Solvency Analyses for IBM The following information was obtained from the comparative financial statements included in IBM’s 2006 annual report. (All amounts are in millions of dollars.)

Required 1. Using the information provided, compute the following for 2006 and 2005:

a. Debt-to-equity ratio (at each year-end)

b. Times interest earned ratio

c. Debt service coverage ratio

d. Cash flow from operations to capital expenditures ratio 2. Comment briefly on the company’s solvency.

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Total liabilities Total stockholders' equity December 31, 2006 December 31, 2005 $74,728 $72,650 33,098 28,506 For the Years Ended December 31 2006 2005 Interest expense $ 278 $ 220 Provision for income taxes 3,901 4,232 Net income 9,492 7,934 Net cash provided by operating activities from continuing operations 15,019 14,914 Cash dividends paid 1,683 1,250 Payments for plant, rental machines and other property 4,362 3,842 Payments to settle debt 3,400 3,522