Ratio Analysis Math Problem Example | Topics and Well Written Essays - 750 words

dimension Analysis - Math Problem ExampleRatio analysis raise simplifies the information and allows for a longitudinal and cross sectional analysis of an organizations performance. I, in this paper, perform ratio analysis of IBM financial statements for the accounting period ending in the long time 2010, 2011, and 2012, and discuss the computed ratios. Accounting ratios Ratio analysis compares different income statement and balance sheet items to determine liquidity, advantage, activity, shekelsability, and developing potentials. The following is a summary of applied formulae for computing different ratios. ... The following table summarizes major ratios for the familiarity over the leash accounting periods based on the above formulae. Table 1 Computed ratios for IBM for the years finish 2010, 2011, and 2012 Ratio 2010 2011 2012 Current ratio 1.18623342 1.2090307 1.13313467 Quick ratio 0.52857354 1.02281414 0.98846991 Debt to total assets ratio 0.79574622 0.82620048 0.84075562 Debt to equity ratio 3.91733923 4.77688946 5.31436903 enormous term debt to equity ratio 0.94793023 1.13501837 1.27720042 Times interest earned 52.5951087 50.0997567 46.7167756 Inventory overthrow 21.982449 22.5220151 22.2077018 Fixed assets turnover 1.52856006 1.52461644 1.49766409 Total assets turnover 0.88028417 0.85774652 0.87664097 Gross profit margin 46.07% 46.89% 48.13% Operating profit margin 18.17% 18.97% 19.56% Net profit margin 14.85% 14.83% 15.89 Return on assets 17.06% 17.69% 17.99% Return on share holders equity 83.98% 102.25% 113.70% (Data ancestor IBM annual reports for the years 2010 and 2011) Discussion The company enjoys high liquidity ratios and this indicates its ability to meet its short-term objectives. Its menstruum ratios are good and indicate stability as they fluctuate above one over the threesome years. Even though the acid-test ratio was low in the year 2010, it improved in 2011 and the slight light in 2012 does not induce much threat. IBM however has significantly high leverage ratios and this indicates its vulnerability to risks of acknowledgment capital. Even though the debt to total equity ratio is bellow 1, its increasing trend over the three years indicate that it will soon reach and even surpass one, a factors that will further expose the organization to sustainability risks. Long-term debt to equity ratio was fair in the year 2010 but in like manner has an