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Accounting 10 Chapter 14 Assignment--50 Points Name Use the IBM Financial Report and the excerpted IBM Financial Statements found at the Wileyplus website under Chapter 14 Materials to answer the following questions. NOTE: FOR ANY RATIO THAT REQUIRES YOU TO USE NET SALES IN THE COMPUTATION, USE TOTAL REVENUES. Round all amounts to the nearest two decimal places. 1. What is IBM's current ratio on December 31, 2015? 2. What is IBM's acid-test or quick ratio on December 31, 2015? 3. What is IBM's Receivable Turnover for 2015? (NOTE: use TRADE receivables only) 4. What is the number of days to collect accounts receivable for IBM for 2015? 5. What is IBM's inventory turnover for 2015? (NOTE--use TOTAL COST for Cost of Goods Sold) 6. What is IBM's days to sell inventory for 2015? 7. What is IBM's conversion period for 2015? 8. What is IBM's asset turnover for 2015? 9. What is IBM's profit margin on sales or return on sales for 2015? 10. What is IBM's return on assets for 2015? 11. What is IBM's cash return on sales for 2015? 12. What is IBM's return on TOTAL common stockholders' equity for 2015? 13. What is IBM's TOTAL basic (no dilution) earnings per share for 2015? 14. What is IBM's TOTAL earnings per share assuming dilution for 2015? 15. What is IBM's price to earnings ratio for 2015? (NOTE--use the TOTAL earnings per share assuming dilution and use the HIGH stock price from the FOURTH quarter from the quarterly data given on page 148 of the complete financial report). 16. What is IBM's payout ratio for 2015? (Note--cash dividends paid on common stock can be found on the Five-Year Comparison of Selected Data on Page 147 of the complete financial report.) 17. What is IBM's debt to total assets on December 31, 2015? 18. What is times interest earned for IBM for 2015? 19. What is IBM's cash debt coverage for 2015? 20. How many shares of IBM common stock have been authorized as of December 31, 2015? 21. How many shares of IBM common stock have been issued as of December 31, 2015? 22. How many of the issued shares of IBM common stock are being held as treasury shares as of December 31, 2015? 23. How many shares of IBM common stock are outstanding as of December 31, 2015? 24. What is IBM's book value per share outstanding on December 31, 2015? (NOTE: Use IBM's Stockholders' Equity--don't forget that financial statement dollar amounts are in millions of dollars) 25. What is IBM's comprehensive income for 2015 (in millions of dollars)? 26. Was the computation of comprehensive income for IBM shown 1-at the bottom of the income statement; 2-on a separate schedule reconciling net income to comprehensive income; or 3-on the expanded statement of equity? 27. Was IBM's cash flow statement prepared using the direct or indirect method? 28. Which SPECIFIC investing or financing activity USED the most cash during 2015? 29. Which SPECIFIC investing or financing activity PROVIDED the most cash during 2015? 30. On the Statement of Financial Position (Balance Sheet) on December 31, 2015, what does the balance of the account "Noncontrolling Interest" represent? Use the information in the "Significant Accounting Policies" in the complete financial report to answer the following questions. On the financials,the LETTER of the note giving further explanation of the account is given--you can use the table of contents to more easily find specific notes. 31. Are IBM's marketable securities accounted for as trading securities or available for sale securities? Where are the unrealized gains and losses on valuation reported? 32. What is the par value of IBM's common stock? 33. IBM Purchased 14 companies as subsidiaries during the year. Name four of them. 34. What depreciation method does IBM use? 35. IBM is organized into how many different business segments? Name two of them. 36. Who is IBM's auditor? What opinion did they issue for 2015? 37. Compute the PERCENT OF CHANGE from 2014 to 2015 in Total Liabilities, Total Assets, Total Revenue, and Net Income. Be sure to indicate whether the change is positive or negative 38. Prepare a VERTICAL ANALYSIS or common-size income statement for 2015 for the following items only: Total Revenue, Total Cost, Gross Profit, Total Expense and Other Income, Income from Continuing Operations Before Income Taxes, Provision for Income Taxes, Income from Continuing Operatings, Loss from Discontinued Operations, and Net Income 39. Using the Five Year Comparison of Selected Financial Data on page 147 of the complete financial report, compute a TREND analysis for the Revenue and the Net Income from 2011 to 2015 using 2011 as the base. 76 Consolidated Statement of Earnings International Business Machines Corporation and Subsidiary Companies ($ in millions except per share amounts) For the year ended December 31: Notes 2015 2014 2013 $49,911 $55,673 $57,655 29,967 35,063 38,666 Revenue Services Sales 1,864 2,057 2,047 81,741 92,793 98,367 33,126 36,034 37,564 Sales 6,920 9,312 11,009 Financing 1,011 1,040 1,110 Total cost 41,057 46,386 49,683 Gross prot 40,684 46,407 48,684 20,430 23,180 23,451 5,247 5,437 5,743 (682) (742) (822) (724) (1,938) (333) 468 484 402 Total expense and other (income) 24,740 26,421 28,440 Income from continuing operations before income taxes 15,945 19,986 20,244 Financing Total revenue T Cost Services Expense and other (income) Selling, general and administrative Research, development and engineering O Intellectual property and custom development income Other (income) and expense Interest expense Provision for income taxes D&J N Income from continuing operations Loss from discontinued operations, net of tax C Net income 2,581 4,234 3,363 13,364 15,751 16,881 (174) (3,729) (398) $13,190 $12,022 $16,483 Earnings/(loss) per share of common stock Assuming dilution Continuing operations P $ 13.60 $ 15.59 $ 15.30 Discontinued operations P (0.18) (3.69) (0.36) P $ 13.42 $ 11.90 $ 14.94 Continuing operations P $ 13.66 $ 15.68 $ 15.42 Discontinued operations P (0.18) (3.71) (0.36) P $ 13.48 $ 11.97 $ 15.06 Total Basic Total Weighted-average number of common shares outstanding Assuming dilution 982,700,267 1,010,000,480 1,103,042,156 Basic 978,744,523 1,004,272,584 1,094,486,604 Amounts may not add due to rounding. The accompanying notes on pages 82 through 146 are an integral part of the financial statements. Consolidated Statement of Comprehensive Income 77 International Business Machines Corporation and Subsidiary Companies ($ in millions) 2015 2014 2013 $13,190 $12,022 $16,483 (1,379) (1,636) (1,335) Unrealized gains/(losses) arising during the period (54) (29) (4) Reclassication of (gains)/losses to net income 86 5 (8) Subsequent changes in previously impaired securities arising during the period 4 32 (24) (8) For the year ended December 31: Notes Net income Other comprehensive income/(loss), before tax Foreign currency translation adjustments L Net changes related to available-for-sale securities L Total net changes related to available-for-sale securities Unrealized gains/(losses) on cash ow hedges L Unrealized gains/(losses) arising during the period Reclassication of (gains)/losses to net income Total unrealized gains/(losses) on cash ow hedges Retirement-related benet plans 618 958 43 (1,072) (97) (166) (454) 861 (123) L Prior service costs/(credits) Net (losses)/gains arising during the period Curtailments and settlements Amortization of prior service (credits)/costs Amortization of net (gains)/losses Total retirement-related benet plans 6 1 16 (2,963) (9,799) 5,369 33 24 (3) (100) (114) (114) 3,304 2,531 3,499 279 (7,357) 8,767 Other comprehensive income/(loss), before tax L (1,523) (8,156) 7,301 Income tax (expense)/benet related to items of other comprehensive income L (208) 1,883 (3,144) Other comprehensive income/(loss) L Total comprehensive income Amounts may not add due to rounding. The accompanying notes on pages 82 through 146 are an integral part of the financial statements. (1,731) (6,274) 4,157 $11,459 $ 5,748 $20,641 78 Consolidated Statement of Financial Position International Business Machines Corporation and Subsidiary Companies ($ in millions except per share amounts) At December 31: 2015 Notes 2014 Assets Current assets Cash and cash equivalents Marketable securities $ D Notes and accounts receivabletrade (net of allowances of $367 in 2015 and $336 in 2014) Short-term nancing receivables (net of allowances of $490 in 2015 and $452 in 2014) F Other accounts receivable (net of allowances of $51 in 2015 and $40 in 2014) Inventories E Prepaid expenses and other current assets Total current assets 7,686 $ 8,476 508 0 8,333 9,090 19,020 19,835 1,201 2,906 1,551 2,103 4,205 4,967 42,504 47,377* G 29,342 39,034 Less: Accumulated depreciation G 18,615 28,263 Property, plant and equipmentnet G 10,727 10,771 Long-term nancing receivables (net of allowances of $118 in 2015 and $126 in 2014) F 10,013 11,109 Prepaid pension assets S 1,734 2,160 Deferred taxes N 4,822 Goodwill I 32,021 30,556 Intangible assetsnet I 3,487 3,104 Investments and sundry assets H 5,187 Property, plant and equipment Total assets 6,675* 5,520** $ 110,495 $ 117,271* ** $ $ Liabilities and equity Current liabilities Taxes N 2,847 5,084 6,461 5,731** Accounts payable 6,028 6,864 Compensation and benets 3,560 4,031 11,021 11,877 Short-term debt D&J Deferred income 4,353 5,994* 34,269 39,581* ** D&J 33,428 34,991** S 16,504 18,261 3,771 3,691 Other accrued expenses and liabilities Total current liabilities Long-term debt Retirement and nonpension postretirement benet obligations Deferred income Other liabilities K Total liabilities Contingencies and commitments M Equity L 8,099 8,733* 96,071 105,257* ** IBM stockholders' equity 53,262 Common stock, par value $.20 per share, and additional paid-in capital 52,666 Shares authorized: 4,687,500,000 Shares issued (20152,221,223,449; 20142,215,209,574) Retained earnings 146,124 137,793 Treasury stock, at cost (shares: 20151,255,494,724; 20141,224,685,815) (155,518) (150,715) Accumulated other comprehensive income/(loss) (29,607) (27,875) Total IBM stockholders' equity 14,262 11,868 Noncontrolling interests Total equity Total liabilities and equity A 162 146 14,424 12,014 $ 110,495 $ 117,271* ** Amounts may not add due to rounding. * Reclassified to reflect adoption of the FASB guidance on deferred taxes in consolidated financial statements. Refer to note B, \"Accounting Changes,\" for additional information. ** Reclassified to reflect adoption of the FASB guidance on debt issuance costs in consolidated financial statements. Refer to note B, \"Accounting Changes,\" for additional information. The accompanying notes on pages 82 through 146 are an integral part of the financial statements. Consolidated Statement of Cash Flows 79 International Business Machines Corporation and Subsidiary Companies ($ in millions) 2015 2014 2013 $13,190 $ 12,022 $ 16,483 Depreciation 2,662 3,145 3,327 Amortization of intangibles 1,193 1,347 1,351 468 512 614 1,387 (237) (1,610) 481 (1,535) (236) 71 3,381 Receivables (including nancing receivables) 812 1,270 (1,407) Retirement related (22) (655) 294 Inventories 133 (39) (57) (3,448) (1,886) (747) For the year ended December 31: Cash ows from operating activities Net income Adjustments to reconcile net income to cash provided by operating activities Stock-based compensation Deferred taxes Net (gain)/loss on asset sales and other Loss on microelectronics business disposal Change in operating assets and liabilities, net of acquisitions/divestitures Other assets/other liabilities 81 (456) (529) 17,008 16,868 17,485 (3,579) (3,740) (3,623) Accounts payable Net cash provided by operating activities Cash ows from investing activities Payments for property, plant and equipment Proceeds from disposition of property, plant and equipment 370 404 372 Investment in software (572) (443) (517) Purchases of marketable securities and other investments (3,073) (2,338) (4,608) Proceeds from disposition of marketable securities and other investments 2,842 2,493 4,873 Non-operating nance receivablesnet Acquisition of businesses, net of cash acquired Divestiture of businesses, net of cash transferred Net cash used in investing activities (398) (1,078) (1,063) (3,349) (656) (3,056) (401) 2,357 297 (8,159) (3,001) (7,326) Cash ows from nancing activities Proceeds from new debt 5,540 8,180 16,353 Payments to settle debt (5,622) (4,644) (10,013) 101 (1,753) 621 (4,609) (13,679) (13,859) 322 709 1,074 Cash dividends paid (4,897) (4,265) (4,058) Net cash used in nancing activities (9,166) (15,452) (9,883) Short-term borrowings/(repayments) less than 90 daysnet Common stock repurchases Common stock transactionsother Effect of exchange rate changes on cash and cash equivalents (473) (655) 28 Net change in cash and cash equivalents (790) (2,240) 304 8,476 10,716 10,412 $ 7,686 $ 8,476 $ 10,716 Income taxes paidnet of refunds received $ 2,657 $ 5,748 $ 4,024 Interest paid on debt $ 995 $ 1,061 $ 982 Capital lease obligations $ 4 $ $ 14 Cash and cash equivalents at January 1 Cash and cash equivalents at December 31 Supplemental data Amounts may not add due to rounding. The accompanying notes on pages 82 through 146 are an integral part of the financial statements. 2 80 Consolidated Statement of Changes in Equity International Business Machines Corporation and Subsidiary Companies ($ in millions) Common Stock and Additional Paid-In Capital Retained Earnings $50,110 $117,641 Treasury Stock Accumulated Other Comprehensive Income/(Loss) Total IBM Stockholders' Equity NonControlling Interests Total Equity $(123,131) $(25,759) $ 18,860 $124 $ 18,984 2013 Equity, January 1, 2013 Net income plus other comprehensive income/(loss) Net income 16,483 16,483 Other comprehensive income/(loss) 4,157 4,157 $ 20,641 $ 20,641 (4,058) (4,058) 1,216 1,216 (117) (142) (142) (13,993) (13,993) (13,993) 268 268 Total comprehensive income/(loss) Cash dividends paidcommon stock Common stock issued under employee plans (9,961,389 shares) (4,058) 1,216 Purchases (1,666,069 shares) and sales (1,849,883 shares) of treasury stock under employee plansnet (25) Other treasury shares purchased, not retired (73,121,942 shares) Changes in other equity 268 Changes in noncontrolling interests Equity, December 31, 2013 $51,594 $130,042 16,483 4,157 $(137,242) $(21,602) 13 13 $ 22,792 $137 $ 22,929 Amounts may not add due to rounding. The accompanying notes on pages 82 through 146 are an integral part of the financial statements. ($ in millions) Common Stock and Additional Paid-In Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Income/(Loss) Total IBM Stockholders' Equity NonControlling Interests Total Equity $51,594 $130,042 $(137,242) $(21,602) $ 22,792 $137 $ 22,929 2014 Equity, January 1, 2014 Net income plus other comprehensive income/(loss) Net income 12,022 12,022 12,022 (6,274) (6,274) $ 5,748 $ 5,748 (4,265) (4,265) 977 977 (79) (85) (85) (13,395) (13,395) (13,395) Other comprehensive income/(loss) (6,274) Total comprehensive income/(loss) Cash dividends paidcommon stock Common stock issued under employee plans (7,687,026 shares) (4,265) 977 Purchases (1,313,569 shares) and sales (1,264,232 shares) of treasury stock under employee plansnet (6) Other treasury shares purchased, not retired (71,504,867 shares) Changes in other equity 95 95 Changes in noncontrolling interests Equity, December 31, 2014 $52,666 $137,793 Amounts may not add due to rounding. The accompanying notes on pages 82 through 146 are an integral part of the financial statements. $(150,715) $(27,875) $ 11,868 95 8 8 $146 $ 12,014 Consolidated Statement of Changes in Equity 81 International Business Machines Corporation and Subsidiary Companies ($ in millions) Common Stock and Additional Paid-In Capital Retained Earnings $52,666 $137,793 Treasury Stock Accumulated Other Comprehensive Income/(Loss) Total IBM Stockholders' Equity NonControlling Interests Total Equity $11,868 $146 $12,014 2015 Equity, January 1, 2015 $(150,715) $(27,875) Net income plus other comprehensive income/(loss) Net income 13,190 13,190 Other comprehensive income/(loss) (1,731) (1,731) $11,459 $11,459 (4,897) (4,897) 606 606 (102) (63) (63) (4,701) (4,701) (4,701) (10) (10) Total comprehensive income/(loss) Cash dividends paidcommon stock Common stock issued under employee plans (6,013,875 shares) (4,897) 606 Purchases (1,625,820 shares) and sales (1,155,558 shares) of treasury stock under employee plansnet 39 Other treasury shares purchased, not retired (30,338,647 shares) Changes in other equity (10) Changes in noncontrolling interests Equity, December 31, 2015 $53,262 $146,124 Amounts may not add due to rounding. The accompanying notes on pages 82 through 146 are an integral part of the financial statements. 13,190 (1,731) $(155,518) $(29,607) $14,262 16 16 $162 $14,424 INTERNATIONAL BUSINESS MACHINES CORP (IBM) CashFlowFlag INCOME STATEMENT Fiscal year ends in December. USD in millions except per share data. Revenue Net income 2011 2012 2013 2014 2015 2016 107000 100.0% 15860 100.0% 104507 97.7% 16604 104.7% 99751 93.2% 16483 103.9% 92793 86.7% 12022 75.8% 81741 76.4% 13190 83.2% 79919 74.7% 11872 74.9% INTERNATIONAL BUSINESS MACHINES CORP (IBM) CashFlowFlag INCOME STATEMENT Fiscal year ends in December. USD in millions except per share data. Revenue Net income 2011 2012 2013 2014 2015 2016 107000 100.0% 15860 100.0% 104507 97.7% 16604 104.7% 99751 93.2% 16483 103.9% 92793 86.7% 12022 75.8% 81741 76.4% 13190 83.2% 79919 74.7% 11872 74.9%