International Business Machines (IBM)
Liquidity ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 1.04 | 0.96 | 0.92 | 0.88 | 0.98 |
| Quick ratio | 0.67 | 0.62 | 0.73 | 0.66 | 0.82 |
| Cash ratio | 0.44 | 0.39 | 0.28 | 0.22 | 0.35 |
International Business Machines' liquidity ratios show a mixed performance over the past five years. The current ratio, a measure of the company's ability to pay its short-term obligations, has fluctuated between 0.88 and 1.04 during the period. While the ratio improved from 0.88 in 2021 to 1.04 in 2024, it hovered below 1 in 2020 and 2022, indicating potential challenges in meeting current liabilities.
The quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, also exhibited variability, ranging from 0.62 to 0.73. The decreasing trend from 0.66 in 2021 to 0.62 in 2023 suggests a potential deterioration in the company's ability to cover immediate liabilities without relying on inventory.
In terms of the cash ratio, reflecting the proportion of current liabilities covered by cash and cash equivalents, there was an overall improvement from 0.22 in 2021 to 0.44 in 2024. This indicates that IBM increased its liquidity position in terms of readily available cash to meet current obligations over the years.
Overall, while the current ratio shows some improvement and variability, the quick ratio and cash ratio indicate a need for IBM to focus on enhancing its liquidity position, possibly by managing its short-term assets more efficiently to meet financial obligations effectively.
See also:
Additional liquidity measure
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 7.64 | 6.23 | 52.92 | 62.78 | 90.61 |
The cash conversion cycle of International Business Machines has shown a decreasing trend over the years, indicating an improvement in the efficiency of its cash management. In 2020, the company's cash conversion cycle was at 90.61 days, which then decreased to 62.78 days in 2021 and further to 52.92 days in 2022. This significant reduction suggests that IBM has been able to better manage its working capital, convert inventory into cash, and collect accounts receivable more efficiently.
Furthermore, the cash conversion cycle witnessed a sharp decline to 6.23 days by the end of 2023 and slightly increased to 7.64 days by the end of 2024. This exceptional improvement in 2023 reflects IBM's prowess in streamlining its operations, enhancing inventory turnover, and accelerating its collection of receivables.
Overall, the declining trend in IBM's cash conversion cycle signifies the company's efforts in optimizing its working capital management, strengthening its cash flow position, and maximizing efficiency in its operations. This positive trajectory suggests improved liquidity and financial health for IBM, potentially leading to enhanced profitability and sustainable growth in the future.