IBMChris Driscoll

ACG 2021

Executive Summary

IBM is an IT company that has been around for a long time and will continue to be since they are since they are making money. The

IT field is the fastest growing industry right and IBM has always been a big part of it . From the information I have gathered and the numbers I’ve they a starting gain back the edge in the business they

had in the early 90’s. Most the numbers I have seen tell me that they are continuing to expand their business.

One of the main ways they are going to do this is be concentrating more on the on-demand part of the company that will increase the

customer service as well as the ability to do business online.

http://www.ibm.com/investor/financials/statements.phtml

Part A. Introduction

• Samuel J. Palmisano

• Armonk, New York

• December 31, 2004

• Main products include computer hardware and software.

• IBM serves the needs of enterprises and institutions world wide.

Part A. Audit Report

• PricewaterhouseCoopers LLP

• The auditor say the IBM’ s management were effective in reporting there financial reports. The reports within the guidelines of COSO among the other institutions the keep track of financial statements of corp.

Part A. Stock Market Information

• $ 79.96

• $ 93.18-$ 71.85

• $ 0.80

• March 3, 2006

• At this point I would say hold until the company makes a move to effect stock prices.

Part B. Industry Situation and Company Plans

The IT industry is start to grew again like they were in the early 1990’s. The industry is expecting

annual growth rates of 4%-7% from 2003-2007. IBM is trying to bring the company to more on

demand. By doing so they also working for better customer service.

Understanding Our Company an IBM prospectusIBM Annual Report

http://www.ibm.com/annualreport/

Part C. Income Statement

•Income statement is most like the single-step income statement.

•Since all three increased it seems that the company is increasing its profit.

(in millions) 2004 2003Gross Profit 36,032 33,018Income for operations 12,028 10,874Net income 8,430 7,583

Part C. Balance Sheet

•Most of the accounts in the assets, liabilities, and SHE are increased.It shows that the company was expanding and increasing in cash flow.

Total Assets=

(in millions)

Liabilities+ Stockholders Equity

Total L & She

(2004)

109,18379,436 29,747 109,183

(2003)

104,45776,593 27,864 104,457

Part C. Statement of Cash Flows

•In the past two years the cash flow was 18 million dollars more than net income in 2004, while in 2003 net income was 30 million more.

•The company was increasing its cash flow with marketable securities and other investments.

•IBM got its financing for short term loans of 90 days or less.

•The company has increased it cash flow in the past two years by close to three billion dollars.

Part D. Accounting Policies•IBM recognizes revenue when it is realized or realizable and earned. Revenue is realized when delivery was made or payment realized.•Topics of the notes are : significant accounting policies, accounting changes, acquisitions/divestitures, financial instruments, inventories, financing receivables; plant, rental machines and other property, investments and sundry assets, as well as a others in the IBM Annual Report 2004.•http://www.ibm.com/annualreport/

Part E. Financial AnalysisLiquidity Ratios

(in millions)• Working Capital: 2004-7,172; 2003-7,039; these are the amounts of money

that is available• Current Ratio: 2004- 1.18; 2003-1.19; these ratio lower then the

recommended two or higher but that along does not mean it’s a bad thing without some more info.

• Receivable turnover:2004-2.46; 2003-2.25; So the they collect on receivables around two times per period.

• Average days’ sales uncollected:2004-148days; 2003-162days; With these numbers we know that the accounts get repaid after that amount of days.

• Inventory turnover:2004- 18.17; 2003-19.07; The inventory of IBM around 18-19 times is sold per period.

• Average days’ inventory on hand:2004-20.08; 2003-19.14; These numbers shows every how many days the inventory is rolled over.

Part E. Financial AnalysisProfitability Ratios

• Profit margin:2004-8.8%; 2003-8.5%; These numbers show you what percent of sales ends up as income in this case at 8.5% is a good number but still needs more evidence to so how good it really is.

• Asset turnover:2004-.90; 2003-.85; This shows that for every dollar spent get $.90 in sales, I think the company would like a little higher like over one.

• Return on assets:2004-.077; 2003-.072; This number shows us that for every dollar invested they 7.7 cents in net income.

• Return on equity:2004-.283; 2003-.272; This shows the investors how much they are making on the money which is 28.3cents per dollar invested.

Part E. Financial AnalysisSolvency Ratio

• Debt to equity:2004-2.67; 2003-2.75; You tell by these numbers that the creditors that do most of the investing in the company.

Part E. Financial AnalysisMarket Strength Ratios

• Price/earnings per share:16.40; This will you the confidence the company has it will continue to prosper.

• Dividend yield:1%; This number shows the investor what kind of return you can expect from money.