International Business Machines Corporation Case Report

Introduction

International Business Machines Corporation (IBM) refers to a public-oriented company currently based in Armonk region in New York, United States. Some of the primary operations carried out by IBM is global financing, system hardware and software, international business services (GBS) and global technology services (GTS). IBM also has a consulting firm currently offering and operating in most countries across the globe. IBM is among the greatest academic giants available around the world, offering computer technology and other related services to more than 170 countries globally. IBM is among the companies listed in the A&P companies with the highest revenue profit (Fortune US 2015). IBM is also among the companies currently registered for trading in New York Stock Exchange Market (NYSE) (Adams, 2014). The report consolidates the inventory valuation and its effect on reported results. The paper focuses on identifying asset valuation technique, shareholder equity and liabilities for International Business Management.

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As stated earlier, IBM is among the leading companies offering technological support globally, as an established company, it is essential to establish a detailed financial analysis for the company through inspection of the company's compliance and internal controls to Sarbanes. Therefore, the economic analysis will incorporate aspects such as vertical, horizontal, and ratios financial statement analysis. The ratios being analyzed include liquidity ratios, efficiency ratios, debt ratios and profit ratios.

Accounting Policies

Accounting principle acceptable by the United States laws accounts for financial statements being prepared by the International Business Machine Corporation (IBM). IBM ensures financial statements are designed for all its controlled subsidiaries. All estimates are made following the company's assumptions and knowledge. The company provides all the necessary information is contained in the financial statement by thoroughly considering the set guidelines and rules.

Shareholders' Equity, Liabilities and Accounting Assets

In assets accounting, the company is responsible for making the necessary acquisition by considering the value of acquired assets. Any operation and other liabilities assumed within the acquirer are expected to equip with the accounting information recorded in the book. Consequently, the financial assets are measured by considering a fair value carried out systematically. When accounting for the company's liabilities, the appropriate valuation method is adopted in such cases within each accounting period through a systematic process ((Adams, 2014). When considering aspects such as receivables and long-term loans, the fair value is based on discounted future cash flow by considering the interest rates charged for clients and similar loans. There fore, liabilities and short-term assets all have approximated fair value. The company maintains a defined hierarchy of level 1, level 2 and level three, which ensure all its financial instruments maintained a fair value hierarchy.

Consequently, all long-term debts values are quoted within the market prices for all similar liabilities value in an active market environment. The corporates current debts and the company's cash equivalents are all actively traded in the current market. For shareholders equity accounting, International Business Market maintains an authorized company stock share amounting to over 4687.5 million with each value equivalent to $2.0 (Adams, 2014).

Inventory Valuation

The company has an established a best estimate for the selling price through third party involvement for cases where it cannot show a vendor-specific fair value for the products or services being offered. Competitors offering similar products are used to achieve Third Party Evidence estimates. However, if the company has been unable to establish third-party evidence, the company can adopt the best estimate concept.

Internal Controls Accounting System

The collaboration of crucial company's executive team such as the Board of Directors, Audit Committee, and the senior management. Senior management is responsible for maintaining adequate internal controls for the financial reporting system. Maintaining internal controls ensures accounting information for external use. It also ensures compliance with the set accounting rules and principles established by the USA constitution (Adams, 2014). The company's senior management has put procedures which provide and ensures accurate records are administration correctly showing the fair reflection of all done dispositions and transactions of the company's assets.

Financial Statement Analysis

Financial statement analysis can be defined as the process in which the economic report information is broken down or processed to concrete vales to allow comprehension and understanding for the financial information to make a coherent decision. Financial statement analysis involves aspects such as horizontal and vertical analysis and financial ratios use. The following table gives both vertical and horizontal IBM financial report. The values included in the table account for the 2013 and 2014 fiscal years. The information contained in the third column gives trend analysis performance for the company every year (Adams, 2014).

Horizontal Analysis of Financial Statements

Horizontal financial analysis is concerned on investigating the reported items in terms of the income statement and financial during the current year compared to the amount obtained from the previous year and predict the movement as either neutral, down or up. From the information provided, the revenue consolidate has decreased from $98793 to $92793, which is equivalent to 5.7% decline for the years under comparison (Wahlen, 2014). In the 2014 fiscal year, the revenue decreased by 3% with a 0.5% margin resulting from general business in the global margin and currency fluctuation (Adams, 2014).

Vertical Analysis of Financial Statements

The process of expressing a financial statement as a percentage or ratio against the price of another particular item is called the vertical analysis in economic analysis. For example, articles in financial information may be expressed in fractions against assets. In the income statement, things will be indicated in the form of an atom using the total revenue base. In the vertical analysis calculation of ratios is done for debt, equity , liquidity, dept and profit.

The term profile ratio defines the full income statement expressions where items are the numerator to the total revenue. In the IBM analysis, the company's gross profit in 2013 was at 49.5%, and in 2014 it was at 50%. The gross profit analysis shows that the company was doing surprisingly well in terms of profitability, whereby it recorded a 0.5 profit index (Adams, 2014). The term debt ratio shows how the calculation of dept has been helpful to the company in the process of securing financial assistance from investors. From our analysis, it is clear to say that the IBM company total dept to the ratio of the real asset was 0.8 in 2013 and 0.9 in 2014 (Wahlen, 2014). From the analysis it shows that the company's assets were heavily by external investors rather than shareholders, meaning the company was not doing very well. The calculation of inefficiency ratio is done to test the productiveness of the used company assets against the resources invested in the production process. For example, from the research data, IBM's returns on investments were calculated and found to be 79% in 2013 and 78% in 2014, a 1% decline (Adams, 2014). The decrease in the return assets shows that an investment of a single dollar in the company was yielding 70cents and above of profit each year in the ratio calculated earnings per shares from income Equality. In 2014 the total amount was $11.90, and in 2013 it was $14.94. Therefore indicating that a single claim could earn a $10 and above per year, thus a sign of positive returns toward the investors. The liquidity ratio that was calculated was also the annual gross profit margins, which were in 2013 49.5% and 2014 50%, thus an indication that the IBM company still extremely profitable (Adams, 2014).

The Integrity of the Internal Financial Control System

The financial performance of the overall internal control integrity of a company can be modified to be very useful towards the process of offering reliable and credible information to the external users. The collaboration is reached by observing the four reasons which are supported by the financial statement members of the company. These members are the board's chairperson, the representative chief officer of the team management. Additionally, the witness at the PrincewatersCoopersHouse LLP acts the companies external financier who not only support the existence of the firm but also support the functionality of the internal controls systems. They also participated in the opinion signing of the internal control systems and provided a good audit of the financial information fair view opinion. Lastly, the IBM company is Sarbanes-Oxley compliant. Therefore its profits form the corporate governance provided by the regulations

Demand for Financial Information

The Financial reports which are released to the public from the IBM company will consist of both the internal and external users. The range of external users comprises of existing and potential shareholders, financial analysts, investors, existing and potential customers, financial lenders, government authorities and international regulatory authorities (Gad, 2014). The management team, firms, employees and other concerned parties can demand the internal firm's financial information. Large institutions individuals consist of both the investors and shareholders. These individuals benefit from the information provided in the financial statement to make investment

Professional Specialist majoring in the financial data collection dissemination and analysis is known as the financial analysts. They will perform assessments of the liquidity, stability, profitability and the solvency of IBM company. Funds lenders will be drawn to the liquidity and solvency assessments to determine the ability of the firm to pay future loans and the amount of loan they can given (Gad, 2014). Examples of such lenders include banks. From the financial information, customers can acquire knowledge about the company's profitability and the possibility of future continuity of the company; therefore, IBM services and products can be benchmarked for pricing. Government and other third party related bodies will be very interested in the financial performance of the IBM company.

Internal users such as the firm's employees and the management team also use financial information. Therefore the IBM employees use the information for retirement, employment and remuneration opportunities purposes. In the management team side, they demand financial data to monitor and control the financial performance of the company. External stakeholders can trust the management team to manage their affairs on their behalf. Finally, to perform future prediction of the company, analysis of business trends, both vertical and horizontal, will be done. Aft wards the management will utilize the financial information to extract income analysis, expenditure on capital and the cash flow as well from similar firms.

References

Adams, B. (2014). Analyze the annual report. Bob-Adams.net. Retrieved from http://bob-adams.net/analyze-annual-reports-mfg/

Adams, B. (2014). Analyzing the yearly information – The easy way. InvestEd Inc. Retrieved from http://bob-adams.net/Documents/Anualize%20the%20Annual%20Rpt-HANDOUT-INTC.pdf