IBM Financial Statements and Financial Ratios Analyzed
Thanks for visiting my IBM Financial Report page. On this page, you will be able to find preliminary information about IBM's current financial performance as well as some historical track records and trends.
For a more detailed examination of IBM's financial performance, please check out the "Financial Report". In this report, written by myself, Paul Borosky, MBA., Doctoral Candidate, and published author, you will find:
- Summarized income statement for the last 5 years.
- Summarized balance sheet for the last 5 years.
- Summary analysis by myself of important income statement, balance sheet, and financial ratio trends and other happenings.
- Five year’s worth of over twenty common financial ratios presented with formulas, calculations, and analysis tips for each ratio.
- Line by line description, explanation, and analysis tip for most financial statement line items and financial ratios.
- Professional financial analysis tips provided in each section to help YOU conduct your OWN financial analysis!
- Each section includes an “in other words” segment. This is were I use plain English to explain concepts.
Enjoy the preliminary information and for a more detailed analysis, buy the financial report!
- Free Bonus Downloads: Annual Statements for the Last Five Years (10k reports)!
Sample Financial Report
IBM: Brief Summary
IBM has its headquarters at 1 New Orchard Rd. in Armonk, New York. The company competes in the information technology services segment of the US and global industry. As for the specific sector, the company claims to compete in the technology segment. At present, IBM employs approximately 350,000 individuals.
As for a current financial perspective, the company’s 52-week stock range has been between $90-$158. The firm’s beta is 1.27. This indicates that the company has a slightly higher risk as compared to the overall market. The firm has reached a market cap of $105 billion. Finally, the firm does pay dividends quarterly.
IBM Financial Report Sources
“IBM 2019 Company Analysis: Financial Statements and Financial Ratios: Defined, Discussed, and Analyzed for 5 Years” was written by, Paul Borosky, MBA. and owner of Quality Business Plan. In this book, the author selected IBM's 2019 10k, 2017 10k annual report, 2016 10k annual report, 2015 10k annual report, and IBM's 2019 10k annual report as the basis for information gathering.
Section 1: IBM Income Statement Analyzed 2015 to 2019
In this section, I walk through a broad definition as to what an income statement is and why it is important. From this, I then discuss and define income statement line items, such as revenues, gross profits, etc. in detail. After each line item is defined and discussed, I finally offer a summary analysis of IBM’s important income statement line item trends from 2015 to 2019, in most cases.
IBM Revenue Growth.
In the last five years, the company has gone from $81.7 billion in revenues to 77.1 billion. This continuous drop in revenues shows that the firm may not be as innovative as other organizations competing in the technology sector. To mitigate this issue, IBM may consider acquiring cutting-edge startups. Or, the firm may use its resources to attract and retain higher skilled technological workers.
IBM Cost of goods sold.
IBM’s cost of goods sold, as a percentage of revenues, has gone from 50% in 2015 to 53.6% in 2018. This indicates that either the management team is not doing as good of a job negotiating raw material costs. Or, the organization is not able to pass on the increased cost to consumers because of elevated industry competition. Fortunately, though, in 2019, the cost of goods as compared to revenues did fall slightly to 52.7%.
IBM Income Statement Summary 2019
|R & D||5,989||5,379||5,590||5,726||5,247|
Section 2: IBM Balance Sheet Analyzed from 2015 to 2019
For IBM's balance sheet, I again go through each important line item from the balance sheet. In reviewing each line item, I will define IBM’s balance sheet line item, such as cash, property, plant and equipment, and liabilities between 2015 to 2019. Next, I then offer an analysis of IBM’s balance sheet important line items.
IBM Cash Position.
IBM’s cash position slightly increased from 2015 to 2019. In 2015, the cash position was $7.6 billion. In 2018, this increased substantially to 11.4 billion. However, there was a slight decrease in 2019 to 8.1 billion. A hefty cash position may be needed for this organization due to its continued decline in revenues. By holding a significant cash position, the firm can show liquidity in short to moderate term. The strategy should be upheld for the foreseeable future.
IBM Accounts receivable.
IBM has done an excellent job of keeping their accounts receivable at approximately 10% of sales. This shows that the firm has optimized its collection procedures to ensure timely payments by vendors. However, the company may wish to loosen its credit policies. By doing this, the firm may be able to generate additional revenues for the organization.
IBM Summary Balance Sheet 2019
|Short Term Investment||696||618||608||701||508|
|LT Debt - Current||-||-||-||-|
|Total Current Liabilities||37,701||38,227||37,363||36,275||34,269|
|Total Equity & Liability||152,186||123,382||125,356||117,470||110,495|
Section 3: IBM Financial Ratios Analyzed from 2015 to 2019
For this final section, I have chosen about 16 different financial ratios to calculate for IBM from 2015 to 2019. I also review some important IBM's financial ratios. I first start with defining the financial ratio. Next, I supply the financial formulas for calculating the specific ratio. Finally, I offer a brief analysis of important financial ratios.
IBM Current Ratio.
IBM’s current ratio ended in 2015 at 1.24. In the next five years, their current ratio would fall to 1.02 and 2019. As noted previously, the gold standard for the current ratio is 1.0. By bringing their current ratio in line with the standard, the company is telling investors that they have enough funds to be solving for short to moderate term. Further, this also indicates to investors that the company is attempting to better optimize the usage of cash by only holding enough funds to cover annual expenses.
IBM Total Asset Turnover.
IBM’s total asset turnover ended 2015.74. As of 2019, their total asset turnover fell to .51. This shows that the company is continually underutilizing their total assets. To mitigate this issue, the firm may wish to divest or sell underperforming assets or buildings that are not optimally used. Also, reducing their cash position to slightly below 1.0 as a current ratio could assist in improving the total asset turnover for the organization.
IBM Return on Equity.
As with most mature companies, IBM has taken on substantial debt to drive up there return on equity. In 2015, the company’s return on equity was a mind-blowing 91.4%. In the next five years, the return on equity would fall to 44.9%. Regardless, for a company that has sales falling continuously, this is still an above-average return on equity for the industry sector. Unfortunately, though, if the company is not using equity to finance growth, then they are using debt. With debt comes elevated risk from the leverage.
IBM Debt ratio.
The company’s debt ratio in 2015 was approximately 30%. In the next five years, the debt ratio would climb to 35.5%. When a company has increased debt and falling revenues, this indicates that the strategy cannot go on forever. There’s just no way for a company to be able to handle increased debt payments while the revenues are falling off. Because of this, the executive team needs to shift strategies to focus more on equity financing and growth as compared to utilizing leverage to elevate return on equity performances.
IBM 2019 Liquidity Ratios
|Net Working Capital||5,569||7,579|
IBM 2019 Asset Utilization
|Total Asset Turnover||0.51||0.65|
|Fixed Asset Turnover||7.71||7.38|
|Days Sales Outstanding||37.23||34.08|
|Accounts Receivable Turnover||9.80||10.71|
|Working Capital Turnover||13.85||10.50|
|Average Days Inventory||0.13||0.13|
|Average Days Payable||0.04||0.03|
IBM 2019 Profitability Ratios
|Return on Assets||6.20%||7.07%|
|Return on Equity||44.94%||51.53%|
|Net Profit Margin||12.22%||10.96%|
|Gross Profit Margin||47.30%||46.41%|
|Operating Profit Margin||13.18%||13.34%|
|Basic Earning Power||6.68%||8.61%|
IBM 2019 Long-term Debt
|Times Interest Earned||7.56||14.69|