MSFT — Microsoft Corp.

Will it survive?

• Can it pay its interest? 43.8×
  Comfortable
  Operating income $128.5B ÷ interest expense $2.9B

  Operating profit covers interest with the kind of margin Graham wanted for a defensive holding. Necessary, not sufficient — it says solvent, not cheap.

• How heavy is the debt? 0.3×
  Conservative
  Total debt $43.2B ÷ operating income $128.5B

  Years of operating profit it would take to repay all debt. A first read, not a credit rating: it's gross debt (not netted against cash) over EBIT (not EBITDA), and a cyclical year distorts it.

• How long is cash tied up? -21d
  Negative — funded by others
  DSO 91 + DIO 4 − DPO 115 days

  Days cash is tied up between paying suppliers and collecting from customers. A negative cycle is a quiet moat: suppliers and customers fund the operation (Buffett's “float”) — the company grows on other people's money.

Is it a good business?

• Return on invested capital 30%
  Exceptional
  NOPAT $105.9B ÷ invested capital $356.4B (debt + equity − cash)

  The rate the business earns on the money tied up in it — Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; below ~8% the company may destroy value as it grows. Asset-light businesses (R&D expensed, little capital) read artificially high — pair this with Owner Earnings.

• Owner Earnings (free cash) margin 25%
  Cash machine
  Owner Earnings $71.6B = operating cash $136.2B − capex $64.6B

  What an owner could take out without starving the business. That's 25% of revenue. Treating stock comp as the real expense it is (less $12.0B of SBC) leaves $59.6B. Honest caveat: capex here blends maintenance and growth, so steady-state Owner Earnings may run higher (see capex vs. depreciation).

• Are earnings backed by cash? 1.34×
  Cash-backed
  Cash from ops $136.2B ÷ net income $101.8B

  How much of reported profit showed up as operating cash. Above 1× is reassuring; well below suggests earnings lean on accruals. One year is noisy — growth and working-capital swings distort it, and this is operating cash, not free cash. Watch the multi-year trend.

How is the cash used?

• Where do the earnings go? 59%
  Returns about half
  Dividends + buybacks $42.5B ÷ Owner Earnings $71.6B

  Of $71.6B Owner Earnings, $42.5B (59%) went back to shareholders — $24.1B dividends, $18.4B buybacks. Net of $12.0B stock comp, the real buyback was about $6.4B. Returning most of it signals a mature cash machine; reinvesting most could mean a long runway — or empire-building. The split doesn't say which; the return earned on it (see ROIC) does.

• Investing or harvesting? —
  Not enough data

  The filing data didn't include the inputs for this check.

Durability — 2018–2025

A moat is high return that doesn’t fade. Here are the quality metrics across a full cycle — judge the consistency, not the latest dot.

• Return on invested capital ≥15% in 7 of 8 years
  30%
• Operating margin
  46%
• Owner Earnings margin
  25%