Financial Ratios Analysis of IBM 2005-2006 Case Study

Financial balances Analysis of IBM 2005-2006 - Case Study ExampleThere was as well an inverse increase in current li great power of $4,939 ($40,091 - $35,152 million) which adversely affected the companys runniness dimension. This decline also reflected in acid test proportion or the ability to settle promise immediately as it also declined by 13.492. 2. Leverage ratios compend a. Debt to-total-assets ratio ( radical liabilities/total assets) 2005 2006 % of change Total debt $22,682 $22,641 Total assets 105,748 103,234 Ratio .687 .724 5.386 b. Debt-to-equity ratio 2005 2006 % of change Total debt $22,682 $22,641 Total equity 28,506 33,098 Ratio 2.195 2.621 19.40 c. Long-term debt-to-equity ratio 2005 2006 % of change Long-term debt 15,425 $13,780 Total equity 28,506 33,098 Ratio .466 .483 3.648 d. ... Changes in liability decreased minimally only when still, the increase in total assets helped drive debt to asset ratio up by 5.386 %. Since debt was almost eonian in 2006, debt to equity ratio significantly went up when IBM registered a profit in the previous year, where portions of the fire gain were retained as equity. 3. Activity ratio analysis a. Inventory turnover 2005 2006 % of change sugar Sales 91,134 91,424 Inventory 2841 2840 Ratio 32.07 32.53 .01 b. Fixed assets turnover 2005 2006 % of change Net Sales 91,340 91,424 Net furbish up assets 60,087 58,574 Ratio 1.517 1.561 2.900 c. Total assets turnover 2005 2006 % of change Net Sales $91,340 $91,424 Total Assets 105,748 103,234 Ratio .862 .886 2.784 d. Average prayer period Payment terms for gillyflower and accounts receivable financing generally range from 30 to 90 days (IBM, 2006 pg. 79). With regard to activity ratios, IBM did a good job of maintaining its level of inventory to 2841-2840 million patronage the increase in sales in 2006 ($91,424 million). It only meant that IBM has a very good internal manoeuvre and monitoring of its inventory. In sum, the activity ratio of IBM increased by 2.784 % which can be mainly attributed to its ability to maintain its inventory despite the increase in sales. With regard to collection period, IBM adopts Payment terms for inventory and accounts receivable financing generally range from 30 to 90 days (IBM, 2006 pg. 79). 4. Profitability ratio analysis a. Gross profit margin 2005 2006 % of change Gross profit margin 36,532 38,295 Net Sales 91,134 91,424 Ratio .401 .419 4.488 b. Operating profit margin Operating profit margin 0.134 0.146 0.012 8.95522388% c. Net profit margin ratio 2005 2006 % of change Net profit after tax 79,940 94,920 Net Sales 91,340