1. Compute the five component ratios of a decomposition of ROE (net profit margin, total asset turnover, return on assets, financial leverage, return on equity) for IBM’s fiscal years 2016-2019 (present your results)
3. Solved by verified expert
4. 1.
5. Net Profit Margin
6. 2016 14.85%
7. 2017 7.27%
8. 2018 10.97%
9. 2019 12.22%
10.
11. Total Assets Turnover
12. 2016 68.03%
13. 2017 65.18%
14. 2018 64%
15. 2019 55.99%
16.
17. Return on Assets
18. 2016 10.11%
19. 2017 4.59%
20. 2018 7.07%
21. 2019 6.20%
22.
23. Financial Leverage
24. 2016 5.39x
25. 2017 6.07x
26. 2018 6.29x
27. 2019 6.25x
28.
29. Return on Equity
30. 2016 64.55%
31. 2017 32.46%
32. 2018 51.56%
33. 2019 44.94%
34.
35. 2.
36. For the net profit margin, the percentage suddenly dropped in 2017.  This is the year that they made the lowest sales as well as the lowest net profit.  The good thing is that, in 2018, the net profit margin increase again.  The trend is decreeing in total assets turnover.  Sales every year fluctuates but the change is minimal. The reason behind this is that the total assets increase every year but the increase in total sales is not proportion to the increase in total assets.  The trend in net profit margin is the same in return on asset except for the result for the year 2019.  Although the net profit increase, the return on equity decreased.  This is because the total assets increased high this year.  For the four years, the company have low return on assets.  This means that they are not efficiently utilizing their resources which they must.  Fi this continues, they may generate loss and they may have a liquidity problem.  Every year, the financial leverage ratio increase.  This means that the company is financed more on liability than equity.  This can be related to the net profit because if the company borrows money, they will have to pay more interest and paying more interest will lower the net profit.  There is no particular trend in return on equity.  But, the 2016 result is the highest.  This means that each and every investment in the company’s equity earned the particular net profit percentage.  If the company maintain it high, it will attract more potential investors. and they will not have to borrow money from the bake.
37.
38. 3.
39. 2016
40. Q1 23.38%
41. Q2 25.32%
42. Q3 24.06%
43. Q4 27.24%
44.
45. 2017
46. Q1 22.94%
47. Q2 24.37%
48. Q3 24.20%
49. Q4 28.49%
50.
51. 2018
52. Q1 23.96%
53. Q2 23.57%
54. Q3 23.57%
55. Q4 27.34%
56.
57. 2019
58. Q1 23.57%
59. Q2 24.84%
60. Q3 23.37%
61. Q4 28.23%
62.
63. 4.
64. In 2016, the last quarter is the biggest contribution of the segment to the total revenue.  Each quarter, the segment’s revenue is increasing.  The trend is also increasing in 2017 and the fourth quarte percentage is higher than in 2016.    The trend in 2019 is it goes up and it goes down but the last quarter increase is really big.  Overall, the company must encourage the segment to make more revenue.  They already make good revenue but they can still make more.  If that happens, the net profit of the company will increase which they will use for their future operations and payments to shareholders in the form of dividends.
65.
66. 5.
67. 2016
68. Q1 46.50%
69. Q2 47.90%
70. Q3 46.90%
71. Q4 50%
72.
73. 2017
74. Q1 42.80%
75. Q2 45.60%
76. Q3 45.90%
77. Q4 56.97%
78.
79. 2018
80. Q1 43.20%
81. Q2 46%
82. Q3 46.90%
83. Q4 49.10%
84.
85. 2019
86. Q1 44.20%
87. Q2 47%
88. Q3 46.20%
89. Q4 51%
90.
91. 6.
92. Over all, each quarter, the percentage of gross profit is increasing.  It is always the last quarter that they performed best because of the high gross profit percentage.  The company’s segments can sell more products at a higher price and this is one of the reason why they have good net profit.  If they can generate high profit not only on the last quarter, they can still achieve the2016’s net profit margin or even higher.
93.
94. 7.
95. 2016
96. Q2 8.32%
97. Q3 (5%)
98. Q4 13.23%
99.
100. 2017
101. Q2 6.25%
102. Q3 (0.71%)
103. Q4 17.70%
104. Annual (0.97%)
105.
106. 2018
107. Q2 (1.66%)
108. Q3 0
109. Q4 16.02%
110. Annual (1.01%)
111.
112. 2019
113. Q2 5.38%
114. Q3 (5.91%)
115. Q4 20.80%
116. Annual (1.53%)
117.
118. 8.
119. Every quarter of every year, there is an increase and decrease of the segment’s revenue and they have no particular trend.  From 2017 up to 2019, the total revenue is on a decreasing trend.  This is al though they are generating higher gross profit.  Motivating the segment to make more revenue is the best option.  It is because they are making good gross profit and the reason is that they are regulating the cost of sales and this is a good strategy.  So if they are motivated to make more sales, the revenue coming from them will be higher and there will be an increase in net profit.  Of course, the company will incur costs to motivate the segment.
120.
121. 9.
122. 2016
123. Q2 11.58%
124. Q3 (6.98%)
125. Q4 20.72%
126.
127. 2017
128. Q2 13.20%
129. Q3 (0.06%)
130. Q4 23.49%
131. Annual (5.38%)
132.
133. 2018
134. Q2 4.72%
135. Q3 2%
136. Q4 21.45%
137. Annual 0.35%
138.
139. 2019
140. Q2 12.07%
141. Q3 (7.52%)
142. Q4 33.34%
143. Annual 0.35%
144.
145. 10.
146. Like in revenue, there is also an increase an decrease in the gross profit.  But unlike in revenue, the decrease is very minimal.  As the revenue increase, the cost of sales also increase.  This is so because of the cause and effect relationship that the have.  The amount of changes in this pattern is quite acceptable and still favorable because it have a big increase and a very minimal decrease.  This pattern can be maintained or improved by fixing a particular percentage of gross profit that will cover all their other expenses plus profit.
147.
148. 11.
149. Among the segments, the global technology services is the segment that positively influenced IBM.  It is because the revenue generated from this segment is the highest while its cost is not that high.  Therefore, this segment provided the highest percentage in the total gross profit of all the segment.
150.
151. 12.
152. Based on the results, the company’s best year is 2016.  It changed in 2017 but starting 2018 it began to strengthen the operations and it really showed on the result of the performance.  Since the company experienced a mini downfall, they will make sure that it won’t happen again.  Their performance is improving each year and they will continue performing well.  The over all sales will improve with the help of each segments.  If they planned their next operations, they must first think how are they going to utilize their resources efficiently.  Because if they will know, they will have good returns and they will maintain their liquidity and solvency.
153. Step-by-step explanation
154. 1.
155. Net Profit Margin = Net Profit / Revenue
156.
157. 2016
158. Net Profit Margin = 11,872 / 79,920
159. Net Profit Margin = 14.85%
160.
161. 2017
162. Net Profit Margin = 5,753 / 79,139
163. Net Profit Margin = 7.27%
164.
165. 2018
166. Net Profit Margin = 8,728 / 79,591
167. Net Profit Margin = 10.97%
168.
169. 2019
170. Net Profit Margin = 9,431 / 77,147
171. Net Profit Margin = 12.22%
172.
173. Total Assets Turnover = Revenue / Average Total Assets
174.
175. 2016
176. Total Assets Turnover = 79,920 / 117,470
177. Total Assets Turnover = 68.03%
178.
179. 2017
180. Total Assets Turnover = 79,139 / [(125,356 + 117,470) / 2]
181. Total Assets Turnover = 65.18%
182.
183. 2018
184. Total Assets Turnover = 79,591 / [(123,382 + 125,356) / 2]
185. Total Assets Turnover = 64%
186.
187. 2019
188. Total Assets Turnover = 77,147 / [(152,186 + 123,382) / 2]
189. Total Assets Turnover = 55.99%
190.
191. Return on Assets = Net Profit / Total Assets
192.
193. 2016
194. Return on Assets = 11,972 / 117,420
195. Return on Assets = 10.11%
196.
197. 2017
198. Return on Assets = 5,753 / 125,356
199. Return on Assets = 4.59%
200.
201. 2018
202. Return on Assets = 8,728 / 123,382
203. Return on Assets = 7.07%
204.
205. 2019
206. Return on Assets = 9,431 / 152,186
207. Return on Assets = 6.20%
208.
209. Financial Leverage = Total Liabilities / Total Equity
210.
211. 2016
212. Financial Leverage = 99,078 / 18,392
213. Financial Leverage = 5.39x
214.
215. 2017
216. Financial Leverage = 107,631 / 17,725
217. Financial Leverage = 6.07x
218.
219. 2018
220. Financial Leverage = 106,453 / 16,929
221. Financial Leverage = 6.29x
222.
223. 2019
224. Financial Leverage = 131,202 / 20,985
225. Financial Leverage = 6.25x
226.
227. Return on Equity = Net profit / Total Equity
228.
229. 2016
230. Return on Equity = 11,872 / 18,392
231. Return on Equity = 64.55%
232.
233. 2017
234. Return on Equity = 5,753 / 17,725
235. Return on Equity = 32.46%
236.
237. 2018
238. Return on Equity = 8,728 / 16,929
239. Return on Equity = 51.56%
240.
241. 2019
242. Return on Equity = 9,431 / 20,985
243. Return on Equity = 44.94%
244.
245. 3.
246. 2016
247. Q1 = 18,684 / 79,920
248. Q1 = 23.38%
249.
250. Q2 = 20,238 / 79,920
251. Q2 = 25.32%
252.
253. Q3 = 19,225 / 79,920
254. Q3 = 24.06%
255.
256. Q4 = 21,770 / 79,920
257. Q4 = 27.24%
258.
259. 2017
260. Q1 = 18,155 / 79,139
261. Q1 = 22.94%
262.
263. Q2 = 19,289 / 19,139
264. Q2 = 24.37%
265.
266. Q3 = 19,153 / 79,139
267. Q3 = 24.20%
268.
269. Q4 = 22,543 / 79,139
270. Q4 = 28.49%
271.
272. 2018
273. Q1 = 19,072 / 79,591
274. Q1 = 23.96%
275.
276. Q2 = 18,756 / 79,591
277. Q2 = 23.57%
278.
279. Q3 = 18,756 / 79,591
280. Q3 = 23.57%
281.
282. Q4 = 21,760 / 79,591
283. Q4 = 27.34%
284.
285. 2019
286. Q1 = 18,182 / 77,147
287. Q1 = 23.57%
288.
289. Q2 = 19,161 / 77,147
290. Q2 = 24.84%
291.
292. Q3 = 18,028 / 77,147
293. Q3 = 23.37%
294.
295. Q4 = 21, 777 / 77,147
296. Q4 = 28.23%
297.
298. 5.
299. 2016
300. Q1 = 8,688 / 18,684
301. Q1 = 46.50%
302.
303. Q2 = 9,694/ 20,238
304. Q2 = 47.90%
305.
306. Q3 = 9,017 / 19,226
307. Q3 = 46.90%
308.
309. Q4 = 10,885 / 21,770
310. Q4 = 50%
311.
312. 2017
313. Q1 = 7,770 / 18,155
314. Q1 = 42.80%
315.
316. Q2 = 8,796 / 19,289
317. Q2 = 45.60%
318.
319. Q3 = 8,791 / 19,153
320. Q3 = 45.90%
321.
322. Q4 = 10,866 / 19,072
323. Q4 = 56.97%
324.
325. 2018
326. Q1 = 8,239 / 19,072
327. Q1 = 43.20%
328.
329. Q2 = 8,628 / 18,756
330. Q2 = 46%
331.
332. Q3 = 8,797 / 18,756
333. Q3 = 46.90%
334.
335. Q4 = 10,684 / 21,760
336. Q4 = 49.10%
337.
338. 2019
339. Q1 = 8,036 / 18,182
340. Q1 = 44.20%
341.
342. Q2 = 9,006 / 19,161
343. Q2 = 47%
344.
345. Q3 = 8,329 / 18,028
346. Q3 = 46.20%
347.
348. Q4 = 11,106 / 21,777
349. Q4 = 51%
350.
351. 7.
352. 2016
353. Q2 = (20,238 – 18,684) / 18,684
354. Q2 = 8.32%
355.
356. Q3 = (19,226 – 20,238) / 20,238
357. Q3 = (5%)
358.
359. Q4 = (21,770 – 19,226) / 19,226
360. Q4 = 13.23%
361.
362. 2017
363. Q2 = (19,289 – 18,155) / 18,155
364. Q2 = 6.25%
365.
366. Q3 = (19,153 – 19,289) / 19,289
367. Q3 = (0.71%)
368.
369. Q4 = (22,543 – 19,153) / 19,153
370. Q4 = 17.70%
371.
372. Annual = (79,140 – 79,918) / 79,918
373. Annual = (0.97%)
374.
375. 2018
376. Q2 = (18,756 – 19,072) / 19,072
377. Q2 = (1.66%)
378.
379. Q3 = (18,756 – 18,756) / 18,756
380. Q3 = 0
381.
382. Q4 = (21,760 – 18,756) / 18,756
383. Q4 = 16.02%
384.
385. Annual = (78,344 – 79,140) / 79,140
386. Annual = (1.01%)
387.
388. 2019
389. Q2 = (19,161 – 18,182) / 18,182
390. Q2 = 5.38%
391.
392. Q3 = (18,028 – 19,161) / 19,161
393. Q3 = (5.91%)
394.
395. Q4 = (21,777 – 18,028) / 18,028
396. Q4 = 20.80%
397.
398. Annual = (77,148 – 78,344) / 78,344
399. Annual = (1.53%)
400.
401. 9.
402. 2016
403. Q2 = (9,694 – 8,688) / 8,688
404. Q2 = 11.58%
405.
406. Q3 = (9,017 – 9,694) / 9,694
407. Q3 = (6.98%)
408.
409. Q4 = (10,885 – 9,017) /9,017
410. Q4 = 20.72%
411.
412. 2017
413. Q2 = (8,796 – 7,770) / 7,770
414. Q2 = 13.20%
415.
416. Q3 = (8,791 – 8,796) / 8,796
417. Q3 = (0.06%)
418.
419. Q4 = (10,856 – 8,791) / 8,791
420. Q4 = 23.49%
421.
422. Annual = (36,223 – 38,284) / 38,284
423. Annual = (5.38%)
424.
425. 2018
426. Q2 = (8,628 – 8,239) / 8,239
427. Q2 = 4.72%
428.
429. Q3 = (8,797 – 8,628) / 8,628
430. Q3 = 2%
431.
432. Q4 = (10,864 – 8,797) / 8,797
433. Q4 = 21.45%
434.
435. Annual = (36,348 – 36,223) / 36,223
436. Annual = 0.35%
437.
438. 2019
439. Q2 = (9,006 – 8,036) / 8,036
440. Q2 = 12.07%
441.
442. Q3 = (8,329 – 9,006) / 9,006
443. Q3 = (7.52%)
444.
445. Q4 = (11,106 – 8,329) / 8,329
446. Q4 = 33.34%
447.
448. Annual = (36,477 – 36,348) / 36,348
449. Annual = 0.35%

All papers are written by ENL (US, UK, AUSTRALIA) writers with vast experience in the field. We perform a quality assessment on all orders before submitting them.

Do you have an urgent order?  We have more than enough writers who will ensure that your order is delivered on time.

We provide plagiarism reports for all our custom written papers. All papers are written from scratch.