Name: Nhi Nguyen TR-11:30

November 27, 2016

Part 1 Due:
Part 2 Paper Due: ___________________

ACCT 1120 ~ Financial Accounting II

Financial Statement Analysis Assignment
Part 1 ~ Information Gathering/Ratio Calculations
Using the IBM 2014 annual report (downloadable @
http://www.ibm.com/investor/)
*Annual Reports link under the Financial Reporting, then select the
*2014 report under the Find an Annual Report drop-down menu (probably
want to the print the statements only and review the notes for the noterelated questions online)
*2013 report under the Find an Annual Report drop-down menu (print
statements only),
find the following information for the most current year (unless otherwise indicated).
For all calculations, you MUST show your work! You also MUST indicate the page
number(s) where the information was found in the annual report.
[pg(s)]
1.

Who is responsible for the financial statements? (79) IBM management

2.
Who audited the financial statements? (79)
Coopers LLP
3.

Price water house

Are the financial statements exactly correct,

materially correct, or hopefully correct? (79)

Materially correct

What information supports your answer? (79) Those Standards require that
we are free of material
misstatement and whether
effective
4.
What is the name of the Income Statement? (81)
of Comprehensive Income

Consolidated Statement

5.

What is the amount of cost of goods sold?

(80) 9,312

6.

What is the amount of net income? (80)

12,022 millions

7.

What percentage of income was income tax? (81)

15.67%
Page 1 of 11

8.

Do they have a simple or complex capital structure?

complex

9.

What is the weighted-average number of shares? (80)

1,004,272,584

What would be the number of weighted-average

shares, if all the things which could be converted
into common stock were converted?

10.

(82)

4,687,500,000

Is the company currently holding treasury stock? (82) Yes

If so, how many shares and what type of stock? (82) 1,224,685,815
common stock at cost.
11. What is the name of the Balance Sheet? (82)
Financial Position
12.

Consolidated Statement of

Is the company issuing/buying its preferred stock?

How many shares for how much?

Not applicable

Not applicable

Is the company issuing/buying its common stock? (82)

13.

How many shares for how much? (82)

52,666-51,594=1072

Were any dividends declared this year? (83)

Yes

If so, what amount was declared?

(20)

4.25

What amount of dividends was paid in cash? (83)

14.

4,265

Does the company get cash or use cash from

noncurrent (long-term) assets? How much?

15.

Issuing.

What is the amount of income tax expense?

(82) Get cash-11,109

(81) 1,883

What is the amount of income tax paid in cash? (44) 1,724

16.

What was the largest source of financing cash? (83)

What was the largest use of financing cash?

repurchases.
17.

What was the amount of operating cash? (83)

18.

Because IBM is global, do they fall under the

control of FASB or IASB? (96)

(83)

Proceeds from new debt.

Common stock
16,868

FASB
Page 2 of 11

What information supported your answer?

19.

How is revenue recognized from term

Straight-line basis

license software? (88)

20.

How are software costs treated? (89)

If capitalized, over how many years?

21.

related to expenses.
(89)

Up to three years.

What depreciation method does the company use? (91)

Straight-line

What years are used?

22. What is the definition/cause of deferred

differences between
income tax? (92)
23.

Tax effect of temporary

asset and liability.

What indicated that the company does use the

lower of cost or market principle? (95)

finished good

Raw material, work in process and

24.

What inventory valuation method is used? (95)

25.

What is the total amount estimated for

Allowance for Credit Losses?

26.

(75)

580

Does the company know of any new standards

that will affect future periods? If so, which?

27.

Average cost

(96) Yes. Revenue recognition

How many and how much was spent for

Acquisitions in 2014?
million

(97)

Six acquisitions and cost 608

Compare to Acquisitions in 2013. (98)

million

10 acquisitions and cost 3219

28.

What was received on Divestitures?(100)

Microelectronics.

29.

How much of inventory is Raw Materials? (110)

How much of inventory is Work-in-Process?

837 (1,674/2)
(110)

837
Page 3 of 11

How much of inventory is Finished Goods? (110)

30.

430

What is the original cost amount of

Plant & Other Property and Rental Machines? (113)

(37,578+1,456)

39,034

What is the amount of accumulated depreciation on

Plant & Other Property and Rental Machines? (113)
(27,500+763)

28,263

What is the net book value of

Plant & Other Property and Rental Machines? (113)

31.

32.

10,771 (10,078+693)

What is the weighted-average interest rate on

commercial paper? (115)

0.1 percent

and for short-term loans? (115)

4.0 percent

Does the company use line of credit debt? (117)

Yes

If so, what is the term and how much is unused? (117) term of 5 years,
9,983,900,000 is unused.
33.

List the largest item included in Other Liabilities?

34.

Does the company have a preferred stock? (118)

If so, what is the par?

(118)

37.

Yes

1%

What is the largest item in Other

Comprehensive Income? How much? (119)

36.

3,146

.01 per share par

If so, what is the stated percentage rate? (118)

35.

(118)

Foreign currency translation

adjustments-1,636.

Is the company involved in any

Contingencies in Utah? (122)

Yes

If so list the suit name and court?

Federal Court in Utah

Does the company only pay U.S. taxes?

No

Page 4 of 11

If any, what amount is U.S. vs. Non-U.S.? (124)

U.S-2,093. Non-U.S-

2,141
38.

Were any stock options exercised this year?

(130)

Yes

What is the percentage of exercised stock

options compared to beginning stock options
available to be exercised? (130)
(3,740,252/5,622,951)x100%=66.52%
39.

Does the company have a defined benefit

or a defined contribution pension plan? (131)

Yes. Defined benefits

is the companys pension plan fully funded?

40.

Yes

What percentage of revenue comes from Japan? (149)

( 8,382/92,793)x100%=9.03%
What percentage of plant assets resides in the U.S.? (149)
(4,388/10,078)x100%=43.54%

41.

Find the Earnings per Share (basic) for 2014.

(80)

12,022,000,000/1,004,272,584=11.97
Find the Earnings per Share (basic) for 2013.
16,483,000,000/1,094,486,604=15.1
42.

Calculate 2014 revenue per share

and the prior year.
(80)
92,793,000,000/1,004,272,584=92.40 (2014)

98,367,000,000/1,094,486,604=89.88 (2013)
43.

Calculate 2014 Gross Margin Ratio

and the prior year.

(2013)
44.

(80)

46,407/92,793=0.5 or 50% (2014)

48,684/98,367=0.495 or 49.5%

Calculate 2014 Days Sales Uncollected

(9,090,000,000/92,793,000,000)x365=35.76 (2014)

(10,465,000,000/98,367,000,000)x365=38.83 (2013)
and the prior year.

(80,82)
Page 5 of 11

45. Calculate 2014 Total Asset Turnover

(2014)

[92,793/(117,532+126,223)/2]=0.76

and the prior year. (80,82)

(2013)

[98,367/(119,213+126,223)/2]=0.80

46.

Calculate 2014 Book Value per Share

12,014,000,000/1,004,272,584=11.96 (2014)

and the prior year. (80,82)

22,929,000,000/1,094,486,604=20.95 (2013)
47. Calculate 2014 Inventory Turnover
(2014)

[46,368/(2,103+2,310)/2]=21.01

and the prior year. (80,82)

(2013)

[49,683/(2,287+2,310)/2]=21.62

48.

49,422/39,600=1.25 (2014)

Calculate 2014 Current Ratio

and the prior year. (82)

49.

50.

51,350/40,154=1.29 (2013)

Calculate 2014 Days Sales in Inventory

365/21.01=17.37 (2014)

and the prior year.

365/21.62=16.88 (2013)

Calculate 2014 Debt Ratio

105,518/117,532=0.9 (2014)

and the prior year. (82)

103,294/126,223=0.82 (2013)

51. Calculate 2014 Acid-Test Ratio

(2014)
and the prior year. (82)
(2013)
52.

(8,476+19,835+9,090)/39,600=0.94
(10,716+19,787+10,465)/40,154=1.02

Calculate 2014 Profit Margin

and the prior year. (80)

12,022/92,793=0.13 (2014)
16,483/98,367=0.17 (2013)

53. Calculate 2014 Return on Equity

(2014)

[12,022/(12,014+22,929)/2]=0.69

and the prior year. (80,82)

(2013)

[16,483/(18,984+22,929)/2]=0.79

54. Calculate 2014 Receivables Turnover

(9,090+10,465)/2]=9.49 (2014)

[92,793/

Page 6 of 11

and the prior year. (80,82)

(2013)

[98,367/(10,667+10,465)/2]=9.31

55. Calculate 2014 Times Interest Earned

(2014)

(12,022+1,883+484)/484=29.73

and the prior year. (80,81)

(2013)

(16,483-3,144+402)/402=34.18

56.

Calculate 2014 Cash Flow to Assets

16,868/117,532=0.14 (2014)

and the prior year. (82,83)

17,485/126,223=0.14 (2013)

57. Calculate 2014 Return on Assets

[(117,532+126,223)/2]=0.1 (2014)

(12,022+484)/

and the prior year. (80,82)

[(119,213+126,223)/2]=0.14 (2013)

(16,483+402)/

58.

Calculate 2014 Cash Flow per Share

16,868,000,000/1,004,272,584=16.8
and the prior year. (80,83)
17,485,000,000/1,094,486,604=15.98

59.

60.

61.

Calculate 2014 Dividends per Share

4,265/991=4.31 (2014)

and the prior year. (20,82)

4,058/1054=3.85 (2013)

Calculate 2014 Price Earnings

160.44/11.97=13.4 (2014)

and the prior year. (20)

187.57/15.1=12.42 (2013)

Calculate 2014 Dividend Yield

and the prior year.

62.

63.

(20)

3.70/187.57=0.02 (2013)

Calculate 2014 Price to Free Cash Flow

158,920/12,400=12.82 (2014)

and the prior year.

197,772/15,000=13.18 (2013)

Calculate 2014 Debt-to-Equity

105,518/12,014=8.78 (2014)

and the prior year. (82)

64.

4.25/160.44=0.03 (2014)

Calculate 2014 Dividend Payout

and the prior year. (20)

103,294/22,929=4.50 (2013)
4.25/11.97=0.36 (2014)
3.70/15.1=0.25 (2013)

Page 7 of 11

Market prices needed for IBM 12/31/2014 was $160.44 and

12/31/2013 was $187.57!

Page 8 of 11

Part 2 ~ Analysis Paper MUST READ & FOLLOW

Using the ratios calculated in part 1, write a business professional paper (demonstrating
effective communication skills and effective word processing computer skills) analyzing this
companys:
Profitability
Risk ~ both short-term liquidity and long-term solvency
Efficiency ~ inventory, collections, asset management, generating cash, etc.
Stockholder/Investor Relations
The analysis MUST compare the current-year to the prior-year and to the industry
averages provided. (This is a ratio-analysis paper for IBM to be used by both investors,
creditors, and management, not a history report.)
Purpose:
Using all of the financial statement ratios calculated (see part 1), analyze and
conclude on the
companys performance in all of the categories listed
above.
Format:
Business-style (i.e. Executive Summary, Memo to the President, etc., if
you have learned a
business-style) or traditional term paper style.
Whatever style you choose, I want the paper
double-spaced with one-inch
margins and a reasonable font size (this is Calibri 11 pt.).
Content:

1.
2.

results as
3.
4.
5.

Introduce the paper.

Introduce the first topic, define/describe terms as appropriate, use ratio
support, & conclude on this topic.
Introduce the second topic.
Introduce the third topic. etc.
Conclude on the whole paper.

Audience:
A knowledgeable business person, but not an accountant. (Understand
general business terms
such as: profit, more risky, etc., but does not know
accounting terms such as: current assets, net
income, liquidity, etc.)
Support:
The detailed formula used to calculate the answer must be shown in part 1 of
the assignment.
However, the detailed formula is not required to be shown
in the written paper, unless that is
part of your writing style. (Note: Too
much detail in a written paper can be confusing and
verbose.)
Generally, the results are used to give support for a conclusion.
Help??:
The Writing Center (Taylorsville Redwood Campus, Academic Admin.
Bldg. Room 127)
Have someone else read your paper.
Write, rewrite, rewrite, ... read, reread, reread, ... proof, proof, proof, ... and
spell check!
Grading:

The paper was properly introduced.

Page 9 of 11

The topics were properly introduced, analyzed, supported (using both current
to prior year and current year to the industry average), and concluded on.
Terms were appropriately defined throughout the paper.
The paper had a proper conclusion.
English: grammar, punctuation, and spelling.
Plagiarism is not allowed! As I am expecting your own words, a Works Cited page may not
be required. But you must cite your sources properly when using information from another
source (textbook, internet sources, etc.)
NO credit will be given for this assignment if it does not demonstrate your own individual
work!

INDUSTRY AVERAGES

Your paper MUST include an industry average comparison for ALL of the ratios listed below
(alphabetical order):

1.57

Acid-Test ratio

5.89

Accounts receivable turnover ratio

1.6

Asset turnover ratio

1.86

Current ratio

20.79
62
59.3%
1.46

Days sales in inventory

Days sales in receivables
Debt ratio
Debt to equity ratio

42.1%

Dividend payout

2.2%

Dividend yield

2.66

Earnings per share

80.1%

Gross profit percentage

17.56

Inventory turnover

19.3

Price/earnings ratio

30.2

Price (per share) to free cash flow (per share)

Page 10 of 11

1.0%

Profit margin ratio

3.94%

Rate of return on common stockholders equity

1.6%

Rate of return on total assets

2.9

Times-interest-earned ratio

Page 11 of 11