Question

In 2016, Microsoft had $16.8 billion of net income. Why did stockholder’s equity decline by about...

In 2016, Microsoft had $16.8 billion of net income. Why did stockholder’s equity decline by about $8 billion?

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Answer #1

The stockholders' equity decline by about $8 billion is on account of decrease in Retained earnings and Other comprehensive income. The retained earnings has been decreased in 2016 because of Stock Repurchase and Cash dividends. Eventhough the net income is about $16.8 billion, the stock repurchase and cash dividends are about $ 23.6 billion. Due to other comprehensive loss of about $1 billion, there was a decline in the stockholders' equity by about $8 bilion.

Note: The financials are taken from the financial statements of Microsoft.

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