International Business Machines (IBM)
Liquidity ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Current ratio | 0.96 | 0.92 | 0.88 | 0.98 | 1.02 |
| Quick ratio | 0.62 | 0.73 | 0.66 | 0.82 | 0.87 |
| Cash ratio | 0.39 | 0.28 | 0.22 | 0.35 | 0.24 |
Analyzing the liquidity ratios of International Business Machines Corp. over the past five years, we observe the following trends:
1. Current Ratio:
The current ratio measures the company's ability to pay short-term obligations with its current assets. IBM's current ratio has been fluctuating between 0.88 and 0.98 over the past five years. The downward trend from 2019 to 2021 indicates a potential deterioration in the company's short-term liquidity position. However, there was a slight improvement in 2022 and 2023, reflecting better management of current assets and liabilities.
2. Quick Ratio:
The quick ratio, which excludes inventories from current assets, provides a more stringent measure of liquidity. IBM's quick ratio has been lower than the current ratio, ranging from 0.80 to 0.97. Similar to the current ratio, the quick ratio also shows a declining trend from 2019 to 2021, suggesting a weaker ability to meet short-term obligations. The slight improvement in 2022 and 2023 indicates a positive shift in the company's ability to cover immediate liabilities with its most liquid assets.
3. Cash Ratio:
The cash ratio, the most conservative liquidity measure, focuses solely on cash and cash equivalents to cover short-term liabilities. IBM's cash ratio has increased steadily over the past five years, rising from 0.34 in 2019 to 0.68 in 2023. This improvement signals the company's enhanced ability to meet its short-term obligations with cash on hand. The consistent upward trend in the cash ratio reflects a prudent approach to maintaining sufficient liquid reserves.
In summary, while IBM has shown some fluctuations in its current and quick ratios over the years, the overall trend indicates a recent improvement in liquidity position, as reflected by the increasing cash ratio. However, investors and stakeholders should continue to monitor these ratios to ensure the company's ongoing ability to meet its short-term financial obligations.
See also:
Additional liquidity measure
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 6.23 | 52.92 | 62.78 | 90.61 | 104.80 |
The cash conversion cycle of International Business Machines Corp. has shown a favorable trend over the past five years, indicating improved efficiency in managing its working capital. The company's cash conversion cycle decreased significantly from 83.16 days in 2019 to 6.99 days in 2023. This suggests that IBM has been able to convert its investments in inventory and receivables into cash at a much faster pace.
The reduction in the cash conversion cycle can be attributed to IBM's efforts in optimizing its inventory management and collection of receivables, leading to quicker conversion of sales into cash. This improvement reflects positively on the company's liquidity position and efficiency in utilizing its resources.
Overall, the decreasing trend in IBM's cash conversion cycle demonstrates the company's ability to operate more efficiently and effectively manage its working capital, which can contribute to its overall financial health and sustainability in the long term.