Need some help with this assignment answering these 6 questi

Need some help with this assignment answering these 6 questions.

b. Is there any dramatic shift in the ratios worthy of note? WEB EXERCISE I. IBM was mentioned in the chapter as having an uneven performance. Let\'s check this out. Go to its website, www.ibm.com, and follow the steps below. Under Information for\" at the bottom of the page, select \"Investors.\" Select \"Financial Snapshot\" on the next page. Click on \"Stock Chart.\" How has IBM\'s stock been doing recently? Click on \"Financial Snapshot.\" Assuming IBM\'s historical price-earnings ratio is 18, how does it currently stand? Assuming its annual dividend yield is 2.5 percent, how does it currently stand? 2. 3. 4. 5. Assuming IBM\'s historical LT\" (long-term) debt/equity is 100 percent, how does it currently stand? Generally speaking, is that good or bad? 6. Assuming its historical return on assets is 10 percent, how des it currently stand? Generally speaking, is that good or bad? Note: Occasionally a topic we have listed may have been deleted, updated, or moved into a different location on a website. If you click on the site map or site index, you will be introduced to a table of contents that should aid you in finding the topic you are looking for.

Solution

Answer-

(1)

According to the report/financial snapshot the key financials are as followS:

We can see here that the key financial metrics such as revenue, pre ta income, net income and free cash flow, all has seen a decline over the year 2013–2014, which suggests that the company had an uneven performance.

(2) if we analyze this stock chart, IBM’s stock is under performing and the graph shows the a downfall over a period. The last price 136.61 is almost near 52 week low i.e 131.65. So we can say stock is following a diminishing trend recently.

(3)

Historical price earnings ratio = 18

Current price earning ratio is 9.6

PE ratio is given by Market price/Earning per share. This means market price of shares per unit of Earning has declined over the period. Shareholder were earlier ready to pay $ 18 for each $1 of earning but now they are ready to pay only $9.6 for $1 earning. So overall performance and expectation of shareholder seems to be declining trend.

(4) The current dividend yield is 3.50% and its historical dividend yield is 2.50 % which is a good sign . A higher dividend yield indicates a higher dividend per share.

(5) The current IBM’s historical “LT (Long-term Debt/Equity) is 234 .00 which indicates a higher debt compared to equity capital . The company has a higher liability compared to its historical performance.

(6)

Historical return on asset = 10%

Current return on asset = 13.10

This is an indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. Calculated by dividing a company\'s annual earnings by its total assets, ROA is displayed as a percentage. Sometimes this is referred to as \"return on investment\".So on comparing this ratio it seems IBM has performed well on this and its current return on asset has increased and it is a good sign for the company to keep investors faith up.

Generally speaking more return on asset is good.

	FY2014 (in $ billions)	Y-o-Y change
Revenue	92.8	-1%
Pre ta income	21.1	-4%
Net Income	16.7	-9%
Free cash flow	12.4	-18%