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IBM Annual Report

IBM Annual Report. Chris LaSalle Section 004. IBM: Executive Summary.

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IBM Annual Report

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  1. IBM AnnualReport Chris LaSalle Section 004

  2. IBM: Executive Summary Recognizing the shift in the field of information technology, IBM’s Management team identified the weaknesses and sought after solutions that would keep them competitive. The result? Profit margins up and losses down. IBM was once a leader in the technological world and is working hard to ensure they stay in the forefront of their field.

  3. Executive Summary (con’t)

  4. IBM: Introduction • Who: Samuel J. Palmisano • Where: New Orchard Road Armonk, New York 10504 914-499-1900 Worldwide with a major focus in North America Europe and Asia • When: December 31, 2005

  5. IBM: Focus • Principal products and services: • Systems and Financing: • Storage , servers, personal systems, printing systems, and retail store solutions • Software: • Specializing in connecting operating systems, business processes, and applications seamlessly • Services: • Including a comprehensive IT services integrated with business insight to reduce costs, improve productivity, and assert competitive advantage

  6. IBM: The Audit Report • PricewaterhouseCoopers LLPNew York, New York • PricewaterhouseCoopers LLP stated that to the best of their knowledge, IBM’s financial report was an accurate representation of the current financial situation. They audited all of the units, minus one, and upheld the report from another firm regarding that one unit.

  7. IBM: Stock Market Information As of 10/6/06 @ 16:00 pm: • Current: $83.14 • 12 Month Range: 72.73 89.94 • Dividend amount: $5.37/share • Recommendation: This stock has a continued growth rate and a solid future: HOLD/BUY

  8. IBM: Industry Situation • The information technology field is currently a central component in all industries. In the year 2006, few business can survive without the services offered by companies such as IBM. All businesses will benefit from better research and development in this field.

  9. IBM: Company Plans • Using the IBM investor guide and the IBM Annual Report, IBM plans to capitalize on their strengths and focus on the three main areas of their business. In addition, a pledge to greater organizational efficiency through reduced costs, decreased inventory, and speedier procurement.

  10. IBM: Income Statement Format: single-step Numbers shown in millions

  11. IBM: Income Statement (con’t) • Although IBM reported a loss in operating and net incomes just shy of 1,000,000; the gross profit has increased by 964,000. These loses may be due to restructuring and/or taxes and in future years could possibly pave the way for the company to show a more rotund profit.

  12. IBM: Balance Sheet Assets=Liabilities + Stockholders’ Equity

  13. IBM: Balance Sheet • While assets and liabilities decreased, stockholders equity increased. A possible explanation for the increase in stockholder equity could be due to the divesting of a less profitable portion of the company.

  14. IBM: Statement of Cash Flows The net cash flows from operations for 2005 were more than 2003 but less than 2004. The companies growth has come from their attention and specialization of products and services in their industry. They have recently consolidated by divesting a significant part of the company. The company’s primary source of financing is currently stock sales. Cash has both increased and decreased over the past two years.

  15. IBM: Accounting PoliciesTopics of the notes to the financial statement • Significant Accounting Policies • Accounting changes • Acquisitions/Divestitures • Financial Instruments • Inventories • Financial Receivables • Plant, rental machines, and other property. • Investments and Sundry Assets • Intangible Assets Including Good Will • Securitization of Receivables • Borrowings

  16. IBM: Accounting PoliciesTopics of the notes to the financial statement con’t • Derivations and Hedging Transactions • Other Liabilities • Stockholders’ Equity Activity • Contingencies and Commitments • Taxes • Research, Development and Engineering • 2005 Actions • Earnings Per Share of Common Stock • Rental Expense and Lease Commitments • Stock-Based Compensation • Retirement-Related Benefits • Segment Information • Subsequent Events

  17. IBM: Financial AnalysisLiquidity Ratios 2005 • Working Capital: $7,858,000 • Current Ratio: 2.66 • Receivable turnover: 3.7 • Average days’ sales uncollected: 98.6 • Inventory turnover: 19.2 • Average days’ inventory on hand: 19.01

  18. IBM: Financial AnalysisLiquidity Ratios con’t 2004 • Working Capital: $5,235,000 • Current Ratio: 2.13 • Receivable turnover: 2.46 • Average days’ sales uncollected: 148.4 • Inventory turnover: 18.3 • Average days’ inventory on hand: 19.94

  19. IBM: Financial AnalysisLiquidity Ratios con’t • When comparing the liquidity ratios from 2004 to 2005 the following results were found: • Working Capitol increased considerably. • Current Ratio shows added strength and an increased ability to pay debt. • Receivable Turnover increased indicating a more effective credit policy.

  20. IBM: Financial AnalysisLiquidity Ratios con’t • Average Day’s Sales Uncollected has shown a significant decrease indicating a smaller number of day’s till collection of receivables. • Inventory turnover has increased equating to a larger relative size of the companies inventory. • Average days inventory on hand has decreased indicating a lower number of days taken to sell inventory.

  21. IBM: Financial AnalysisProfitability Ratios • Profit margin: 2005= 8.7%, 2004= 7.7% • Asset turnover:2005= .86, 2004= .87 • Return on assets:2005= 7.5%, 2004= 6.7% • Return on equity:2005= 23.9%, 2004= 23.6%

  22. IBM: Financial AnalysisProfitability Ratios con’t. • The increase in Profit Margin is indicative of an increase in efficiency with respect to each dollar spent. • Asset turnover has remained relatively unchanged. • An increase in the Return on Assets shows the companies solid profitability. • A slight increase in the Return on Equity shows the gain in profitability of stockholders investments.

  23. IBM: Financial AnalysisSolvency Ratio • Debt to equity: 2005= 3.19, 2004= 3.5 • Although IBM’s stockholders own more of the company than in the past, the creditors still own a majority.

  24. IBM: Financial AnalysisMarket Strength Ratios • Price/earnings per share: 2005= 15.48, 2004= 16.4. Investor confidence has declined. • Dividend yield: 2005= .07, 2004= 1. This stocks current return to an investor has declined.

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