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James Kingston

Accounting II
Shauna Hatfield
In this paper or report, I will be analyzing IBMs financial statements. I will use
ratios to determine if the companys risk, efficiency, profitability, and stockholder
relations.
Risk
The working capital for IBM is 9,822 for 2014 and 11,196 for 2013. The
current ratio is 1.25 for 2014 and 1.27 for 2013. The industry average is 1.86. It
shows that IBM can pay their current debts and liabilities almost the same good as
the industry. The debt ratio for IBM is 89% in 2014 and 82% in 2013. The times
interest earned ratio for IBM in 2014 is 29.73 and 42.00 in 2013. The industry
average is 2.9. IBM is able to pay their interest more in 2013 than in 2014 The
company is also able to pay its interest more than the industry.
Efficiency
The inventory turnover ratio shows how efficiently a business uses all of its
assets to make sells. IBM turned over their assets .76 times in 2014 and .80 times in
2013. The industry average is 17.56. The Days Sales in Inventory in 2014 is 16.87
and 11.30 for 2013. The industry average is 20.79. That means IBM turns their
inventory over sooner than the industry does. IBMs receivables turnover 97 times
in 2014 and 95 times 2013. The Days Sales in Receivables for IBM are 3.74 days in
2014 and 3.82 in 2013. That means that their days sales in receivables are less
than the industry average. IBMs Asset Turnover Ratio is .76 in 2014 and .80 in
2013. That shows that IBM turns over their assets .76 times in 2014 and .80 times
in 2013, which is less than the average industry of 1.6 times. Their free cash flow is

-2240 in 2014 and 304 in 2013. The price to free cash flow ratio is -1.88 in 2014 and
12.82 in 2013. The industry average is 30.2. That means that IBM had more cash
that came into the business in 2013 than 2014 and less than the industry average
in both years. The cash flow to assets ratio is 14% in 2014 and 13.8% in 2013. That
means that the business made more cash from operating activities in 2014 than
2013. The Cash flow per share ratio for IBM is 17.02 for 2014 and 16.59 for 2013.
The cash flow per share shows how much cash there is from operating activities for
every common share thats outstanding. IBM had a better Cash flow per share in
2014 than in 2013.

Profitability
The profit ratios show if IBM can use its money for investments or other
things. The ratios that determine the companys profit are profit margin, gross
margin, return on assets, return on common stockholders equity, earnings per
share, price-earnings ratio, and the payout ratio. The profit margin shows how much
profit comes from net sales. IBMs profit margin is 17% for 2013 and 13% for 2014.
This ratio show that they did better in 2013 than 2014. The gross margin is 71% in
2013 and 73% in 2014. That means that sales were good in both years, but the
sales were better in 2014. The return on assets ratio shows how much profit comes
from a companys assets. The ratio is 13.8% in 2013 and 10.3% in 2014. This shows
that the company received more profit from their assets in 2013 than in 2014. The
return on common stockholders equity show how much income is available to
common stockholders. For 2014, it was 11%, and for 2013, it was 16%. The return
on equity was more available to stockholders than last year. IBMs return on

stockholders equity is better than the industry average. The Earnings per share is
16.53 for 2014 and 16.28 for 2013. That is better than the industry average.
Stockholder and Investor Relations
The stockholders and Investor relations are anything that have to do
investing ratios or stock ratios. The Earnings per share for IBM is 16.53 in 2014 and
16.28. The industries earnings per share is 2.66. That means that IBM is doing
better than the industry in 2013 and 2014. The Price Earnings Ratio for IBM is 9.71
for 2014 and 11.52 for 2013. The industry average is 19.3. That shows that IBMs
2013 earnings has a higher stock market value than 2014. The industry has a higher
measurement from the stock market on its stocks than IBMs 2014 and 2013 Price
Earnings ratios. The Dividend yield for IBM is 2.64% in 2014 and 1.97% in 2013. The
industry average is 2.2% IBM had more dividends to stockholders in 2014 than in
2013, and the industry had more returns than in 2013. The dividend payout is
25.7% in 2014, 22.7% in 2013, and 42.1% for the industry. IBM returned more
dividends to investors in 2015 than in 2013, though the industry returns more to
investors than IBM.
After analyzing IBMs financial statements we can conclude many different
things. IBM is doing well on their risk ratios. IBM turns their inventory sooner than
the industry. Their free cash flow dropped really low in 2014. It was higher in 2013
at $304 of free cash flow. Though, they received more cash from operating activities
in 2014 than in 2013. IBM did less well making a profit in 2014 than 2013. IBMs
stock price is better than the industry average at 16.53 per share in 2014. Overall it
looks like IBM had a tough year, though its stocks did really good.

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