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This is a report paper of performance analysis of the company entitled HP, IBM and DELL. The ratio analysis of these companies will help to compare the financial performance of the company. The period of analysis is from 2008 to 2010. The performance of HP, IBM and DELL has been analyze in terms of Liquidity Ratios Activity Ratios Debt Ratios Profitability Ratios Market Value Ratios

OBJECTIVES

The objectives of this report is to Analyze the performance of HP, IBM and DELL using ratios to judge the liquidity, leverage, activity, profitability and market position.(from the perspective of current and potential investor’s view point). To identify current performance of the world re-known IT companies which are HP, IBM & DELL and come up with our own conclusion and see if the companies current share prices truly reflect the real picture and performance. Provide some suggestions for these companies order to improve their performance.

SCOPE

Ratio analysis is one of the important performance indicators for these companies. In this report, through the all scholarly journals and articles it will be more visible to the reader that which IT company is the market leader.

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METHODOLOGY

As we has been assigned to prepare the report on “performance analysis of the HP, IBM & DELL”. Our data collection is based on secondary data which collect from the annual report of HP, IBM & DELL companies. We will collect information from different sources like books, websites, journal reviews etc. After gathering all the information we have prepared the report.

LIMITATIONS

Although we have tried our level best to provide the most up to date and accurate information about these companies in this report but there were a few limitations. Because of which we were unable to present the report to the level of accuracy which we wanted to obtain. The limitations were The information that I have used in this report were gathered from secondary source which included financial statements of these companies from 2008 - 2010 and also information provided from the company’s website. The time frame for writing this report was restricted to 3 months or a single semester. If we were allowed more time, we would surely be able to present the information more descriptively.

COMPANY PROFILE

Hewlett-Packard Company or HP is an American multinational information technology corporation headquartered in Palo Alto, California, USA that provides products, technologies, software, solutions and services to consumers, small- and medium-sized businesses (SMBs) and large enterprises, including customers in the government, health and education sectors. The company was founded in a one-car garage in Palo Alto by William (Bill) Redington Hewlett and Dave Packard. Currently, HP is the world's leading PC manufacturer, operating in nearly every country. It specializes in developing and manufacturing computing, data storage, and networking hardware, designing software and delivering services. Major product lines include personal computing devices, enterprise, and industry standard servers, related storage devices, networking products, software and a diverse range of printers, and other imaging products. HP markets its products to households, small- to medium-sized businesses and

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enterprises directly as well as via online distribution, consumer-electronics and office-supply retailers, software partners and major technology vendors. HP also has strong services and consulting business around its products and partner products. International Business Machines abbreviated IBM and nicknamed "Big Blue", is a multinational computer technology and IT consulting corporation headquartered in Armonk, New York, United States. The company is one of the few information technology companies with a continuous history dating back to the 19th century. IBM manufactures and sells computer hardware and software (with a focus on the latter), and offers infrastructure services, hosting services, and consulting services in areas ranging from mainframe computers to nanotechnology. Samuel J. Palmisano is the chairman and CEO of IBM. IBM has been well known through most of its recent history as one of the world's largest computer companies and systems integrators. With over 388,000 employees worldwide, IBM is one of the largest and most profitable information technology employers in the world. IBM holds more patents than any other U.S. based technology company and has eight research laboratories worldwide. The company has scientists, engineers, consultants, and sales professionals in over 170 countries. Dell was ranked the 25th largest company on the fortune 500 list by Forbes magazine. It’s founded by Michael Dell with a startup capital of 1000$ in a college dorm room at the University of Texas. His vision was to produce some similar personal products like IBM which would meet individual consumer needs. The strategy of the company was slight different than the other personal computer manufacturers. Dell wanted to build a computer system according to the individual requirements. In 1985, Mr. Dell got a family loan of $300000 dollars to begin a new company which is today’s Dell Inc. Later the same year the company introduced its first company designed computer, the Turbo PC. The computer boasted an Intel 8088 processor that ran at an impressive speed of 8MHz. The computer systems, which were advertised in computer magazines nationally, were purchased through direct sales. Given a list of options, the customers choose the components they wanted and the computers were built as they were ordered. By ordering the components wholesale, the company was able to provide great pricing, which proved to be much lower than their competitors’. The company’s business formula proved to be a great success and the first year of trading they grossed more than $73 million dollars.

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the more liquid the firm is considered to be. the better is the position of the company.LITERATURE REVIEW Ratio Analysis is the starting point in developing the information desired by the analyst. Current Ratio Current ratio indicates the extent to which current liabilities are covered by those assets expected to be converted to cash in the near future and thereby. Current Ratio Quick/ Acid Test Ratio I. Generally. In the ratio analysis it is possible to define the company ratio with a standard one. The higher the quick ratio. Liquidity refers to the solvency of the firm’s overall financial position-the ease with which it can pay its bills. LIQUIDITY RATIOS The liquidity of a firm is measured by its ability to satisfy its short-term obligations as they come due. Two ratios discussed under Liquidity ratio are: I. the analysis being for one given point or period in time. higher the current ratio. For this report we have gone through time series analysis. it shows the firm’s ability to meet its short-term obligations. The quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets. 1. II. Current Ratio II. Ratio analysis provides only a single snapshot. Quick / Acid test Ratio This ratio is an indicator of a company's short-term liquidity. These liquidity ratios actually show the relationship between a firm’s cash and other current assets to its current liabilities. Quick or Acid Test Ratio ( ) 4|Page .

they measure the speed with which various accounts are converted into sales or cash-inflows or outflows. from its customers and clients and it is useful in evaluating credit and collection policies. Inventory Turnover Ratio II. II. the liquidity of a firm’s inventory. III. In other words.2. that is. Four types of activity ratios are discussed below: I. IV. ACTIVITY RATIOS Activity Ratios are the financial statement ratios that measure how effectively a business uses and controls its assets. Average Collection Period 5|Page . Inventory Turnover Ratio Average Collection Period Average Payment Period Total Asset Turnover Ratio I. Average Collection Period ( ) Average Collection Period is the approximate amount of time that it takes for a business to receive payments owed. Inventory Turnover Ratio The ratio is regarded as a test of efficiency and indicates the rapidity with which the company is able to move its merchandise. in terms of receivables.

DEBT RATIOS Debt management ratios reveal: 1) The extent to which the firm is financed with debt and 2) Its likelihood of defaulting on its debt obligations. The higher the value the better able the firm is to fulfill its interest obligation.III. Times Interest Earned Ratio This ratio measures the extent to which operating income can decline before the firm is unable to meet its annual interest cost. Average Payment Period Average Payment Period is defined as the number of days a company takes to pay off credit purchases. higher a firm’s total asset turnover. Generally. Times-Interest-Earned (TIE) Ratio II. Average Payment Period IV. Debt Ratio I. the more efficiently its assets have been used. The more debt a firm has. Total Asset Turnover Ratio The Total Asset Turnover Ratio indicates the efficiency with which the firm uses its assets to generate sales. the greater its risk of being unable to meet its contractual debt payments. Debt ratios include: I. Total Asset Turnover 3. Times Interest Earned (TIE) Ratio ( ) 6|Page .

Gross Profit Margin The gross profit margin is used to analyze how efficiently a company is using its raw materials. PROFITABILITY RATIOS Profitability is the net result of a number of policies and decisions. The higher the ratio. Profitability ratios show the combined effects of liquidity. A higher margin percentage is a favorable profit indicator. Gross Profit Margin 7|Page . asset management and debt on operating results. Debt Ratio 4. VI. V. There are four important profitability ratios that we are going to analyze: I.II. III. Debt Ratio: Debt ratio measures the proportion of total assets financed by the firm’s creditors. the greater the amount of other people’s money being used to generate profit. Gross Profit Margin Operating Profit Margin Net Profit Margin Earnings per Share (EPS) Return on Asset (ROA) Return on Equity (ROE) I. II. IV. labor and manufacturing-related fixed assets to generate profits.

Earnings per Share V. This signifies the profit of the company that accrues to each share. Operating Profit Margin The operating profit margin ratio indicates how much profit a company makes after paying for variable costs of production such as wages. Net Profit Margin The net profit margin. Net Profit Margin IV. Return on Assets (ROA) Return on assets is a key profitability ratio which measures the amount of profit made per dollar of assets that they own.II. indicates how much net income a company makes with total sales achieved. also known as net margin. etc. Earnings per Share (EPS) The earnings per share ratio is mainly useful for companies with publicly traded shares. raw materials. Operating Profit Margin ( ) III. It measures the company’s ability to generate profits before leverage with its own assets. Return on Asset (ROA) 8|Page .

These ratios give management an indication of what investors think of the company’s past performance and future prospects. Price / Earnings Ratio II. in comparison with the amount of capital invested by current and past shareholders into it. Price / Earnings Ratio The P/E ratio (price-to-earnings ratio) of a stock (also called its "P/E". Price/ Earnings ratio Market/ Book ratio I. Market / Book Ratio 9|Page . or simply "multiple") is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. Return on Equity (ROE) 5. It measures how much a company worth at present. Return on Equity (ROE) Return on equity measures the return earned on the common stockholders’ investment in the firm.VI. Market / Book Ratio Market-to-Book Ratio is the ratio of the current share price to the book value per share. II. we are going to have a discussion mainly on two types of ratios: I. In this section. MARKET VALUE RATIOS The market value ratios relate the firm’s stock price to its earnings and book value per share.

29 2008 0. where industry average is 1. where industry average is 1. it is 0.00 0.80 0.15. it is 1. where it slightly reachable the industry average and lowest for the year 2008.20 1. it is 1.60 1.49 1. it is 1.40 0. IBM: The Current Ratio of IBM for the year 2010 is 1. where it exceeds the industry average and 10 | P a g e .19 1. for 2009.16.29 and for 2008.26.PERFORMANCE ANALYSIS 1.26.98.40 1.26 2009 1. The Current Ratio is highest for the year 2009. The overall performance of the company in terms of Current Ratio is fair compared to industry average.36 where industry average is 1.19.29 and for 2008.15 1. where industry average is 1.36 1.98 1.10 1.60 0.36 1.20 0.22 1. for 2009. where it is quite below the industry average. Current Ratio 2010 1.10. IBM’s Current Ratio is highest for the year 2009.16.22 where industry average is 1.00 HP IBM 2010 DELL HP IBM 2009 DELL HP IBM 2008 DELL Total Industry Avg HP: The Current Ratio of HP for the year 2010 is 1. LIQUIDITY RATIOS I.28 1.16 Company Name HP IBM DELL Industry Average Current Ratio 1. where the industry average is 1.

30 1.4 0. where industry average is 1.26.29 1. where industry average is 1.8 0.2 1 0.20 2008 0.2 0 HP IBM DELL 2010 HP IBM DELL 2009 HP IBM DELL 2008 Total Industry Avg 11 | P a g e . DELL: The Current Ratio of Dell for the year 2010 is 1. After analyzing the ratios for the 3 years.07 Company Name HP IBM DELL Industry Average Quick / Acid Test Ratio 1. for 2009.42 1. Dell’s Current Ratio is higher compared to industry average.29 and for 2008. In all of these years except 2009. Quick/ Acid test Ratio 2010 0.28 where industry average is 1.lowest for 2008. II.6 1.6 0.22 1. thus indicating a very good performance in terms of Current Ratio.17 2009 1.36. The overall performance of IBM in terms of Current Ratio is good compared to industry average. it is 1.16. The Current Ratio is highest for the year 2010 and lowest for 2008. where it is still above the industry average.49. it is 1.09 1.97 1.08 1. it is apparent that Dell is in a comparatively better position out of the 3 firm’s consideration.13 1.83 1.4 1.

where industry average is 1. IBM: The Quick Ratio of IBM for 2010 is 1.20 and for 2008. It is indicating a good performance in terms of Quick Ratio.HP: The Quick Ratio of HP for the year 2010 is 0.20 and for 2008.29 where industry average is 1.86 21. it is 1.13. for 2009.17.46 57.07.17. it is 1. for 2009.20 and for 2008.28 20.30.84 30. The firm has performed poorly in terms of Quick Ratio when compared to the industry average.41 21. The Quick Ratio is highest for the year 2009 and lowest for 2008.42.55 2008 11.22 where industry average is 1. Inventory Turnover Ratio 2010 14.83. where the industry average is 1. where industry average is 1.12 2009 14. After analyzing the ratios for the 3 years. but in all the 3 years. The Quick Ratio of IBM is highest for 2009 and it is exceeds the industry average and lowest for 2008 which is above the industry average. it is 1. DELL: The Quick Ratio of DELL for the year 2010 is 1. it is 0.09. The Quick Ratio is highest for 2010 and lowest for 2009.07. where industry average is 1.24 Company Name HP IBM DELL Industry Average 12 | P a g e . it is apparent that Dell is in a comparatively better position out of these 3 firms and HP is weakest.84 41. indicating a very good performance in terms of Quick Ratio. it is 1. this ratio is well above the industry average.52 25.98 38. ACTIVITY RATIOS I.07. where industry average is 1. it is 1.97. for 2009. 2. where industry average is 1.08 where the industry average is 1.51 25.17.

12. for 2009. IBM: The Inventory Turnover Ratio of IBM for the year 2010 is 21. where the industry average is 25.41. for 2009. possible overstocking.84.12. and obsolescence.12. however it can still be said that IBM had a fair performance based on this ratio. where industry average is 30. The Inventory Turnover Ratio is highest for 2010 and lowest for 2009. but it may also reflect a planned inventory buildup in the case of material shortages or in anticipation of rapidly rising prices. Although Dell’s Inventory Turnover Ratio has been decreasing since 2008.46. The Inventory Turnover Ratio is highest for 2008 and lowest for 2010. it is 57. HP has performed poorly. where industry average is 30. where it is below the industry average.52 where industry average is 25. Thereby. it is 21.24.48 where industry average is 25.51. DELL: The Inventory Turnover Ratio of Dell for the year 2010 is 38.86. yet this 13 | P a g e .28 where industry average is 25. The Inventory Turnover Ratio is highest for 2010 and lowest for 2008 and for all these 3 years. it is 41. it is 11.55 and for 2008.24. where the industry average is 25.55 and for 2008.55 and for 2008.24.98. Although this ratio is below the industry average for the three years indicating some degree of inefficiency. this ratio is much below the Industry Average.Inventory Turnover 60 50 40 30 20 10 0 HP IBM 2010 DELL HP IBM 2009 DELL HP IBM 2008 DELL Total Industry Avg HP: The Inventory Turnover Ratio of HP for the year 2010 is 14. A low Inventory Turnover Ratio is a signal of inefficiency and can also imply poor sales or excess inventory along with poor liquidity. where the industry average is 25. where industry average is 30. based on Inventory Turnover Ratio. for 2009. it is 14. it is 20.

After analyzing the ratios for the 3 years. II.5 2 1.16 2009 1.15 2008 1.ratio remains above the industry average for all the three years. therefore the buying price is higher). which may lead to a loss in business.5 Total 1 0.57 1.00 0.59 1.A high inventory turnover ratio can indicate better liquidity.95 2.01 0. it is apparent that Dell is in a comparatively better position out of the 3 firms considered and HP is the weakest. Thus. A high inventory turnover ratio can either indicate strong sales or ineffective buying (the company buys too often in small quantities. but it can also indicate a shortage or inadequate inventory levels. based on the high inventory turnover ratio.88 1. Dell had very good performance for the 3 years.5 0 HP IBM DELL 2010 HP IBM DELL 2009 HP IBM DELL 2008 Industry Avg 14 | P a g e . Total Asset Turnover Ratio 2010 1.04 0.31 1.43 Company Name HP IBM DELL Industry Average Total Asset Turnover 2.88 1.

The total asset turnover ratio is highest for the year 2008 and it remains constant for 2009 and 2010. it is 1.31. For the three years considered.58 43. it is 1. For all the three years. III. For the three years considered.43.33 53.01.52 39.15 and for 2008.43. The total asset turnover is highest for the year 2008 and lowest for 2009.88. The total asset turnover ratio is highest for the year 2008 and lowest for 2009.92 50. indicating efficient use of assets to generate sales and thereby a good performance based on this ratio.41 38. it is 1. this ratio for Dell remains above the industry average.84 2008 52. is very poor.15 2009 52. DELL: The Total Asset Turnover ratio of Dell for the year 2010 is 1. for 2009.15 and for 2008. where industry average is 1.69 40. where industry average is 1. where industry average is 1.92 58. After analyzing the ratios for the 3 years.20 38.04. it is 0. for 2009.88 where industry average is 1. IBM: The Total Asset Turnover ratio of IBM for the year 2010 is 0.60 66.06 Company Name HP IBM DELL Industry Average 15 | P a g e .16.57 where industry average is 1. it is apparent that Dell is in a comparatively better position out of the 3 firms considered and IBM is the weakest.59. it is 2.16. the ratio remains below the industry average indicating that HP is not using its assets to generate sales as efficiently as some of its competitors. where industry average is 1. where industry average is 1. it is 0. indicating that it is the least efficient in using its assets to generate sales and thereby its performance based on this ratio.95.00.16. Average Collection Period Ratio 2010 53. where industry average is 1.HP: The Total Asset Turnover ratio of HP for the year 2010 is 1.15 and for 2008.43. where industry average is 1. for 2009. this ratio for IBM remains much below the industry average.

where the industry average is 53. the firms overall performance based on this ratio is good.84 days and for 2008.33 days.84 days and for 2008. IBM: The Average Collection Period of IBM for the year 2010 is 39.84 days and for 2008. where industry average is 43. this ratio of Dell is much higher than the industry average. for 2009. it is 52. where the industry average is 53. Thus.58 days.06 days.69 days where industry average is 50. The Average Collection Period is highest for the year 2010 and lowest for 2008.06. where the industry average is 53.15 days.41 days. where industry average is 43. The Average Collection Period is highest for the year 2010. For all these years.52 days.Average Collection Period 70 60 50 40 30 20 10 0 HP IBM DELL 2010 HP IBM DELL 2009 HP IBM DELL 2008 Total Industry Avg HP: The Average Collection Period of HP for the year 2010 is 53. it is 38.06 days. DELL: The Average Collection Period of Dell for the year 2010 is 66. The Average Collection Period is highest for the year 2009 and lowest for 2008. indicating prompt payments by debtors and reduced chances of bad debts. for 2009.15 days. it is 40.92 days where industry average is 50. where it is exceeds the industry average and lowest for the year 2008. it is 58. for 2009. it is 52. where industry average is 43.60 days.15 days.20 days. where it is much higher than the industry average. it is 38.92 days where industry average is 50. indicating too liberal and 16 | P a g e . However for all these 3 years except 2008. This longer collection period implies too liberal and inefficient credit collection performance. this ratio is lower to the industry average.

98 63. it is 88. which needs to be redefined. The Average Payment Period is highest for the year 2009 and lowest for 2010.6 135.inefficient credit collection policies.98 days. it is 81.23 74. where industry average is 77. After analyzing the ratios for the 3 years. it is apparent that IBM is in a comparatively better position out of the 3 firms considered and DELL is the weakest. Thus Dells performance in terms of this ratio is poor.23 where industry average is 99.40 77. where the industry average is 90.57 days and for 2008. Average Payment Period Ratio 2010 77.16 Company Name HP IBM DELL Industry Average Average Payment Period 140 120 100 80 60 40 20 0 HP IBM DELL HP 2010 IBM DELL HP 2009 IBM DELL 2008 Total Industry Avg HP: The Average Payment Period of HP for the year 2010 is 77.95 days.57 2008 81.56 117.35 2009 88.35 days. Based on this ratio HP has performed comparatively well according to industry average.54 90.09 86. 17 | P a g e . for 2009.16 days.95 75. IV.88 99.

24% 79.62% 2008 65. it is 63. Based on this ratio Dell has performed poorly according to industry average.24% 75. where the industry average is 90.16 days.49% 79. Debt Ratio Company Name HP IBM DELL Industry Average 2010 67.13% 83.54% 87.57 days and for 2008. it is 74. DEBT RATIOS I. it is apparent that IBM is in a comparatively better position out of the 3 firms considered and DELL is the weakest position. where the industry average is 90. DELL: The Average Payment Period of Dell for the year 2010 is 117.16 days. The Average Payment Period is highest for the year 2010 and lowest for 2008. for 2009. The Average Payment Period is highest for the year 2009 and lowest for 2008.09 days.58% 79.6 days where industry average is 99. where industry average is 77.IBM: The Average Payment Period of IBM for the year 2010 is 75. where industry average is 77.59% 83.88% 79.88 days where industry average is 99. Based on this ratio IBM has performed very good according to industry average.04% 18 | P a g e .35 days.35 days.57 days and for 2008.88% 75.57% 2009 64. for 2009. After analyzing the ratios for the 3 years. it is 135.54 days. it is 86.56 days.40 days. 3.

54%.13% where industry average is 75.88%. After analyzing the ratios for the 3 years. where the industry average is 75.57%. 19 | P a g e . The ratio is highest for 2010 and lowest for 2009. The ratio is highest for 2008 and lowest for 2010. where the industry average is 75.00% 10.04%.58%. where industry average is 79.00% HP IBM DELL 2010 HP IBM DELL 2009 HP IBM DELL 2008 Total Industry Avg HP: The Debt Ratio of HP for the year 2010 is 67. for 2009.00% 70. Based on this ratio HP has performed really well according to industry average. where the industry average is 75.57%.59%. it is 83.00% 20. IBM: The Debt Ratio of IBM for the year 2010 is 79.00% 60. Based on this ratio IBM has performed relatively well according to industry average. it is 87. for 2009. it is 64.00% 0. it is 65. The ratio is highest for 2008 and lowest for 2009.62% and for 2008. for 2009.62% and for 2008.00% 80. where industry average is 79.00% 40. where industry average is 79. DELL: The Debt Ratio of DELL for the year 2010 is 79. Based on this ratio Dell has performed very poor according to industry average. it is 79.24%.04%.24% where industry average is 75.88%.04%.62% and for 2008. it is apparent that HP is in a comparatively better position out of the 3 firms.57%.00% 30. it is 83.Debt Ratio 90.49% where industry average is 75.00% 50.

II. for 2009. DELL: The TIE Ratio of Dell for the year 2010 is 17. it is 25.41.25 32. it is 45.40 where industry 20 | P a g e . for 2009.41 2009 16.53 52. where the industry average is 32. where the industry average is 32.27 and for 2008.25 13. it is 16.53.27 2008 22. it is 13. IBM: The TIE Ratio of IBM for the year 2010 is 52.25.46 17.38. Based on this ratio IBM has performed really well according to industry average.41. it is 22.30 27.98 45.46.38.25 where industry average is 25.43 where industry average is 27. Times Interest Earned (TIE) Ratio 2010 27.40 34.40 where industry average is 27.98 where industry average is 25. The ratio is highest for 2010 and lowest for 2008. for 2009.58 25. where the industry average is 32.38 Company Name HP IBM DELL Industry Average TIE Ratio 60 50 40 30 20 10 0 HP IBM DELL HP 2010 IBM DELL HP 2009 IBM DELL 2008 Total Industry Avg HP: The TIE Ratio of HP for the year 2010 is 27.27 and for 2008.43 25. The ratio is highest for 2010 and lowest for 2009. Based on this ratio HP has not performed well according to industry average. it is 34.27 and for 2008.58 where industry average is 25.41.

00% 14.28% 8.95% Net profit margin where industry average is 8. in 2010 HP generates 6. in 2009 it generates 6. After analyzing the ratios for the 3 years.67%.85% 4.04% Net profit margin where industry average is 7.67% Company Name HP IBM DELL Industry Average Net Profit Margin 16. 21 | P a g e .00% 12.95% 14. The Net profit margin was highest in 2008 and lowest in 2009.00% 8.69% 14. it is apparent that IBM is in a comparatively better position out of the 3 firms considered and Dell is the weakest. The 3 years Net Profit Margin is below the industry average which means HP has not perform well.average is 27.81% 2008 7.06% 7.71% 7.00% 6.69% 2009 6.00% HP IBM DELL 2010 HP IBM DELL 2009 HP IBM DELL 2008 Total Industry Avg HP: The graph shows that. 4.00% 2.00% 0.69%.69% Net profit margin where industry average is 7.81%. The ratio is highest for 2008 and lowest for 2009. Net Profit Margin Ratio 2010 6.04% 11.00% 10.02% 2. Based on this ratio Dell has performed poorly according to industry average.38.00% 4. in 2008 it generates 7.90% 4. PROFITABILITY RATIOS I.

69%. in 2008 it generates 2.76% 46.IBM: The graph shows that. in 2010 it generates 4. The Net profit margin was highest in 2010 and lowest in 2009.94% 2008 24.81%. in 2009 it generates 14.85% Net profit margin where industry average is 7.53% 29.51% 28.85% Net profit margin where industry average is 8. in 2008 it generates 11.03% 44. II. in 2009 it generates 2. After analyzing the 3 years ratios. This lower cost generally occurs because of their efficient operations. we can see that IBM’s net profit margin ratios are well above from the ratios of others.67%.59% 45. But the performance of the company is very poor compare to industry average.06% 17. DELL: The graph shows that.90% Net profit margin where industry average is 7.71% Net profit margin where industry average is 7. The Net Profit Margin ratio is much better than industry average which means IBM profit performance is very good. The Net profit margin was highest in 2010 and lowest in 2008.28% Net profit margin where industry average is 8.81%.93% 28. Dell position is completely opposite. Gross Profit Margin Ratio 2010 23.73% 17.07% 18.67% Company Name HP IBM DELL Industry Average 22 | P a g e .67%. IBM’s ratio is high because their costs are relatively lower than others. in 2010 it generates 14.02% Net profit margin where industry average is 7. On the other hand.69%.45% 2009 23.

DELL: The graph shows that.94%.45%.00% 40. The overall performance of the company is much better than the industry average.59% gross profit margin where industry average is 28. And IBM gross profit margin is almost two times higher comparing to others.67%. in 2010 it generates 23. in 2010 it generates 18.76% gross profit margin where industry average is 29. The overall performance of the company is poor compare to industry average. in 2009 it generates 45.67%.00% 30.73% gross profit margin where industry average is 28.Gross Profit Margin 50.00% HP IBM DELL 2010 HP IBM DELL 2009 HP IBM DELL 2008 Total Industry Avg HP: The graph shows that. IBM: The graph shows that. The gross profit margin was highest in 2008 and lowest in 2009. The gross profit margin was highest in 2010 and lowest in 2009. in 2008 it generates 44.00% 15.00% 20. 23 | P a g e . The gross profit margin was highest in 2010 and lowest in 2008. in 2008 it generates 17.00% 0. in 2009 it generates 23.51% gross profit margin where industry average is 28. in 2008 it generates 24.94%.00% 10.67%. in 2009 it generates 17.45%.03% gross profit margin where industry average is 28.00% 45.06% gross profit margin where industry average is 28.07% gross profit margin where industry average is 29.93% gross profit margin where industry average is 28.45%. in 2010 it generates 46.53% gross profit margin where industry average is 29. But the company 3 years gross profit margin is below the industry average.94%.00% 5.00% 25.00% 35.

65% 2008 8.11% 19.11% 10.22% 10.00% 2.00% HP IBM DELL HP 2010 IBM DELL HP 2009 IBM DELL 2008 Total Industry Avg HP: The graph shows that.00% 12. And Dell has the lowest gross profit margin which means they may be unable to pay expenses or earn profit.34% 2009 8.19% Company Name HP IBM DELL Industry Average Operating Profit Margin 20.00% 18.00% 16.85% operating profit margin where industry average is 10.11% operating profit margin where industry average is 11.00% 0.65%.After analyzing the 3 years ratios. in 2009 it generates 8. 24 | P a g e . III. we can see that IBM’s gross profit margin ratios are well above from the ratios of others. in 2008 it generates 8.00% 4. HP performance is below the industry average.85% operating profit margin where industry average is 10.33% 5.00% 6.85% 19. Operating Profit Margin Ratio 2010 9. The operating profit margin was highest in 2010 and lowest in 2009 and 2008.34%.00% 10.00% 8.85% 16.19%.00% 14.00% 4.58% 11.49% 5. in 2010 it generates 9.

05% Company Name HP IBM DELL Industry Average 25 | P a g e . Return on Equity (ROE) Ratio 2010 21. in 2010 it generates 19.65%.91% 59.00% operating profit margin where industry average is 10.33% operating profit margin where industry average is 11. DELL: The graph shows that.34%. After analyzing the 3 years ratios. This means they are keeping their costs under control and also their sales are increasing faster than costs. in 2010 it generates 5.22% operating profit margin where industry average is10.11% operating profit margin where industry average is 10. On the other hand.32% 12.65%.60% 22. in 2009 it generates 4. we can see that IBM’s operating profit margin ratios are well above from the ratios of others. Dell’s position is completely opposite.58% operating profit margin where industry average is 11.49% operating profit margin where industry average is 10. The operating profit margin was highest in 2010 and lowest in 2009.19%. IBM 3 year’s performance is very well comparing to the industry average.15% 45. and the firm is in a relatively liquid position. But the overall performance of the company is poor compare to industry average.12% 2009 18.IBM: The graph shows that. in 2008 it generates 16.34% 36.24% 2008 21. IV.39% 91.66% 64.34%. The operating profit margin was highest in 2010 and lowest in 2008. in 2009 it generates 19. in 2008 it generates 5.49% 30.37% 22.19%.

00% 70.32 cents on each dollar of equity where industry average is 30. The overall performance of the company is way better than industry average because it generates almost two times higher return on equity compare to others. in 2009 it earned 59. in 2009 it earned 18.Return on Equity (ROE) 100.37 cents on each dollar of equity where industry average is 36. in 2008 it earned 21. DELL: The ROE Ratio shows that.00% 30.00% 60. Return on equity was highest in 2010 and lowest in 2009. in 2008 it earned 91.34 cents on each dollar of equity where industry average is 36.05 cents. 26 | P a g e . But the overall performance of the company is not relatively good compare to industry average. Return on equity was highest in 2008 and lowest in 2009.12 cents.00% 40.24 cents.12 cents. But the overall performance of the company is not relatively good compare to industry average.91 cents on each dollar of equity where industry average is 30.15 cents on each dollar of equity where industry average is 45.24 cents. IBM: The ROE Ratio shows that.12 cents. in 2010 it earned 64. in 2010 it earned 21.00% 10.00% 90. in 2010 it earned 22.00% 20. in 2008 it earned 22. in 2009 it earned 12.66 cents on each dollar of equity where industry average is 36.00% 80.39 cents on each dollar of equity where industry average is 45.60 cents on each dollar of equity where industry average is 45.24 cents.00% 50.05 cents.00% HP IBM DELL HP IBM DELL HP IBM DELL 2010 2009 2008 Total Industry Avg HP: The ROE Ratio shows that. Return on equity was highest in 2010 and lowest in 2009.05 cents.00% 0.49 cents on each dollar of equity where industry average is 30.

00% 12. in 2008 it earned 7. ROE of IBM is much higher than the other companies. V. Return on Asset (ROA) Ratio 2010 7. 27 | P a g e .35 cents on each dollar of asset investment where industry average is 9.67 cents on each dollar of asset investment where industry average is 7.83% 8.00% 4.98 cents.75% 2008 7. Return on assets was highest in 2008 and lowest in 2009. creating substantial assets for each dollar invested.00% 0.00% 10. we can see that. in 2009 it earned 6.26% 9.75 cents. That means they are generating high returns to their shareholder's equity and paying their shareholders off handsomely.08% 6.32% 4. in 2010 it earned 7.98% 2009 6. HP’s overall performance is not relatively good compare to industry average.32 cents.00% 6.04% 13.32% Company Name HP IBM DELL Industry Average Return on Asset (ROA) 14.67% 12.00% 8.00% HP IBM DELL HP IBM DELL HP IBM DELL 2010 2009 2008 Total Industry Avg HP: The ROA Ratio shows that. 2009 and as well as 2008.35% 11.04 cents on each dollar of asset investment where industry average is 8.00% 2.26% 7.35% 9.After analyzing the 3 years ratios. in 2010.

64 Company Name HP IBM DELL Industry Average 28 | P a g e . Basic earning power and interest cause IBM’s net income relatively high.19 $ 1. we can see that.37 $ 5.75 cents. Return on assets was highest in 2008 and lowest in 2009.45 $ 9.75 cents. 2009 and as well as 2008.32 cents.24 $ 10.77 2008 $ 3.34 $ 0. This high return of assets results from IBM’s high basic earning power and low interest cost resulting from its less use of debt than others.26 cents on each dollar of asset investment where industry average is 9. in 2010.83 cents on each dollar of asset investment where industry average is 8.98 cents. in 2009 it earned 12. DELL: The ROA Ratio shows that. in 2008 it earned 9.32 cents.08 cents on each dollar of asset investment where industry average is 8. in 2010 it earned 6. Dell’s overall performance is not relatively good compare to industry average.84 2009 $ 3.00 $ 12.26 cents on each dollar of asset investment where industry average is 7.73 $ 4. VI.27 $ 4. in 2008 it earned 11. in 2009 it earned 4. After analyzing the 3 years ratios. ROA of IBM is much higher than the other companies.32 cents on each dollar of asset investment where industry average is 7. Earnings Per Share (EPS) Ratio 2010 $ 4. Return on assets was highest in 2010 and lowest in 2008.IBM: The ROA Ratio shows that.16 $ 1. The overall performance of the company is way better than industry average because it generates almost two times higher return on assets compare to others. in 2010 it earned 13.35 cents on each dollar of asset investment where industry average is 9.98 cents.

in 2010 it earned $ 1.45 per share where industry average is $ 4.27 per share where industry average is $ 4.84. in 2010 it earned $ 4.00 $12. Dell’s overall performance is very poor compare than industry average and other company.Earnings Per Share (EPS) $14.64.37 per share where industry average is $ 5. in 2009 it earned $ 10.00 per share where industry average is $ 5. in 2008 it earned $ 1.77. Earnings per Share were highest in 2010 and lowest in 2008.00 $6. in 2008 it earned $ 9.19 per share where industry average is $ 4.00 $4. But the overall performance of the company is relatively good compare to industry average.73 per share where industry average is $ 4. The overall performance of the company is way better than industry average because it generates almost three times higher earnings per Share compare to others.16 per share where industry average is $ 5.77. in 2009 it earned $ 0.64. Earnings per Share were highest in 2010 and lowest in 2009.00 $2.24 per share where industry average is $ 4.00 $8. 29 | P a g e .84.00 $HP IBM DELL HP IBM DELL HP IBM DELL 2010 2009 2008 Total Industry Avg HP: The EPS shows that.34 per share where industry average is $ 4.84.00 $10. DELL: The EPS shows that.64. Earnings per Share were highest in 2010 and lowest in 2009. in 2009 it earned $ 3. in 2010 it earned $ 12. in 2008 it earned $ 3. IBM: The EPS shows that.77.

00 of earning where industry average is $ 15. They should be more focus on their business.After analyzing the 3 years ratios.00 of earning where industry average is $ 9.17 2009 15.60 on each $ 1. 5.89 11. in 2010 investors were paying $ 10. MARKET VALUE RATIOS I.40 8. On the other hand. Dell’s position is very bad.17.26 on each $ 1.67 15.83. in 2008 investors were paying $ 10.31 on each $ 1. in 2009 investors were paying $ 15. Price/ Earnings Ratio were highest in 2009 and 30 | P a g e .60 12.31 9.00 of earning where industry average is $ 11.23 19.06 9.24. we can see that IBM’s earnings per share ratios are well above from the ratios of others. IBM’s ratios indicates that they are growing rapidly which means they are doing very well and company is finding more ways to make more money.83 2008 10.31 13.26 9. Price / Earnings (P/E) Ratio 2010 10.24 Company Name HP IBM DELL Industry Average Price / Earnings (P/E) Ratio 20 18 16 14 12 10 8 6 4 2 0 HP IBM DELL 2010 HP IBM DELL 2009 HP IBM DELL 2008 Total Industry Avg HP: The P/E Ratio shows that.

Price/ Earnings Ratio were highest in 2010 and lowest in 2008.99 5.17.15 Company Name HP IBM DELL Industry Average 31 | P a g e . But the overall performance of the company is relatively good compare to industry average. IBM: The P/E Ratio shows that. But the overall performance of the company is not relatively good compare to industry average.00 of earning where industry average is $ 9.61 4. Price/ Earnings Ratio were highest in 2009 and lowest in 2008.83. in 2008 investors were paying $ 9.23 8.00 of earning where industry average is $ 11. Market / Book (M/B) Value Ratio 2010 2. in 2010 investors were paying $ 9.07 2008 2.57 3.35 4. in 2009 investors were paying $ 12. 3 firms are not in a position where we can say that one company is better than other because 3 years P/E ratio is fluctuating.67 on each $ 1. P/E ratio indicates how much the market is willing to pay for the company’s earnings. in 2010 investors were paying $ 13. we can see that.89 on each $ 1. After analyzing the 3 years ratios.00 of earning where industry average is $ 15.17. II.31 on each $ 1.00 of earning where industry average is $ 11.24.23 on each $ 1. But the overall performance of the company is relatively good compare to industry average.72 2009 2.83.26 4.00 of earning where industry average is $ 15.00 of earning where industry average is $ 9.24. in 2008 investors were paying $ 8.40 on each $ 1. in 2009 investors were paying $ 19.lowest in 2008.19 8. DELL: The P/E Ratio shows that.65 5.06 on each $ 1.95 7.

00 of book value of stock where industry average is $ 5. Market-to-Book Ratio was highest in 2008 and lowest in 2010.65 on each $ 1.72.61 on each $ 1.99 on each $ 1. in 2009 investors are currently paying $ 4.07.00 of book value of stock where industry average is $ 4.15.00 of book value of stock where industry average is $ 5.26 on each $ 1.35 on each $ 1.15.00 of book value of stock where industry average is $ 5.95 on each $ 1. in 2009 investors are currently paying $ 2. The overall performance of the company is way better than industry average because it generates almost two times higher compare to others. in 2010 investors are currently paying $ 3.00 of book value of stock where industry average is $ 5.07.07. in 2008 investors are currently paying $ 8.72. DELL: The M/B Ratio shows that. in 2008 investors are currently paying $ 2. 32 | P a g e . in 2010 investors are currently paying $ 2. But the overall performance of the company is relatively good compare to industry average. IBM: The M/B Ratio shows that. Market-to-Book Ratio was highest in 2009 and lowest in 2008.00 of book value of stock where industry average is $ 5.00 of book value of stock where industry average is $ 5.57 on each $ 1.Market/Book (M/B) Value Ratio 9 8 7 6 5 4 3 2 1 0 HP IBM DELL 2010 HP IBM DELL 2009 HP IBM DELL 2008 Total Industry Avg HP: The M/B Ratio shows that.00 of book value of stock where industry average is $ 4. in 2010 investors are currently paying $ 8.23 on each $ 1. Market-to-Book Ratio was highest in 2008 and lowest in 2009.15. in 2009 investors are currently paying $ 7.19 on each $ 1. in 2008 investors are currently paying $ 4.72. But the overall performance of the company is very poor compare to industry average.00 of book value of stock where industry average is $ 4.

That means they have more liquidity asset than HP in the year 2008. Generally the higher the current ratio the more liquid a firm is considered to be. FINDINGS After analyze the performance of HP. Dell has done exceptionally well in inventory turnover in year 2008. Here except IBM other two companies have greater 33 | P a g e . An inventory turnover for Manufacturer Company should be 4 or more than 4. In analyzing inventory turnover ratio we can see all the companies in all year has a good turnover. Here our shows that only IBM and DELL have the quick ratio more than 1. It provides a better measure of overall liquidity. A quick ratio of 1. So the ratios for the 3 years. This is because IBM and DELL have less current liabilities in 2008 than HP. 2009 and year 2010. Here we can see that Dell has pretty well current ratio considering other companies in 2008 although it is not 2 or close to 2. On the other hand DELL quick ratio slightly decreased. In 2010 except DELL all other 3 companies quick ratio goes down though IBM didn’t go less than 1 but HP are below 1 these means HP has failed to maintain ideal quick ratio. because it indicates whether the firms operations have been financially efficient.0 or greater is occasionally recommended. This measure is probably of greatest interest to management. IBM and DELL we are found different things. increasing their market share as well as offering higher quality products. Its higher Market to Book Value ratio indicates that the stock of IBM has more attractive outlook than other companies.15 in 2008. And next is IBM which is 1. it is apparent that Dell is in a comparatively better position out of the 3 firm’s consideration.By analyzing 3 years ratio we see that IBM is performing well than others by improving profit. The higher a firm’s total asset turnover the more efficiently its assets have been used. In the year 2009 IBM quick ratio increase and HP also improved in 2009 and it is more than 1. A current ratio of 2 is occasionally cited as acceptable. But IBM inventory turnover goes up and down in 2008 to 2010. But in 2009 it shows that IBM current ratio has gone up as well as HP but DELL current ratio goes down though it was not significantly decreased.

HP and DELL need more periods to collect its cash from their customers. DELL should be more focus in their cost and expense and need to increase their sales. It means these two companies has poorly managed credit or collection department. The average collection period is meaningful only in relation to the firm’s credit terms. The higher the value the better able the firm is to fulfill its interest obligations. Less the collection period more it is good for a company. Except HP other two companies IBM and DELL has financed more than 75% of its assets with debt.value that means they are more efficiently using their asset. HP has standard profit margin in 2008-2010 but DELL position is completely opposite to IBM. That means these two companies have more financial leverage. Suppliers or trade credit are most interested in the average payment period because it provides insight into firms bill paying patterns. 2009 and 2010. But IBM turnover on asset per year is not good enough. 34 | P a g e . And we can see that only IBM can maintain credit terms less than industry average in all the year 2008. And here except IBM Company other two need more or less than 100 days to pay their credits though it is not a good sign for these companies. TIE Ratio measures the firm’s ability to make contractual payments. But other two companies’ credit term to customers extend the industry average. So they should try to organize their collection department more efficiently so that it keeps less than industry average. IBM is comparatively better position to others. DELL should be more focus in their EBIT to increase it. The net profit margin is commonly cited measures of the firm’s success with respect to earnings on sales. Else it may bring negative effect in future for the company. The higher the ratio the greater the amount of other people’s money to being used to generate profit. The higher the firms net profit margin the better. Average payment period is the average of time needed to pay accounts payable. Because suppliers and trade creditors is very important factor for every manufacturer company. IBM has exceptionally good net profit margin. A value close to 5 is preferable. But HP has financed on average of 65% of its assets with debt. The debt ratio measures the proportion of total assets financed by the firm’s creditors.

So it should try to increase the gross profit margin percentage. IBM has exceptionally good operating profit margin in all the three year. Operating profit margin is pure because they measure only the profits earned on operations and ignore interest taxes and preferred stock dividend. So DELL should focus in their cost and expense. A high profit margin is preferred. But on the other hand DELL has very low profit margin which is not preferable for the company. But DELL gross profit is lesser than other companies. It measures the percentage of each sales dollar remaining after the firm has paid for its goods. It’s a good sign for them because they are way ahead than their competitors. Most of the ratios shows that IBM is way better than industry average because it generates almost two times higher compare to others. we can come up with the conclusion that IBM is doing exceptionally well in terms of all ratios. Operating Profit Margin represents the pure profits earned on each sales dollar. CONCLUSION After analyzing this whole report.Higher the gross profit margin the better. IBM has greater percentage of gross profit margin. They should try to reduce their cost and increase their operating profit in terms of sales. 35 | P a g e .

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