expenses).
Edit: by the way, thereβs a βstatement of cash flowsβ in their annual filings that shows you **exactly** where the cash goes. So you can Google that for the past 3 years and look at it.
Why would Microsoft keep cash? Cash is a really bad way to keep your money. It loses value with inflation. If you use money to put elsewhere, then that money gives you a return. Much better.
It went into investments, philanthropic donations, probably returns on dividends as well. You donβt just leave cash sitting there.
Idk anything about Microsoft but likely assets and investments. Land, buildings, new tech, etc. Investments into stocks. Reinvesting in the company, such as hiring more workers, experimenting on new tech, etc. Paying their CEO ludicrous amounts of money, too, Iβd say.
Salaries. New buildings (have you seen their new campus, with the 8800 space four-story underground parking garage?). Data centers arenβt cheap and have huge operating costs. Free beverages in office buildings.
Maybe investments like science or new infrastructuresβ¦.
They opened 120 new data centers in one year and spent billions on GPUs to support their AI efforts.
do
do you think that all company profits just go into a piggy bank and aren’t used for anything
Check the cashflow statement in their annual report that states the cash they got in and that went out.
As a Dutch accountant it’s interesting to read these replies on posts like this one. Tax structures work similar in most countries, but there are so many differences when you start to look int other different tax structures.
You can also see the difference in the saving/loaning culture for personal finance. So just the warning for everybody who reads this, take the advice on here with a grain of salt.
Cash in your hand makes $0 profit. Cash invested makes money. Cash invested reduces taxes.
Assets.
Microsoft has $88 billion in cash, which is likely their determined optimal amount. It’s bad to have no cash, but it’s also bad to have too much.
Debt payments, investments, and dividends. $270 billion is a lot to keep on hand in a liquid state. Microsoft can take part of their profit and pay off any debt they’ve secured to financing construction of campuses. Investments can be other stocks and companies, or improvements to their current buildings such a remodels. Dividends to shareholders are self-explanatory.
Investment
I think that it’s a common misconception to think that people and businesses which are making a lot of money just sit on that money. Most often, they spend that money. For businesses, that is usually spent in an attempt to make more and better products for consumers. There are some assets kept on hand to weather market shifts and unexpected problems, but in general, they use that money to make things better for themselves, and in a free market, that means better for the economy and those in it. In a sense, the majority of that $190B is being distributed at some point into the pockets of people like yourself.
Goes through the double Irish with a Dutch twist tax loop hole, like all corps do
– acquisitions (activision)
– dividends
– stock buybacks
– some companies put some of their excess cash in short term bonds
– investments in other companies. E.g. Open AI
– capital investments (purchasing assets, RnD expenses)
– debt repayments
Not sure how good you are when accounting – and not an issue if your aren’t, you should learn about cash flow statements and income statements.
Dividend payments on stock, stock buybacks, or paying out dividends on stocks they are short on, investment losses, etc.
No company just sits on their cash stack like a greedy dragon – that would be insane!
They typically either reinvest into the company, new machines or trainings maybe. Otherwise they usually release profits as a dividend to investors, this increases their happiness and hopefully draws in new capital and obviously happy shareholders.
Capital expenditure, dividends and other capital management programmes like buybacks
Cash isn’t considered WORKING captial because it’s doing nothing… so you normally invest in things (like OPENAI).. or more IP or real estate etc… but as everyone else is saying, cash isn’t cash π
Up Bill Gatesβ nose.
Reinvestment, stock buybacks, dividends