International Business Machines (IBM)

Activity ratios

Short-term

Turnover ratios

	Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Inventory turnover	21.10	23.74	17.94	15.69	13.42
Receivables turnover	8.21	8.01	4.26	3.83	2.94
Payables turnover	6.75	6.67	6.87	6.54	6.03
Working capital turnover	46.83	—	—	—	—

International Business Machines (IBM) has shown a positive trend in its inventory turnover ratio over the years, increasing from 13.42 in 2020 to 21.10 in 2024. This indicates that the company has been effectively managing its inventory levels and converting it into sales, reflecting operational efficiency.

Similarly, IBM's receivables turnover ratio has also improved steadily from 2.94 in 2020 to 8.21 in 2024. This signifies that the company has been collecting its receivables at a faster pace, indicating strong credit control and potentially favorable payment terms for customers.

The payables turnover ratio has remained relatively stable for IBM, ranging between 6.03 and 6.87 over the five-year period. This suggests that the company has been maintaining consistent payment cycles with its suppliers.

Moreover, IBM's working capital turnover ratio, although not available for the years up to 2023, shows a significant value of 46.83 in 2024. This can be interpreted as the company generating substantial revenue relative to its working capital, indicating efficient utilization of resources to drive sales.

Overall, IBM's activity ratios demonstrate sound management of inventory, receivables, payables, and working capital, reflecting operational effectiveness and efficiency in its business operations over the years.

Average number of days

		Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Days of inventory on hand (DOH)	days	17.30	15.38	20.35	23.27	27.20
Days of sales outstanding (DSO)	days	44.45	45.58	85.68	95.32	123.95
Number of days of payables	days	54.10	54.72	53.11	55.81	60.54

Based on the provided data for International Business Machines (IBM), let's analyze the activity ratios:

1. Days of Inventory on Hand (DOH):
- IBM's DOH has been decreasing over the years, which is a positive trend. The company held inventory for 27.20 days as of December 31, 2020, and this number decreased to 17.30 days by December 31, 2024. A lower DOH indicates efficient inventory management, which suggests that IBM is effectively managing its inventory levels and turning them into sales.

2. Days of Sales Outstanding (DSO):
- IBM's DSO has also shown a decreasing trend over the years, indicating efficient accounts receivable management. The number of days it took to collect outstanding sales decreased from 123.95 days on December 31, 2020, to 44.45 days by December 31, 2024. A declining DSO typically indicates that IBM is collecting its receivables more quickly, improving its cash flow and working capital efficiency.

3. Number of Days of Payables:
- IBM's number of days of payables has remained relatively stable over the years, ranging from 53.11 days on December 31, 2022, to 60.54 days on December 31, 2020. This stability suggests that IBM is maintaining consistent payment terms with its suppliers. An optimal balance in payables management helps IBM manage its cash flow effectively.

Overall, the decreasing trends in both DOH and DSO indicate improved efficiency in inventory and accounts receivable management for IBM. Maintaining relatively stable payables days also shows consistency in managing payables. These trends suggest that IBM is effectively managing its working capital and operational activities to support its overall financial health and performance.

Long-term

	Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Fixed asset turnover	—	—	11.35	10.07	8.89
Total asset turnover	0.46	0.46	0.48	0.43	0.35

The fixed asset turnover ratio for International Business Machines (IBM) has shown a consistent upward trend over the past few years, indicating an improvement in the company's efficiency in generating sales from its fixed assets. The ratio increased from 8.89 in December 2020 to 11.35 in December 2022. This suggests that IBM is utilizing its fixed assets more effectively to generate revenue.

On the other hand, the total asset turnover ratio, which measures the company's efficiency in generating sales from all its assets, increased from 0.35 in December 2020 to 0.48 in December 2022. However, the ratio slightly declined to 0.46 in both December 2023 and 2024. This indicates that while IBM has been able to generate more sales relative to its total assets, the efficiency slightly decreased in the last two years.

Overall, the increasing trend in both the fixed asset turnover and total asset turnover ratios indicates that IBM has been effectively utilizing its assets to generate sales. However, the slight decline in the total asset turnover ratio in the last two years may warrant further investigation to understand the underlying factors affecting the company's asset efficiency.