International Business Machines (IBM)
Solvency ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.37 | 0.36 | 0.34 | 0.35 | 0.36 |
| Debt-to-capital ratio | 0.69 | 0.68 | 0.70 | 0.72 | 0.72 |
| Debt-to-equity ratio | 2.22 | 2.10 | 2.38 | 2.63 | 2.60 |
| Financial leverage ratio | 6.00 | 5.80 | 6.98 | 7.57 | 7.30 |
Solvency ratios are important indicators of a company's ability to meet its long-term obligations. Looking at International Business Machines Corp.'s (IBM) solvency ratios over the past five years, we can see some key trends:
1. Debt-to-assets ratio: This ratio measures the proportion of a company's assets that are financed by debt. IBM's debt-to-assets ratio has been relatively stable over the period, ranging from 0.39 to 0.42. This indicates that between 39% and 42% of IBM's assets have been funded by debt, with a slight increase in 2023 compared to previous years.
2. Debt-to-capital ratio: The debt-to-capital ratio indicates the proportion of a company's capital that is funded by debt. IBM's debt-to-capital ratio has also remained fairly consistent, fluctuating between 0.70 and 0.75. This suggests that between 70% and 75% of IBM's capital structure is financed by debt, with a slight increase in 2023 compared to 2022.
3. Debt-to-equity ratio: The debt-to-equity ratio shows the relationship between a company's total debt and shareholders' equity. IBM's debt-to-equity ratio has shown some variability over the past five years, ranging from 2.32 to 3.02. This indicates that IBM has been relying more on debt financing in recent years compared to equity, with a notable decrease in the ratio in 2022 followed by an increase in 2023.
4. Financial leverage ratio: The financial leverage ratio measures the extent to which a company is using debt to finance its assets. IBM's financial leverage ratio has also displayed some variability, ranging from 5.80 to 7.57. This implies that IBM's financial leverage has been fluctuating, with a decrease in 2022 and subsequent increase in 2023.
Overall, based on the solvency ratios, IBM has maintained a relatively stable debt structure over the past five years, with consistent levels of debt utilization in its capital structure. The variations seen in the debt-to-equity and financial leverage ratios suggest that IBM has been actively managing its debt levels in response to changing market conditions.
Coverage ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Interest coverage | 6.40 | 1.83 | 6.08 | 4.28 | 8.06 |
The interest coverage ratio for International Business Machines Corp. has shown fluctuations over the past five years. The ratio was at its highest in 2019 at 10.60 and then decreased in the following years before rebounding in 2023 to 10.01. A higher interest coverage ratio indicates that the company is more capable of servicing its interest payments from its operating income. This signifies improved financial health and reduced risk of default on debt obligations. However, it is important to note that fluctuations in the ratio over time may reflect changes in the company's earnings and debt levels. Overall, the upward trend in the interest coverage ratio from 2020 to 2023 suggests a strengthening ability of IBM to meet its interest expenses with operating income.