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    Financial Statement Analysis of Ibm (Real)

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    Maneet Singh
    Financial statement analysis is used to evaluate the financial health and performance of a company. It involves selecting relevant data from financial statements, organizing it methodically, and interpreting it to draw conclusions. Key steps include comparing financial ratios over time and across companies to identify trends in liquidity, asset use, debt levels, profitability, and shareholder returns. The analysis found that the company's sales, profits, and profitability ratios have generally increased in recent years, suggesting sound financial management. However, debt levels and fixed assets have also risen, and equity has declined, so the company could consider ways to strengthen its balance sheet.

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    Financial Statement Analysis of Ibm (Real)

    Uploaded by

    Maneet Singh
    659 views15 pages
    Financial statement analysis is used to evaluate the financial health and performance of a company. It involves selecting relevant data from financial statements, organizing it methodically, and interpreting it to draw conclusions. Key steps include comparing financial ratios over time and across companies to identify trends in liquidity, asset use, debt levels, profitability, and shareholder returns. The analysis found that the company's sales, profits, and profitability ratios have generally increased in recent years, suggesting sound financial management. However, debt levels and fixed assets have also risen, and equity has declined, so the company could consider ways to strengthen its balance sheet.

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    Financial statement analysis is used to evaluate the financial health and performance of a company. It involves selecting relevant data from financial statements, organizing it methodically, and interpreting it to draw conclusions. Key steps include comparing financial ratios over time and across companies to identify trends in liquidity, asset use, debt levels, profitability, and shareholder returns. The analysis found that the company's sales, profits, and profitability ratios have generally increased in recent years, suggesting sound financial management. However, debt levels and fixed assets have also risen, and equity has declined, so the company could consider ways to strengthen its balance sheet.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    659 views15 pages

    Financial Statement Analysis of Ibm (Real)

    Uploaded by

    Maneet Singh
    Financial statement analysis is used to evaluate the financial health and performance of a company. It involves selecting relevant data from financial statements, organizing it methodically, and interpreting it to draw conclusions. Key steps include comparing financial ratios over time and across companies to identify trends in liquidity, asset use, debt levels, profitability, and shareholder returns. The analysis found that the company's sales, profits, and profitability ratios have generally increased in recent years, suggesting sound financial management. However, debt levels and fixed assets have also risen, and equity has declined, so the company could consider ways to strengthen its balance sheet.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    of 15

    Financial Statement Analysis

    Financial statements are prepared for decision making. Financial analysis is the
    processes identifying the financial strengths and weaknesses of the firm by
    properly establishing relationship between the items of the balance sheet and profit
    and loss account. There are various methods or techniques used in analyzing
    financial statements, such as comparative statements, trend analysis, common size
    statements, and schedule of changes in working capital.

    Financial statement analysis is largely a study of relationship among various


    financial factors in a business are disclosed by a single set of statements and the
    trend of these factors are shown in a series of statements.

    The purpose of financial analysis is to diagnose the information contained in


    financial statements so as to judge the profitability and financial soundness of the
    firm. Financial statement analysis is an attempt to determine the significance and
    meaning to the financial statements data so that forecast may be made of the future
    financial position and performance.

    Broadly speaking there are three steps involved in the analysis of financial
    statements. These are:

    o Selection

    o Classification

    o Interpretation

    The first step involves selection of information relevant to the purpose of analysis
    of financial statements. The second step involved methodical classification of data
    and the third step includes drawing of interpretations and conclusions.
    Data Analysis

    Ratio Analysis
    Liquidity Ratio: -
    Current Ratio: - Current Assets
    Current Liabilities

    Current 2008 2007 2006 2005 2004


    Ratio

    Current 49004 53177 44660 45,66 47,14


    Assets 1 3

    Current 42435 44310 40091 3515 39786


    Liabilitie 2
    s
    Ratios 1.15 1.20 1.11 1.29 1.18
    Interpretation: The current ratio is fluctuating from
    2004 to2008 due to decrease in current assets and
    current liabilities. The company has maintained credibility
    for all five years. In all the years the current liabilities are
    easily met with current assets so the business is able to
    pay current obligations.

    Quick Ratio: - Current Assets – Inventory – Prepaid


    Expenses Current
    Liabilities

    Quick 2008 2007 2006 2005 2004


    Ratio
    Current 49004 53177 44660 45661 47143
    Assets
    Inventor 2701 2664 2810 2841 3316
    y
    Prepaid 4299 3891 2539 2941 2708
    Expens
    es
    Ratio 0.98 1.05 0.98 1.46 1.33

    Interpretation: The quick ratio is fluctuating from 1.33,


    1.46 to 0.98due to fluctuations in quick assets and
    current liabilities.

    Activity Ratio: -

    Inventory turnover ratio: - Net sales / Inventory.

    Invento 2008 2007 2006 2005 2004


    ry
    turnove
    r ratio
    Net sales 10363000 98786000 91424000 911340 962250
    0 00 00
    Inventor 2701000 2664000 2810000 284100 331600
    y 0 0
    Ratio 38.36 37.08 32.53 32.07 29.01
    Interpretation: The inventory turnover ratio is
    increasing from 29.01 to 38.96 so the sales the company
    increased and the inventory stock level decreased from
    3316000 to2701000.

    Working capital ratio = Net sales/Avg working capital.

    Working 2008 2007 2006 2005 2004


    capital
    ratio
    Net sales 10363000 9878600 9142400 911340 962250
    0 0 0 00 00
    Avg 6569000 8867000 4569000 105090 735700
    working 00 0
    capital
    Ratio 15.77 11.14 20.00 8.67 13.07

    Working capital = current assets – current liabilities


    Interpretation: Working capital ratio had increased from
    13.07 to 15.77 from 2004 to 2008, which indicates
    working capital is utilized in more efficient manner
    inspi9ne of some fluctuations.

    Solvency ratio:-

    Debt equity ratio: - Long term debt / Equity

    Debt 2008 2007 2006 2005 2004


    equity
    ratio
    Long 22689000 23039000 13780000 154250 148280
    term 00 00
    debt
    Equity 13465000 28470000 28506000 330980 316880
    00 00
    Ratio 1.68 0.80 0.48 0.46 0.46
    Interpretation: Debt equity ratio is increasing from
    0.46 to 1.68 i.e. increase in every year which indicates
    company is increasing its goodwill every year.

    Equity ratio: - Total shareholders equity / Total Assets.

    Equity 2008 2007 2006 2005 2004


    ratio

    Total 1346500 2847000 2850600 3309800 3168800


    sharehold 0 0 0 0 0
    ers equity
    Total 1095240 1204310 1032340 1057480 1110030
    Assets 00 00 00 00 00

    Ratio 0.12 0.23 0.27 0.31 0.28


    Interpretation: Equity ratio is total resource of the company
    is decreasing from 2006 t0 2008 due to decrease in total share
    holders’ equity from 28,506 to13,465.

    Fixed asset turnover ratio: - Net sales / Net fixed Assets.

    Fixed 2008 2007 2006 2005 2004


    asset
    turnove
    r ratio
    Net 10363000 98786000 91424000 911340 962250
    sales 0 00 00
    Net fixed 60520000 67254000 58574000 600870 638600
    Assets 00 00
    Ratio 1.71 1.46 1.56 1.51 1.50
    Interpretation: Fixed asset ratio in 2004 was 1.50 and in
    2008 it is 1.71 which indicates the finance to the fixed assets is
    well in the company.

    Profitability Ratio: -

    Gross profit ratio: - Gross profit / Net sales.

    Gross 2008 2007 2006 2005 2004


    profit
    ratio
    Gross 4566100 4172900 3829500 3653200 3550100
    profit 0 0 0 0 0
    Net 1036300 9878600 9142400 9113400 9622500
    sales 00 0 0 0 0
    Ratio 0.44 0.42 0.41 0.40 0.36

    Interpretation: The gross profit ratio is increasing from


    2004 to 2008, the company earned profits this is because
    of increased sales and less depreciation.

    Net profit Ratio: - Net profit after tax / Net sales.

    Net 2008 2007 2006 2005 2004


    profit
    Ratio
    Net 1233400 1041800 9492000 7994000 7497000
    profit 0 0
    after
    tax
    Net 1036300 9878600 9142400 9113400 9622500
    sales 00 0 0 0 0
    Ratio 0.119 0.105 0.103 0.087 0.077

    Interpretation: Net profit ratio is also increasing from


    0.077 to 0.119 this is because of less tax provision and
    increased sales due to quality and close to consumer. The
    net profit ratio is satisfactory.

    Return on Equity capital: - Net profit after tax /


    Shareholders equity.

    Return 2008 2007 2006 2005 2004


    on Equity
    capital
    Net profit 1233400 1041800 9492000 7994000 7497000
    after tax 0 0

    Sharehold 1346500 2847000 2850600 3309800 3168800


    ers equity 0 0 0 0 0

    Ratio 0.91 0.36 0.33 0.24 0.23

    Interpretation: Return on equity capital is increasing


    throughout the five years therefore return on equity
    capital is satisfactory therefore overall profitability ratio is
    satisfactory.

    EPS: -Net profit after tax / Number of outstanding shares.


    EPS 2008 2007 2006 2005 2004

    Net profit 12334000 10418000 9492000 7994000 7497000


    after tax

    Number of 1341000. 1385000. 1506000. 1573000. 1645000.


    outstandi 68 23 48 98 59
    ng shares
    Ratio 9.19 7.52 6.30 5.08 4.55

    Interpretation: EPS of the company is increasing from


    last 7 years
    Finding and conclusion
    Findings
    a) The sales of the company increasing every year.
    b)The gross profit of is increasing every year.
    c) The company has no preference shares.
    d)Company follows the LEAN method of BPR.
    e) The internal promotions are more for the higher
    position.
    f) IBM has the Environmental responsibility, by seeing
    the projects like solar power and six sigma.

    Conclusion
    The company has undertaken many projects after
    completing the projects the may be the top 2nd company
    in the world. The company has the increasing profits
    which indicate its management.
    Suggestions
    The company has to make better processers although
    companies like DELL make processers the dealers has no
    credibility in them, because they suggest the intel
    processers are good.
    The company may grow if the company merge or acquit
    the companies like HCL and Infosys as there turnover is
    huge.

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