Analysis of Liquidity Ratios
Liquidity ratios measure the company ability to meet its short-term obligations.
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- Analysis of Short-term (Operating) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value (EV)
- Enterprise Value to FCFF (EV/FCFF)
- Dividend Discount Model (DDM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Return on Equity (ROE) since 2005
- Debt to Equity since 2005
- Total Asset Turnover since 2005
- Price to Sales (P/S) since 2005
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Liquidity Ratios (Summary)
International Business Machines Corp., liquidity ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Current ratio | ||||||
| Quick ratio | ||||||
| Cash ratio |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
- Current Ratio
- The current ratio demonstrates a fluctuating but generally improving trend over the five-year period. Starting at 0.98 in 2020, it experienced a decline to 0.88 in 2021, followed by a slight recovery to 0.92 in 2022. The upward movement continued with an increase to 0.96 in 2023 and further to 1.04 in 2024, indicating an enhancement in the company's short-term liquidity and its ability to cover current liabilities with current assets by the end of the period.
- Quick Ratio
- This ratio shows a similar pattern to the current ratio but remains consistently lower, reflecting a more conservative measure of liquidity excluding inventory. The quick ratio declined from 0.83 in 2020 to a low of 0.69 in 2021, indicating a reduction in liquid assets relative to current liabilities. Subsequently, it improved steadily over the next three years, rising to 0.76 in 2022, 0.82 in 2023, and 0.90 in 2024. This trend suggests a strengthening liquidity position with a better capacity to meet short-term obligations without relying on inventory sales.
- Cash Ratio
- The cash ratio, representing the most liquid assets relative to current liabilities, indicates a notable increase over the analyzed timeframe. Beginning at 0.36 in 2020, the ratio dropped to 0.22 in 2021, the lowest point in the period, implying reduced cash reserves against current liabilities. After this decline, a clear recovery trend is observed, with the ratio rising to 0.28 in 2022, 0.39 in 2023, and reaching 0.45 in 2024. This improvement reflects an enhanced cash position, contributing to greater financial flexibility and the ability to cover immediate liabilities with available cash.
Current Ratio
International Business Machines Corp., current ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current assets | ||||||
| Current liabilities | ||||||
| Liquidity Ratio | ||||||
| Current ratio1 | ||||||
| Benchmarks | ||||||
| Current Ratio, Competitors2 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Fair Isaac Corp. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| ServiceNow Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
| Current Ratio, Sector | ||||||
| Software & Services | ||||||
| Current Ratio, Industry | ||||||
| Information Technology | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 2024 Calculation
Current ratio = Current assets ÷ Current liabilities
= ÷ =
2 Click competitor name to see calculations.
The financial data reveals notable trends in the company's liquidity position over the observed five-year period.
- Current Assets
- Current assets decreased significantly from 39,165 million USD at the end of 2020 to 29,539 million USD in 2021 and remained relatively stable in 2022 with a slight decline to 29,118 million USD. Thereafter, current assets increased steadily, reaching 32,908 million USD by the end of 2023 and further to 34,482 million USD in 2024.
- Current Liabilities
- Current liabilities followed a downward trend from 39,869 million USD in 2020 to 33,619 million USD in 2021, then further declined to 31,505 million USD in 2022. However, they rose again in 2023 to 34,122 million USD before decreasing slightly to 33,142 million USD by the end of 2024.
- Current Ratio
- The current ratio exhibited a fluctuating but overall improving trend. Starting below one at 0.98 in 2020, it dropped to the lowest point of 0.88 in 2021, which indicates a weaker liquidity position during that year. Subsequently, it improved gradually to 0.92 in 2022, nearly 1.0 in 2023 at 0.96, and finally exceeded 1.0 in 2024, reaching 1.04. This progression shows an enhancement in short-term financial stability, suggesting that current assets began to sufficiently cover current liabilities by the end of the period.
In summary, the company experienced a contraction in current assets and liabilities in the early years followed by recovery and growth in current assets and stabilization of current liabilities towards the latter years. The current ratio's upward trend culminating in a value above 1.0 signals an improved liquidity position, potentially reflecting a more prudent management of working capital or better operational efficiency over the span analyzed.
Quick Ratio
International Business Machines Corp., quick ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cash and cash equivalents | ||||||
| Restricted cash | ||||||
| Marketable securities | ||||||
| Notes and accounts receivable, trade, net of allowances | ||||||
| Short-term financing receivables, held for investment, net of allowances | ||||||
| Short-term financing receivables, held for sale | ||||||
| Other accounts receivable, net of allowances | ||||||
| Total quick assets | ||||||
| Current liabilities | ||||||
| Liquidity Ratio | ||||||
| Quick ratio1 | ||||||
| Benchmarks | ||||||
| Quick Ratio, Competitors2 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Fair Isaac Corp. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| ServiceNow Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
| Quick Ratio, Sector | ||||||
| Software & Services | ||||||
| Quick Ratio, Industry | ||||||
| Information Technology | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 2024 Calculation
Quick ratio = Total quick assets ÷ Current liabilities
= ÷ =
2 Click competitor name to see calculations.
The analysis of the financial data over the five-year period reveals several notable trends in liquidity metrics.
- Total Quick Assets
- The total quick assets experienced a significant decline from 33,013 million US dollars in 2020 to 23,327 million in 2021, representing a sharp decrease. Following this drop, the quick assets showed signs of recovery, increasing gradually each year from 23,327 million in 2021 to 29,715 million in 2024. This recovery suggests a strengthening of liquid assets after the initial downturn.
- Current Liabilities
- Current liabilities demonstrated a downward trend from 39,869 million US dollars in 2020 to 31,505 million in 2022, indicating improved short-term obligations management or reduced short-term debt levels. However, there is a reversal of this trend in 2023, with liabilities rising to 34,122 million before slightly decreasing again to 33,142 million in 2024. The fluctuation suggests some volatility or operational changes affecting short-term liabilities during this period.
- Quick Ratio
- The quick ratio, which measures the ability to cover current liabilities with quick assets, declined from 0.83 in 2020 to its lowest point of 0.69 in 2021, reflecting decreased short-term liquidity. Subsequently, the quick ratio improved steadily each year to reach 0.9 in 2024, indicating enhanced liquidity and a stronger capacity to meet short-term obligations without relying on inventory.
Overall, the data illustrates initial challenges in liquidity in 2021, followed by a gradual improvement in quick assets and liquidity ratios through to 2024. The recovery in quick assets combined with a relatively stable level of current liabilities contributed to a more favorable quick ratio, suggesting better short-term financial health over the recent years.
Cash Ratio
International Business Machines Corp., cash ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cash and cash equivalents | ||||||
| Restricted cash | ||||||
| Marketable securities | ||||||
| Total cash assets | ||||||
| Current liabilities | ||||||
| Liquidity Ratio | ||||||
| Cash ratio1 | ||||||
| Benchmarks | ||||||
| Cash Ratio, Competitors2 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Fair Isaac Corp. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| ServiceNow Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
| Cash Ratio, Sector | ||||||
| Software & Services | ||||||
| Cash Ratio, Industry | ||||||
| Information Technology | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 2024 Calculation
Cash ratio = Total cash assets ÷ Current liabilities
= ÷ =
2 Click competitor name to see calculations.
- Total Cash Assets
- The total cash assets show a fluctuating trend over the five-year period. Beginning at 14,275 million US dollars at the end of 2020, there was a significant decline in 2021 to 7,557 million. After this decrease, the cash assets increased gradually to 8,841 million in 2022, followed by a more pronounced rise to 13,462 million in 2023 and reaching 14,805 million in 2024. The overall pattern indicates a recovery and growth in cash holdings after the initial drop in 2021.
- Current Liabilities
- Current liabilities have exhibited a general downward trend from 39,869 million US dollars at the end of 2020 to 33,142 million in 2024. A notable decrease occurred in 2021 to 33,619 million, followed by a slight reduction to 31,505 million in 2022. There was a temporary increase to 34,122 million in 2023, but liabilities again declined in 2024. This pattern suggests overall management of current obligations towards lower levels, with some short-term variability.
- Cash Ratio
- The cash ratio, measuring the capability to cover current liabilities with cash and cash equivalents, reflects the fluctuations in both cash assets and current liabilities. It started at 0.36 in 2020, decreased to its lowest point of 0.22 in 2021, and then showed a recovery trend: rising to 0.28 in 2022, further increasing to 0.39 in 2023, and reaching 0.45 in 2024. This indicates an improving liquidity position and stronger coverage of short-term obligations by cash resources over the analyzed period.