# Financial Analysis IBM Jen

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Financial Analysis IBM Jen
Financial Statements Interpretation: IBM
FIN 571
June 15, 2015
Kathleen O’Keefe

Financial Statements Interpretation: IBM
Introduction
Industry analysts use ratio analysis when they are trying to identify trends with an organization as well as when they are trying to compare and contrast the financial standing of the firm to the industry. Using ratio analysis will allow would be investors to make an informed decision on whether to invest in that firm or spot trends for that firm, they are a useful tool for both investors and those managing. This paper uses ratio analysis to calculate the financial performance of IBM Corporation for the last 3 years: 2012-2014. Using the analysis to then compare to the entire industry.
Liquidity Ratios Liquidity ratios will be able to tell if a company is able to pay of their short-term debts, they use short-term assets to be calculated. Two of the main ratios used to determine if the firm can pay off short-term loans, “This is done by comparing a company 's most liquid assets (or, those that can be easily converted to cash), its short-term liabilities.” (Investopedia, 2015). To calculate liquidity ratios, you need find current ratio and quick ratios. To find the current ratio you divide current assets by current liabilities. Current ratio IBM 2012 2013 2014 Industry Average 1.13 1.28 1.25 1.33
The current ratio increased from 2012-2013, and then fell again in 2014, in the last year the ability of IBM to pay off their short-term debts increased. If we compare IBMs latest current ratio with the industry’s current ratio it falls short. This tells investors that IBM is lagging behind industry standards to pay off their short-obligations.
To calculate the quick ratio, you must you the formula: Quick Ratio = Cash and Equivalents +

References: International Business Machines Corporation (IBM) Income Statement. (2015). Retrieved June 15, 2015, from https://finance.yahoo.com/q/is?s=IBM&annual Ratio Analysis: Using Financial Ratios | Investopedia. (n.d.). Retrieved June 15, 2015. Return On Assets (ROA) Definition | Investopedia. (n.d.). Retrieved June 15, 2015.

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