Ibm Financial Analysis

Table of Contents

Executive summary 2

Introduction 3

Section 1. Company overview 4

IBM today 4

News 5

Stock exchange 6

Section 2. Financial Statement Analysis 7

Financial ratios 7

DuPont analysis 9

Section 3. Capital Asset Pricing Model 11

Beta 11

Risk free rate 11

Market risk premium 11

Cost of equity 12

Section 4. Cost of Capital 12

Cost of debt 12

Weighted Average Cost of Capital 12

Capital Structure 13

Section 5. Market Efficiency and Dividends. 14

Conclusion 16

Appendix 17

References 26

Executive summary

In the given report we made financial analysis of IBM company. This company was ranked the 20th largest firm in the U.S. by Fortune and the 33rd largest globally by Forbes.

The analysis were made on the basis of the following sources: IBM annual report 2010, website of the company, Standard and Poor’s website, finance.yahoo.com website and nasdbondinfo.com website.

We used the company’s financial statements for the last five years, dividend policy and key statistics on its trading information. Almost all the calculations were made in Excel program.

Financial analysis includes the basic ratio analysis, DuPont Identity, CAPM, WACC, capital structure and dividends. We compared received results with the industry and S&P500 index.

The results showed that in 2010 IBM had pre-tax income of $19.7 billion, the highest indicator the company ever had. The company also managed to achieve strong EPS growth. It returned more than $18 billion to its shareholders after investing in Reseach and Development and in net capital expenditures. The company’s last year’s dividend increase was 18 percent. Over the past ten years, the company returned $107 billion to its shareholders in the form of dividends and share repurchases.

IBM operates in a very competitive industry. The technology and computer industry is run by a lot of big players but also a lot of smaller companies that have been innovating and setting themselves apart. But...