International Business Machines (IBM)
Solvency ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.36 | 0.37 | 0.36 | 0.34 | 0.35 |
| Debt-to-capital ratio | 0.65 | 0.69 | 0.68 | 0.70 | 0.72 |
| Debt-to-equity ratio | 1.83 | 2.22 | 2.10 | 2.38 | 2.63 |
| Financial leverage ratio | 5.02 | 6.00 | 5.80 | 6.98 | 7.57 |
The solvency ratios of International Business Machines (IBM) indicate its ability to meet its long-term financial obligations and the extent to which its assets are financed by debt. Here is a detailed analysis based on the provided data:
1. Debt-to-Assets Ratio:
- The debt-to-assets ratio measures the proportion of IBM's assets financed by debt.
- The ratio has been relatively stable over the years, ranging from 0.34 to 0.37.
- This indicates that IBM relies on debt for around 34% to 37% of its total assets, which suggests a moderate level of debt utilization.
2. Debt-to-Capital Ratio:
- The debt-to-capital ratio shows the proportion of IBM's capital structure that is comprised of debt.
- The ratio has shown a decreasing trend from 0.72 in 2020 to 0.65 in 2024.
- A decreasing ratio suggests that IBM has been reducing its reliance on debt to finance its operations, which can be seen as a positive sign for solvency.
3. Debt-to-Equity Ratio:
- The debt-to-equity ratio highlights the extent to which IBM's operations are funded by debt as compared to equity.
- There has been a decreasing trend in this ratio from 2.63 in 2020 to 1.83 in 2024.
- A declining ratio signifies that IBM has been decreasing its debt levels relative to equity, indicating improved financial health and lower risk of insolvency.
4. Financial Leverage Ratio:
- The financial leverage ratio measures IBM's financial risk by comparing its total assets to equity.
- The ratio has shown a decreasing trend from 7.57 in 2020 to 5.02 in 2024.
- A decreasing financial leverage ratio indicates that IBM is becoming less reliant on debt to finance its assets, reducing its financial risk and enhancing solvency.
In conclusion, based on the solvency ratios analysis, International Business Machines (IBM) appears to have managed its debt levels effectively over the years, with a decreasing trend in debt ratios indicating a stronger financial position and improved solvency.
Coverage ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Interest coverage | 4.39 | 6.40 | 1.83 | 6.08 | 4.28 |
Interest coverage ratio measures a company's ability to pay interest expenses with its earnings before interest and taxes (EBIT). For International Business Machines, the interest coverage ratio has shown some fluctuation over the years.
In December 31, 2020, the interest coverage ratio was 4.28, indicating that IBM was generating operating income 4.28 times its interest expenses, a relatively weak coverage. By December 31, 2021, the interest coverage improved significantly to 6.08, suggesting IBM's ability to cover its interest payments improved.
However, by December 31, 2022, the interest coverage dropped to 1.83, signaling a decrease in IBM's ability to cover its interest expenses with its operating income, which could be a cause for concern.
The trend improved in December 31, 2023, with the interest coverage ratio increasing to 6.40, indicating a healthier position for IBM in terms of servicing its interest obligations.
By the end of December 31, 2024, the interest coverage ratio stood at 4.39, showing a slight decrease from the previous year but still at a level that suggests IBM has the ability to comfortably cover its interest payments.
Overall, while there have been fluctuations in IBM's interest coverage ratio over the years, it is important for investors and stakeholders to monitor these ratios closely to ensure IBM can continue to meet its interest obligations effectively.