Aurora'S Technological and Research Institute: Ompany Analysis Report

MASTER OF BUSINESS ADMINISTRATION 1
AURORA’S TECHNOLOGICAL AND

RESEARCH INSTITUTE
Parvathapur, Uppal, RR Dist. 501301
COMPANY ANALYSIS REPORT

ON
FINANCIAL POSITION OF THE
IBM
By
J.ANIL KUMAR
REG NO 08841E0002
UNDER THE GUIDANCE OF

MANI SWAPNA MADAM
For
JAWAHARLAL NEHRU TECHNOLOGICAL UNIVERSITY,
HYDERABAD-A.P
AURORA’S TECHNOLOGICAL AND RESEARCH

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INTRODUCTION TO THE PROJECT

The project is all about the study of observations, Trend, Future project
problems and comparative growth rate, PAT sales turn over and few ratios
around ten.
OBJECTIVE OF THE STUDY

The main objective of the project is to analyze the financial performance of the
company using the tools of financial analysis viz ratio and comparative balance
sheet .The data from the company’s Financial statements are used to calculate
the firm’s Financial ratios and to prepare comparative balance sheet in order to
determine the efficiency and performance of the company’s management as
reflected in Financial reports. Financial analysis tools help in evaluating the
company’s liquidity conditions, profitability, capital structure and operational
efficiency.
The objective of financial analysis is to identify the financial strength and
weakness of the company in order to make the best use of its strength and
take suitable corrective actions to check the weakness.
To gain an insight into operating and financial characteristics of the
accounting data and financial statements viz., balance sheet and income
statement.
To locate the symptoms of the operating and financial problems
confronting the company and determining the cause of the problem and
suggesting corrective solutions.
To acquaint with research methodology involving data collection, calculating,
tabulation, besides the numerical and graphical presentation

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NEED FOR STUDY:

The analysis helps company to assess its position, which is to be introduced and
standardized for this organization, which is looking ahead, and the ratios
calculated for a number of years work as a guide for the future. The financial
strengths and weaknesses of firm are communicated in a mare easy and
understandable manner by the use of ratios. Ratio analysis also helps in
effective control of the business.

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METHODOLOGY OF THE STUDY:

The first phase of the project involves collection of data from the sites of an
organization. Secondary data collection is from P&L Accounts and Balance
Sheets published in the year wise annual reports of the organization.
The methodology to be followed here is;
Preparation of numeric data tables with data of accounting year wise
factors of ratios along with calculating ratios.
Graphical presentation of the ratios indicating changes.
Interpretation with the help of numeric and graphical presentation.
Opinion based on results of the analysis with conclusion.

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Financial Statement Analysis
Financial statements are prepared for decision making. Financial analysis is the
processes identifying the financial strengths and weaknesses of the firm by
properly establishing relationship between the items of the balance sheet and profit
and loss account. There are various methods or techniques used in analyzing
financial statements, such as comparative statements, trend analysis, common size
statements, and schedule of changes in working capital.
Financial statement analysis is largely a study of relationship among various

financial factors in a business are disclosed by a single set of statements and the
trend of these factors are shown in a series of statements.
The purpose of financial analysis is to diagnose the information contained in

financial statements so as to judge the profitability and financial soundness of the
firm. Financial statement analysis is an attempt to determine the significance and
meaning to the financial statements data so that forecast may be made of the future
financial position and performance.
Broadly speaking there are three steps involved in the analysis of financial
statements. These are:
o Selection
o Classification
o Interpretation
The first step involves selection of information relevant to the purpose of analysis
of financial statements. The second step involved methodical classification of data
and the third step includes drawing of interpretations and conclusions.
Methods or devices for Research methodology

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The analysis and interpretation of financial statements is used to determine the

financial position and results of operations as well. A number of methods or
devices are used to study the relationship between different statements. An effort is
made to use those devices which clearly analyze the position of the enterprise.
The following are the methodologies used:
 Ratio analysis
 Comparative statements
 Leverages

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RATIO ANALYSIS
Introduction:
The ratio analysis is one of the most powerful tools of financial analysis. It is the
process of establishing and interpreting various ratios. It is with the help of ratios
that the financial statements can be analyzed more clearly and decisions made from
such analysis.
A ratio is simple arithmetical expression of the relationship of one number to

another. It may be defined as the indicated quotient of two mathematical
expressions.
Ratio analysis is a technique of analysis and interpretation of financial statements

for helping in making certain decisions. It is a better understanding of financial
strengths and weakness of a firm. There are number of ratios which can be
calculated from the information gives in the financial statements. But the analysis
has to select the appropriate data and calculated a few appropriate ratios from the
keeping in mind the objective of analysis.
The following are the four steps involving in the ratio analysis.
1. Selection of relevant data from the financial statements depending upon the
objective of the analysis.
2. Calculate of appropriate ratios from the above data.
3. Comparison of the calculated ratios with the ratio developed from projected
financial statements or the ratio of some other firms or the comparison with
ratio of the industry to which the firm belongs.
4. Interpretation of the ratios.
The observation of the ratio is an important factor. Observation needs skills,

intelligence, and fore sightedness the inherent limitations of ratio analysis should
be kept in mind while interpreting them. A single ratio in itself does not convey
much of the sense. To make ratio a useful, they have to be further interpreted.
Guidelines for use of ratios:

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The calculation of ratios may not be difficult task but their use in not easy.
Following are the guidelines or factors may be kept in mind, while interpreting
various ratios.
1. Accuracy of financial statements:

The ratios are calculated from the data available in financial statements.
The reliability of ratios is linked to the accuracy of information in these
statements.
2. Purpose of analysis:
The type of ratios to calculate will depend upon the purpose for which
these are required. The purpose of user is also important for the analysis of
ratios.
3. Selection of ratios:
Another precaution in this analysis is the proper selection of appropriate
ratios. The ratio should match the purpose for which those are required.
Use and significance of ratios:
The ratio analysis is one of the most powerful tools of financial health of
enterprise. The use of ratios is not confined to financial managers, as discussed
earlier, these are different parties’ interest in the ratio analysis for knowing the
financial position of a firm for different purposes. The supplier of goods on credit,
banks, financial institutions, investors, shareholders and management all make use
of ratio analysis as tools in evaluating the financial position and performance of a
firm for getting credit, providing loans or making investments in the firm.
Limitations of ratio analysis:
1) Limited use of single ratio:

A single ratio usually does not convey much of a sense, to make better
interpretation a number of ratios have to calculate. This is likely to
confuse the analyst than help him in making any meaningful
conclusion
2) Lack of adequate standards:

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There are no well accepted standards or rules of thumb for all ratios
which can be accepted as norms. It renders interpretation of the ratios
difficult.
3) Inherent limitations of accounting:
Like financial statements, ratios also suffer from the inherent
weakness of accounting records such as their historical nature, ratio
are the part are not necessarily true indicators of future.
Classification of ratios:
Liquidity ratio
Liquidity refers to the ability of a concern to meet its current obligation as

and when these become due. The short term obligations are met by realizing
amounts from current, floating or circulating assets. The current assets should be
convertible in to cash for paying obligation of short term nature.
To measure the liquidity of a firm, the following ratios can be calculated:
1> Current ratio

2> Quick ratio
3> Absolute liquid ratio.
1) Current ratio: Current ratio may be defined as relationship between current

assets and current liabilities. This ratio is also known as working capital
ratio, is a measure of general liquidity and is mostly widely used to make the
analysis of liquidity of a firm.
Current ratio = Current assets/Current liabilities.
Ideal ratio is 2:1.
2) Quick assets ratio: Quick assets ratio is also known as acid test ratio. It is
more rigorous test of liquidity than the current ratio. Quick assets include
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bills receivables, sundry debtors, marketable securities and shot term or

temporary investments.
Quick assets = Current assets – inventory – prepaid expenses.
Quick assets ratio = Quick assets/Current liabilities.
Ideal ratio is 1:1.
Activity ratios
Funds are invested in various assets to make sales and earn profits. Activity ratios
measure the efficiency with which a firm manages its resources or assets. These
ratios are also called turnover ratios because they indicate the speed with which
assets are converted or turned over into sales.
1) Inventory turnover ratio: Inventory turnover ratio is also known as stock

turnover ratio. Every firm has to maintain a certain level of inventory of
finished goods. So as to be able to meet the requirements of the business. It
is very essential to keep sufficient stock in business.
It would indicate whether inventory has been efficiently used or not the purpose is
to see whether only the required minimum funds have been locked up in inventory.
Inventory turnover ratio = Net sales/ Inventory.
2) Debtors turnover ratio: A concern may sell goods on cash as well as on

credit, it is one of the important elements of sales promotion. Trade debtors
are expected to be converted into cash within a short period.
Debtors turnover ratio = Net sales/ Debtors.
3) Working capital turnover ratio: Working capital of a concern is directly

related to sales. The current assets like debtors, bills receivable, cash, and
stock etc. changes with the increase or decrease in sales.
Working capital = current assets – current liabilities.

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Working capital turnover ratio indicates the velocity of the utilization of net
working capital. A very high working capital turnover ratio is not a good situation
for any firm.
Working capital ratio = Net sales/Avg working capital.
Solvency ratio:
The term solvency refers to the ability of a concern to meet its long term
obligations. The long term creditors of a firm are primarily interested in knowing
the firm ability to pay regularity interest on long term borrowings, repayment of
the principal amount at the maturity and the security of their loans they are
1) Debt equity ratio

2) Proprietary ratio
3) Fixed assets ratio
1) Debt equity ratio: Debt equity ratio is calculated to measure the relative
claims of outsiders and the owners against the firm assets. The ratio
indicates the relationship between the external equities or the outsiders’ fund
and the equities or the shareholders fund.
Debt equity ratio = Long term debt/ Shareholders Equity.
2) Proprietary ratio: a variant to the debt equity ratio is the proprietary ratio,
which is also known as equity ratio or share holders to total equity ratio or
net worth to total assets ratio. This ratio establishes the relationship between
shareholders fund to the assets of the firm. The shareholders fund are equity
share capital, preference share capital, undistributed profits, reserves and
surplus, out of this amount accumulated losses should be deducted. The total
assets on the other hand denote total resources of the concern.
Proprietary ratio or equity ratio = Shareholders Equity/Total assets.
3) Fixed assets ratio: the ratio establishes the relationship between fixed assets
and Shareholders’ funds. The ratio indicates the extent to which share
holders funds are sunk into the fixed assets. Generally, the purchase of fixed
assets should be financed by shareholders equity including reserves, surplus

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and retained earnings. If the ratio is more than 100%, it implies that owners’
funds are not sufficient to finance the fixed assets and the firm has to depend
upon outsiders to finance the fixed assets. If it is less than 100%, it implies
that more the owners funds than fixed assets.
Fixed assets ratio = Net sales/Fixed assets.
Profitability ratios:
The primary objective of the business under taking is to earn profits. Profits
earning is considered essential for the business. A business needs profits not only
for its existence but also for expansion and diversification. The investors, workers
and creditors want their remuneration security and they want to know the
profitability of the concern.
1) Gross profit ratio

2) Net profit ratio
3) Return on equity capital
4) Earnings per share
1) Gross profit ratio: The gross profit ratio measures the relationship of gross
profit to net sales and is represented as a percentage. This ratio indicates the
extent to which selling prices of goods per unit may decline without
resulting in losses on operations of a firm. It reflects the efficiency with
which a firm produces its products. A low ratio generally indicates high cost
of goods sold due to unfavorable purchase policies, lesser sales, lower
selling prices and excessive competition etc.
Gross profit = Net sales – cost of goods sold.
Gross profit ratio = Gross profit x 100/Net sales.
2) Net profit ratio: This ratio indicates the efficiency of the measurement in
manufacturing, selling, administration and other activities of the firm. This
measures overall profitability of firm. This ratio also indicates the firms
capacity to face adverse economic conditions such as price competition, low
demand etc., obviously higher the ratio better the profitability.

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Net profit ratio = Net profit after tax x 100/Net sales.
3) Return on equity capital: In real sense ordinarily shareholders are the real
owners of the company. They assume the highest risk in company.
Preference shareholders get a fixed rate of dividend irrespective of quantum
of profits of the company. Thus ordinary shareholders are more interested in
the profitability of the company and performance of that concern.
Return on equity capital = Net profit after tax – preference dividends.

Equity capital
4) Earnings per share: Earnings per share is a small variation of return on

equity capital and calculated by dividing the net profit after the taxes and
preferences dividends by the total number of equity shares.
Earnings per share = Net profit after tax-preference dividends

Number of outstanding shares.

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Comparative statements
Comparative analysis:
In comparative analysis financial statements are those statements which have been
designed in a way so as to provide time perspective to the consideration of various
elements of financial position embodied in such elements.
In these statements figures for two or more periods are placed side by side to
facilitate comparison.
Both the Income statement and balance sheet can be prepared in the form of
comparative financial statements.
Comparative Income Statement:
The income statement discloses net profit or net loss on account of operations.
A comparative income statement will show the absolute figures for two (or) more
periods, the absolute from one period to another period and it desired the change in
terms of percentages.
Since the figures for two or more periods are shown side by side the reader can
quickly as certain whether sales have increased or decreased whether cost of sales
has increased or decreased etc.
Thus only a reading of data included in comparative statement will be helpful in

deriving meaningful of conclusions.
Comparative Balance Sheet:
It is one two or more different data can be used for companies assets and liabilities
and finding out any increase or decrease in those items. Thus while in a single
balance sheet the emphases is on present in the comparative balance sheet. Such a
balance sheet is very useful in studying the trends in an enterprise.

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Format of Comparative Income Statement:
Particulars Previous Year Current Year Absolute Percentage

change
Change
Net sales
Cost of goods
sold
Gross Profit(A)
Operating
expenses
Administration
expenses
Selling expenses
Total operating
expenses(B)
Operating
profit(A – B)

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Format of comparative balance sheet
Particulars Previous year Current Year Absolute Percentage

change change
Assets
Current assets
Fixed Assets
Total assets
Liabilities
Current
liabilities
Long term
liabilities
Total
liabilities
Absolute change = Current year – previous year
Change in % = Absolute change
Previous year amt

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Leverage
The term leverage refers to relationship between two variables i.e. interrelated
variables. The variable could be sales, cost, revenues and operating profits etc…
Leverage: - % change in one variable (Dependent Variable)

% change in another variable (Independent variable)
Three different leverages: -
1) Operating leverage
2) Financial leverage
3) Combined leverage
1) Operating leverage: - The relationship between sales and EBIT.
Operating leverage = Sales/EBIT.
2) Financial leverage: - The usage of fixed charges of funds (Debenture +

Preference) along with equity in capital structure of a firm. It is also known
as gearing or trading on equity. EBIT/EBT.
Financial leverage = EBIT/EBT.
3) Combined leverage: - Relationship between sales and EBT. Sales/EBT.
Combined leverage = operating leverage x financial leverage.

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Company profile
International Business Machines Corporation
Type Public (NYSE: IBM)
Founded Endicott, New York, U.S. (1889, incorporated 1911)
Headquarters Armonk, New York, USA
Samuel J. Palmisano (Chairman, President and CEO)

Mark Loughridge (SVP and CFO)
Dan Fortin (President - Canada)
Key people Frank Kern (Senior Vice President, IBM Global Business Services)
Nick Donofrio (Executive Vice President - Innovation & Technology)
Mike Rhodin (President IOT Northeast Europe)
Dominique Cerutti (President IOT Southwest Europe)
Computer hardware
Computer software
Industry
Consultant
IT Services
Revenue US$ 103.6 billion (2008)
Net income US$ 12.3 billion (2008)
Employees 398,455 (2009)
Website www.ibm.com
INTRODUCTION
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International Business Machines Corporation, abbreviated IBM and nicknamed

"Big Blue" (for its official corporate color), 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, and offers infrastructure services, hosting
services, and consulting services in areas ranging from mainframe computers to
nano technology.
IBM has been known through most of its recent history as the world's largest
computer company. With over 3, 88,000 employees worldwide, IBM is the largest
and most profitable information technology employer in the world. IBM holds
more patents than any other U.S. based technology company and has eight research
laboratories worldwide. Widely acclaimed for its highly talented workforce, the
company has scientists, engineers, consultants, and sales professionals in over 170
countries. IBM employees have earned three Nobel Prizes, four Turing Awards,
five National Medals of Technology, and five National Medals of Science. As a
chip maker, IBM has been among the Worldwide
Top 20 Semiconductor Sales Leaders in past years, and in 2007 IBM ranked
second in the list of largest software companies in the world.
History of IBM
The company which became IBM was founded in 1896 as the Tabulating Machine
Company by Herman Hollerith, in Broome County, New York (Endicott, New
York or Binghamton, New York), where it still maintains very limited operations.
Thomas John Watson

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Thomas Watson in 1917
Born February 17, 1874

Campbell, New York, U.S.
Died June 19, 1956 (aged 82)

New York City, New York, U.S.
Occupation Business
Spouse(s) Jeanette M. Kittredge (m. April 17,

1913)
Children Thomas J. Watson, Jr.

Jane Watson
Helen Watson
Arthur K. Watson
Parents Thomas Waston and Jane Fulton

Whyte or George Marshall Watson
and Mary Keller Watson
It was incorporated as Computing Tabulating Recording Corporation (CTR) on

June 16, 1911, and was listed on the New York Stock Exchange in 1916. CTR's
Canadian and later South American subsidiary was named International Business

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Machines in 1917, and the whole company took this name in 1924 when Thomas
Watson took control.
Tom Watson: Founder of IBM
Watson joined the Computing Tabulating Recording Corporation (CTR) on May 1,

1914. When Watson took over as general manager, the company had fewer than
400 employees. In 1924, he renamed the company International Business
Machines. Watson built IBM into such a powerful force that the federal
government filed a civil antitrust suit against them in 1952. IBM owned and leased
more than 90 percent of all tabulating machines in the United States at the time.
Throughout his life, Watson maintained a deep interest in international relations.

He was known as President Roosevelt's un-official Ambassador in NY and often
entertained foreign statesman. In 1937, he was elected president of
the International Chamber of Commerce (ICC) and at that year's biennial congress
in Berlin stated the conference keynote to be World Peace Through World
Trade. That phrase became the slogan of both the ICC and IBM. He was one of the
most prominent businessmen in the Democratic Party. Watson served as a trustee
of Columbia University, where he engineered the selection of Dwight D.
Eisenhower as president.
Environmental record
IBM has a long history of dealing with its environmental problems. It established a
corporate policy on environmental protection in the year 1971, with the support of
a comprehensive global environmental management system. According to IBM’s
stats, its total hazardous waste decreased by 44% over the past five years, and has
decreased by 94.6% since 1987. IBM's total hazardous waste calculation consists
of waste from both non-manufacturing and manufacturing operations. Waste from
manufacturing operations includes waste recycled in closed-loop systems where
process chemicals are recovered for subsequent reuse, rather than just disposing of
them and using new chemical materials. Over the years, IBM has redesigned
processes to eliminate almost all closed loop recycling and now uses more

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environmental-friendly materials in their place. IBM has also now built a

modelling solution to help protect the environment and reduce it’s own Carbon
Footprint using Lean and Six Sigma principles Green Sigma.
IBM was recognized as one of the "Top 20 Best Workplaces for Commuters" by
the United States Environmental Protection Agency (EPA) in 2005. This was to
recognize the Fortune 500 companies that provided their employees with excellent
commuter benefits that helped reduce traffic and air pollution.
Current projects
Developer Works
Developer Works is a website run by IBM for software developers and IT

professionals. It contains a small number of how-to articles and tutorials, as well as
software downloads and code samples, discussion forums, podcasts, blogs, wikis,
and other resources for developers and technical professionals. Subjects range from
open, industry-standard technologies like Java, Linux, SOA and web services, web
development, Ajax, PHP, and XML to IBM's products (Web Sphere, Rational,
Lotus, Tivoli and DB2). In 2007 developer Works was inducted into the Jolt Hall
of Fame. IBM, hospital develop 3D patient record software (Thursday, 12 Mar,
2009).
Alpha Works
Alpha Works is IBM's source for emerging software technologies. These

technologies include:
Flexible Internet Evaluation Report Architecture: -
A highly flexible architecture for the design, display, and reporting of

Internet surveys.
FairUCE :-

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A spam filter that verifies sender identity instead of filtering content.
Unstructured Information Management Architecture (UIMA) SDK :-
A Java SDK that supports the implementation, composition, and

deployment of applications working with unstructured information.
Accessibility Browser :-
A web-browser specifically designed to assist people with visual

impairments, to be released as open-source software. Also known as the "A-
Browser," the technology will aim to eliminate the need for a mouse, relying
instead completely on voice-controls, buttons and predefined shortcut keys.
Semiconductor design and manufacturing
IBM's Wii "Broadway" CPU
Virtually all modern console gaming systems use microprocessors developed by

IBM. The Xbox 360 contains the PowerPC tri-core processor, which was designed
and produced by IBM in less than 24 months. Sony's PlayStation 3 features the
Cell BE microprocessor designed jointly by IBM, Toshiba, and Sony. Nintendo's
seventh-generation console, Wii, features an IBM chip codenamed Broadway. The
older Nintendo GameCube utilizes the Gekko processor, also designed by IBM.
Open Client Offering

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IBM announced it will launch its new software, called "Open Client Offering"
which is to run on Linux, Microsoft's Windows, and Apple's Mac OS X. The
company states that its new product allows businesses to offer employees a choice
of using the same software on Windows and its alternatives. This means that
"Open Client Offering" is to cut costs of managing whether Linux or Apple
relative to Windows. There will be no necessity for companies to pay Microsoft for
its licenses for operations since the operations will no longer rely on software
which is Windows-based. One alternative to Microsoft's office document formats
is the Open Document Format software, whose development IBM supports. It is
going to be used for several tasks like: word processing, presentations, along with
collaboration with Lotus Notes, instant messaging and blog tools as well as an
Internet Explorer competitor – the Firefox web browser. IBM plans to install Open
Client on 5% of its desktop PCs.
UC2: Unified Communications and Collaboration
UC2 (Unified Communications and Collaboration) is an IBM and Cisco joint

project based on Eclipse and OSGi. It will offer the numerous Eclipse application
developers a unified platform for an easier work environment.
The software based on UC2 platform will provide major enterprises with easy-to-
use communication solutions, such as the Lotus based Same time. In the future the
Same time users will benefit from such additional functions as click-to-call and
voice mailing.
Solar power
Tokyo Ohkla industrial area Kogyo Co., Ltd. (TOK) and IBM are collaborating to
establish new, low-cost methods for bringing the next generation of solar energy
products, called CIGS (Copper-Indium-Gallium-Selenide) solar cell modules, to
market. Use of thin film technology, such as CIGS, has great promise in reducing
the overall cost of solar cells and further enabling their widespread adoption.

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IBM is exploring four main areas of photovoltaic research: using current

technologies to develop cheaper and more efficient silicon solar cells, developing
new solution processed thin film photovoltaic devices, concentrator photovoltaics,
and future generation photovoltaic architectures based upon nanostructures such as
semiconductor quantum dots and nano wires.
Dr. AMAM is the leading scientist in IBM photovoltaic research.
Green Sigma
Green Sigma is an Active Management Six Sigma system which is currently being
developed and enhanced through the Innovation Centre in Dublin. It’s goal is to
Manage & Reduce Carbon Footprint whilst achieving associated economic and
environmental benefits.
Green Sigma is focused around the elements of:
 Carbon
 Water
 Atmospheric Emissions
 Liquid Waste
 Solid Waste
 Ground Emissions
 Reporting
IBM Green SigmaTM consultants work with the client team to establish ongoing
optimisation of core processes and KPIs.
 Phase I: Define Key Performance Indicators (KPIs)

 Phase II: Establish Metering
 Phase III: Deploy Carbon Console
 Phase IV: Optimise Processes
 Phase V: Control Performance

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IBM’s goal with the Green SigmaTM offering is to partner with clients to drive
innovation, achieving economic benefits for the business and reducing impact to
the environment.
Corporate culture of IBM
Big Blue is a nickname for IBM; several theories exist regarding its origin. One
theory, substantiated by people who worked for IBM at the time, is that IBM field
reps coined the term in the 1960s, referring to the color of the mainframes IBM
installed in the 1960s and early 1970s. "All blue" was a term used to describe a
loyal IBM customer, and business writers later picked up the term. Another theory
suggests that Big Blue simply refers to the Company's logo. A third theory
suggests that Big Blue refers to a former company dress code that required many
IBM employees to wear only white shirts and many wore blue suits. In any event,
IBM keyboards, typewriters, and some other manufactured devices, have played on
the "Big Blue" concept, using the color for enter keys and carriage returns.
Sales
IBM has often been described as having a sales-centric or a sales-oriented business
culture. Traditionally, many IBM executives and general managers are chosen
from the sales force. The current CEO, Sam Palmisano, for example, joined the
company as a salesman and, unusual for CEOs of major corporations, has no MBA
or postgraduate qualification. Middle and top management are often enlisted to
give direct support to salesmen when pitching sales to important customers.
The Uniform
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A dark (or gray) suit, white shirt, and a "sincere" tie was the public uniform for
IBM employees for most of the 20th century. During IBM's management
transformation in the 1990s, CEO Lou Gerstner relaxed these codes, normalizing
the dress and behavior of IBM employees to resemble their counterparts in other
large technology companies.
IBM company values and "Jam"
In 2003, IBM embarked on an ambitious project to rewrite company values. Using

its Jam technology, the company hosted Intranet-based online discussions on key
business issues with 50,000 employees over 3 days. The discussions were analyzed
by sophisticated text analysis software (eClassifier) to mine online comments for
themes.
As a result of the 2003 Jam, the company values were updated to reflect three
modern business, marketplace and employee views:
"Dedication to every client's success",
"Innovation that matters - for our company and for the world",
"Trust and personal responsibility in all relationships".
In 2004, another Jam was conducted during which 52,000 employees exchanged
best practices for 72 hours. They focused on finding actionable ideas to support
implementation of the values previously identified. A new post-Jam Ratings event
was developed to allow IBMers to select key ideas that support the values. The
board of directors cited this Jam when awarding Palmisano a pay rise in the spring
of 2005.

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IBM launched another jam session called Innovation Jam 2008.This jam began on
October 5 at 6:00 p.m. US EDT and continued for 72 hours through October 8.
Unlike past jams, Innovation Jam 2008 involved wide participation from hundreds
of IBM's clients, business partners and academics from around the world as well as
thousands of IBM's own employees.
Corporate affairs
 Diversity and workforce issues
IBM has never contradicted any of the evidence or facts in the books or the many
documentaries nor has it disputed Black's allegations, but claimed it has no real
information on the period and has questioned the research done and the
conclusions made.
IBM's efforts to promote workforce diversity and equal opportunity date back at
least to World War I, when the company hired disabled veterans. IBM was the
only technology company ranked in Working Mother magazine's Top 10 for 2004,
and one of two technology companies in 2005 (the other company being Hewlett-
Packard).
On September 21, 1953, Thomas J. Watson, the CEO at the time, sent out a
controversial letter to all IBM employees stating that IBM needed to hire the best
people, regardless of their race, ethnic origin, or gender. In 1984, IBM added
sexual preference. He stated that this would give IBM a competitive advantage
because IBM would then be able to hire talented people its competitors would turn
down.
The company has traditionally resisted labor union organizing, although unions
represent some IBM workers outside the United States.
In the 1990s, two major pension program changes, including a conversion to cash
balance plan, resulted in an employee class action lawsuit alleging age
discrimination. IBM employees won the lawsuit and arrived at a partial settlement,
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although appeals are still underway. IBM also settled a major overtime class-action
lawsuit in 2006.
Historically IBM has had a good reputation of long-term staff retention with few
large scale layoffs. In more recent years there have been a number of broad
sweeping cuts to the workforce as IBM attempts to adapt to changing market
conditions and a declining profit base. After posting weaker than expected
revenues in the first quarter of 2005, IBM eliminated 14,500 positions from its
workforce, predominantly in Europe. In May 2005, IBM Ireland said to staff that
the MD (Micro-electronics Division) facility was closing down by the end of 2005
and offered a settlement to staff. However, all staff that wished to stay with the
Company was redeployed within IBM Ireland. The production moved to a
company called Amkor in Singapore who purchased IBM's Microelectronics
business in Singapore and is widely agreed that IBM promised this Company a full
load capacity in return for the purchase of the facility. On June 8, 2005, IBM
Canada Ltd. eliminated approximately 700 positions. IBM projects these as part of
a strategy to "rebalance" its portfolio of professional skills & businesses.
IBM India and other IBM offices in China, the Philippines and Costa Rica have
been witnessing a recruitment boom and steady growth in number of employees
due to lower wages.
On October 10, 2005, IBM became the first major company in the world to
formally commit to not using genetic information in its employment decisions.
This came just a few months after IBM announced its support of the National
Geographic Society's Genographic Project.
 Logo

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The striped logo was first used in 1967, and fully replaced the solid logo by 1972.
The horizontal stripes suggesting “speed and dynamism”.
IBM's logo is rated at #78 on goodlogo.com.
(This logo as well as the previous one, were designed by graphic designer Paul
Rand)
Corporate social responsibility
The number one slot for the Best Corporate Citizen declared by the magazine
Business Ethics for the year 2002 has been bagged by IBM. IBM has regained the
coveted position (it ranked number one in the 2000 survey) after falling to the fifth
position in 2001. IBM’s progressive diversity policies, which focus on women and
minority employee, were judged to be the best, earning the company the highest
marks for corporate citizenship. The company received the second highest marks
for contributions made towards the community. According to IBM, a social cause
cannot be supported by monetary contributions alone; assistance in terms of
people, products, programs are also essential.
IBM’s philanthropic donations in the year 2001 totaled $126.1 million.

Approximately 31% of this amount was donated in the form of cash. The rest was
in the form of technology and technical services. 70%of IBM’s donations were
used to improve education. In 1994, IBM launched the ‘Reinventing Education’
program, which used state-of-the-art technology to transform the methodology of
learning in the schools.

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This initiative currently involves 10 million children n 21 states and eight

countries. Another offshoot of the ‘Reinvesting Education’ initiative was the
‘Wired For Learning’ program. This program has created a cooperative
environment for high school teachers in West Virginia. By means of this program,
teachers can develop on-line lesson plans, which become a part of a shared
database. This database can be accessed by teachers across the state of West
Virginia, enabling them to share their experiences and effective teaching practices.
In Ireland, IBM is using the same concept to electronically connect home, school
and community. This creates a shared environment that allows parents to have
online discussions with teachers about their children’s studies and academic
progress. This platform also facilitates employees of IBM and other businesses to
serve as online mentors for students in various subject areas.
IBM’s corporate culture encourage employee involvement in community service.

The company allows employees to take leave of absence for community service. In
the year 2001, IBM employees contributed 4 million hours of time to a variety of
community projects.
Not only do the community benefits from IBM’s philanthropic programs, IBM too
gains goodwill and a favorable public image. IBM has thus carved a niche for itself
with its philanthropic efforts. It has touched the lives of many people. IBM‘s
corporate citizenship report rightly sums up its perspective on philanthropic
activities, “it is not just good deeds, it’s good business”.
Companies’ portal
 IBM AIX (operating system)
 IBM OS/2
 IBM PS/2
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 IBM PC-DOS
 IBM Personal Computer
 IBM System/360
 IBM System/370
 IBM ESA/390
 IBM System z9, IBM System z10
 IBM System p, POWER6
 IBM System i
 IBM PC compatible (or IBM PC clone)
 List of computer system manufacturers
 List of IBM acquisitions and spinoffs
 List of IBM products
 SCO v. IBM
 IBM Rochester
 IBM and the Holocaust
 IBM's Deep Thought (chess computer)
 Extreme Blue
 IEEE
Board of directors
Current members of the board of directors of IBM are:
Cathleen Black - President, Hearst Magazines

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William Brody - President, Johns Hopkins University

Ken Chenault - Chairman and CEO, American Express
Company
Juergen Dormann - Chairman of the Board, ABB Ltd
Ayan Barua - CEO, PIC
Simon Shum Siu-hung - CEO, Lenovo Computer Ltd.
Michael Eskew - former Chairman and CEO, United Parcel
Service, Inc.
Shirley Ann Jackson - President, Rensselaer Polytechnic
Institute
Minoru Makihara - Senior Corporate Advisor and former
Chairman, Mitsubishi Corporation
Lucio Noto - Managing Partner, Midstream Partners LLC
James W. Owens - Chairman and CEO, Caterpillar Inc.
Samuel J. Palmisano - Chairman, President and CEO, IBM
Joan Spero - President, Doris Duke Charitable Foundation
Sidney Taurel - Chairman, Eli Lilly and Company
Lorenzo Zambrano - Chairman and CEO, Cemex SAB de
CV
Data Analysis
Ratio Analysis
Liquidity Ratio: -
Current Ratio: - Current Assets
Current Liabilities
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Current 2008 2007 2006 2005 2004

Ratio
Current 49004 53177 44660

Assets 45,661 47,143
Current 42435 44310 40091 35152 39786

Liabilities
Ratios 1.15 1.20 1.11 1.29 1.18
Ratios
12
10
8
Ratios
6
0
0 2 4 6 8 10 12
Interpretation: The current ratio is fluctuating from 2004 to2008 due to

decrease in current assets and current liabilities. The company has
maintained credibility for all five years. In all the years the current
liabilities are easily met with current assets so the business is able to
pay current obligations.

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Quick Ratio: - Current Assets – Inventory – Prepaid Expenses

Current Liabilities
Quick 2008 2007 2006 2005 2004

Ratio
Current 49004 53177 44660 45661 47143
Assets
Inventory 2701 2664 2810 2841 3316
Prepaid 4299 3891 2539 2941 2708

Expenses
Ratio 0.98 1.05 0.98 1.46 1.33
Ratio
12
10
8
Ratio
6
0
0 2 4 6 8 10 12
Interpretation: The quick ratio is fluctuating from 1.33, 1.46 to 0.98due

to fluctuations in quick assets and current liabilities.
Activity Ratio: -
Inventory turnover ratio: - Net sales / Inventory.

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Inventory 2008 2007 2006 2005 2004

turnover
ratio
Net sales 103630000 98786000 91424000 91134000 96225000
Inventory 2701000 2664000 2810000 2841000 3316000
Ratio 38.36 37.08 32.53 32.07 29.01
Ratio
12
10
8
Ratio
6
0
0 2 4 6 8 10 12
Interpretation: The inventory turnover ratio is increasing from 29.01 to

38.96 so the sales the company increased and the inventory stock level
decreased from 3316000 to2701000.
Working capital ratio = Net sales/Avg working capital.
Working 2008 2007 2006 2005 2004

capital
ratio
Net sales 103630000 98786000 91424000 91134000 96225000
Avg 6569000 8867000 4569000 10509000 7357000

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working
capital
Ratio 15.77 11.14 20.00 8.67 13.07
Working capital = current assets – current liabilities
Ratio
12
10
8
Ratio
6
0
0 2 4 6 8 10 12
Interpretation: Working capital ratio had increased from 13.07 to 15.77

from 2004 to 2008, which indicates working capital is utilized in more
efficient manner inspi9ne of some fluctuations.
Solvency ratio:-
Debt equity ratio: - Long term debt / Equity
Debt 2008 2007 2006 2005 2004

equity
ratio
Long term 22689000 23039000 13780000 15425000 14828000
debt

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Equity 13465000 28470000 28506000 33098000 31688000
Ratio 1.68 0.80 0.48 0.46 0.46
Ratio
12
10
8
Ratio
6
0
0 2 4 6 8 10 12
Interpretation: Debt equity ratio is increasing from 0.46 to 1.68 i.e.

increase in every year which indicates company is increasing its
goodwill every year.
Equity ratio: - Total shareholders equity / Total Assets.
Equity ratio 2008 2007 2006 2005 2004
Total 13465000 28470000 28506000 33098000 31688000

shareholders
equity

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Total Assets 109524000 120431000 103234000 105748000 111003000
Ratio 0.12 0.23 0.27 0.31 0.28
Ratio
12
10
8
Ratio
6
0
0 2 4 6 8 10 12
Interpretation: Equity ratio is total resource of the company is decreasing from

2006 t0 2008 due to decrease in total share holders’ equity from 28,506 to13,465.
Fixed asset turnover ratio: - Net sales / Net fixed Assets.
Fixed asset 2008 2007 2006 2005 2004

turnover
ratio
Net sales 103630000 98786000 91424000 91134000 96225000

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Net fixed 60520000 67254000 58574000 60087000 63860000

Assets
Ratio 1.71 1.46 1.56 1.51 1.50
Ratio
12
10
8
Ratio
6
0
0 2 4 6 8 10 12
Interpretation: Fixed asset ratio in 2004 was 1.50 and in 2008 it is 1.71 which
indicates the finance to the fixed assets is well in the company.
Profitability Ratio: -
Gross profit ratio: - Gross profit / Net sales.
Gross 2008 2007 2006 2005 2004

profit
ratio

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Gross 45661000 41729000 38295000 36532000 35501000

profit
Net sales 103630000 98786000 91424000 91134000 96225000
Ratio 0.44 0.42 0.41 0.40 0.36
Gross Profot Ratio

12
10
8
Ratio
6
0
0 2 4 6 8 10 12
Interpretation: The gross profit ratio is increasing from 2004 to 2008,

the company earned profits this is because of increased sales and less
depreciation.
Net profit Ratio: - Net profit after tax / Net sales.
Net profit 2008 2007 2006 2005 2004

Ratio

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Net profit 12334000 10418000 9492000 7994000 7497000

after tax
Net sales 103630000 98786000 91424000 91134000 96225000
Ratio 0.119 0.105 0.103 0.087 0.077
Ratio
12
10
8
Ratio
6
0
0 2 4 6 8 10 12
Interpretation: Net profit ratio is also increasing from 0.077 to 0.119

this is because of less tax provision and increased sales due to quality
and close to consumer. The net profit ratio is satisfactory.
Return on Equity capital: - Net profit after tax / Shareholders equity.
Return on 2008 2007 2006 2005 2004

Equity
capital

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Net profit 12334000 10418000 9492000 7994000 7497000

after tax
Shareholder 13465000 28470000 28506000 33098000 31688000

s equity
Ratio 0.91 0.36 0.33 0.24 0.23
Return on Equity
12
10
8
Ratio
6
0
0 2 4 6 8 10 12
Interpretation: Return on equity capital is increasing throughout the

five years therefore return on equity capital is satisfactory therefore
overall profitability ratio is satisfactory.
EPS: -Net profit after tax / Number of outstanding shares.
EPS 2008 2007 2006 2005 2004

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Net profit 12334000 10418000 9492000 7994000 7497000

after tax
Number of 1341000.68 1385000.23 1506000.48 1573000.98 1645000. 59
outstanding
shares
Ratio 9.19 7.52 6.30 5.08 4.55
Ratio
12
10
8
Ratio
6
0
0 2 4 6 8 10 12
Interpretation: EPS of the company is increasing from last 7 years
Comparative Statements

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1. Comparative Balance sheet
2. Comparative Income statement
Comparative Balance sheet

Comparative Balance sheet of years 2004 and 2005
Particulars Previous Current Absolute % change
year(04) year(05) change
Current 47143 45661 (1482) 0.031

Assets
Fixed Assets 63860 60187 (3673) 0.057
Total Assets 111003 105,748 5255 0.047
Current 39786 35152 (4634) 0.116

Liabilities
Long term 71217 70596 (621) 0.008

debts
Total 111003 105748 (5255) 0.047

Liabilities

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Current 45661 44660 (1001) 0.02

Assets
Fixed Assets 60187 58574 (1613) 0.026
Total Assets 105,748 103234 (2514) 0.023
Current 35152 40091 4939 0.14

Liabilities
Long term 70596 63143 (7453) 0.10

debts
Total 105748 103234 (2514) 0.023

Liabilities

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Current 44660 53177 8517 19.07

Assets
Fixed Assets 58574 67254 8680 14.81
Total Assets 103234 120431 17197 16.65
Current 40091 44310 4219 10.52

Liabilities
Long term 63143 76121 12978 20.55

debts
Total 103234 120431 17197 16.65

Liabilities

Current 53177 49004 (4173) (7.84)

Assets

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Fixed Assets 67254 60520 (6734) (10.01)
Total Assets 120431 109524 (10907) (9.05)
Current 44310 42435 (1875) (4.23)

Liabilities
Long term 76121 67089 (9032) (11.86)

debts
Total 120431 109524 (10907) (9.05)

Liabilities
Interpretation: The total current assets have increased from 47143

to53177 from year 2004 to 2008, current liabilities had also increased.
Fixed assets also increased and long term debts have also increased
which indicates long term plans of expansion.
The financial position seems to be better.
Comparative Income statement
Comparative Income statements of year 2004 and2005

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Particulars Previous Current Absolute % Change

year(04) Year(05) Change
Net sales 96293000 91134000 5159000 0.05
(-) Cost of 60724000 54602000 6122000 0.10

goods
Gross 41691000 36532000 5159000 0.12

profit(A)
(-)Operating
Expenses
Administration 20079000 21314000 1235000 0.06

and selling
expenses
Total 20079000 21314000 1235000 0.06
Operating
Expenses(B)
Operating 21612000 15218000 6394000 0.29
Profit(A-B)


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Net sales 91134000 91424000 290000 0.003
(-) Cost of 54602000 53129000 1473000 0.02

goods
Gross 36532000 38295000 1763000 0.048

profit(A)
(-)Operating
Expenses
Administration 21314000 20259000 1055000 0.049

and selling
expenses
Total 21314000 20259000 1055000 0.049
Operating
Expenses(B)
Operating 15218000 18036000 2818000 0.18
Profit(A-B)


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Net sales 91424000 98786000 7362000 8.05
(-) Cost of 53129000 57057000 3928000 7.39

goods
Gross 38295000 41729000 3434000 8.96

profit(A)
(-)Operating
Expenses
Administration 20259000 22060000 1801000 8.88

and selling
expenses
Total 20259000 22060000 1801000 8.88
Operating
Expenses(B)
Operating 18036000 19669000 1633000 9.05
Profit(A-B)

Particulars Previous Current Absolut %
year(07) Year(08) e Change

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Change
Net sales 98786000 103630000 4844000 4.90
(-) Cost of 57057000 57969000 912000 1.59

goods
Gross 41729000 45661000 3932000 9.42

profit(A)
(-)Operating
Expenses
Administration 22060000 23386000 1326000 6.01

and selling
expenses
Total 22060000 23386000 1326000 6.01
Operating
Expenses(B)
Operating 19669000 22275000 2606000 13.24
Profit(A-B)
Interpretation: The net sales have increased from 96293000 to

103630000 which is, the gross profit ratio 9.42% increase from 2007 to
2008.
The total operating profit is satisfactory.
Leverages

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Particulars 2008 2007 2006 2005 2004
Sales 10,36,30,000 9,87,86,000 9,14,24,000 9,11,34,000 9,62,25,000
(Variable Cost) 3,62,42,000 3,36,86,000 2,78,29,000 2,89,08,000 3,55,56,000
Contribution 6,73,88,000 6,51,00,000 6,35,95,000 6,22,26,000 60669000
(Fixed cost) 5,00,00,000 5,00,00,000 5,00,00,000 5,00,00,000 5,00,00,000
EBIT 1,73,88,000 1,51,00,000 1,35,95,000

1,22,26,000 1,06,69,000
(Interest) 6,73,000 6,11,000 2,78,000

220000 139000
EBT 1,67,15,000 1,44,89,000 1,33,17,000 1,20,06,000 1,05,30,000
(Variable cost and Fixed cost are assumed valued)

2008 2007 2006 2005 2004
Degree of operating leverage (DOL): - Contribution/EBIT 3.87 4.31 4.67 5.08 5.6
Degree of financial leverage (DFL): - EBIT /EBT 1.04 1.04 1.02 1.01 1.01
Degree of combined leverage (DCL): - DOL x DFL 4.02 4.48 4.76 5.17 5.65
Interpretation: The combined leverage of the2004 is 5.65, 2005 is 5.17,

2006 is 4.76 and 2007 is 4.48. the combined leverage of 2008 is 4.02 .By
seeing the leverages we can easily tell when compared to 2004 to 2007 the
company is in more riskier in 2008.

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Finding and conclusion
Findings
a) The sales of the company increasing every year.

b) The gross profit of is increasing every year.
c) The company has no preference shares.
d) Company follows the LEAN method of BPR.
e) The internal promotions are more for the higher position.
f) IBM has the Environmental responsibility, by seeing the projects
like solar power and six sigma.
Conclusion
The company has undertaken many projects after completing the

projects the may be the top 2nd company in the world. The company
has the increasing profits which indicate its management.
Suggestions
The company has to make better processers although companies like

DELL make processers the dealers has no credibility in them, because
they suggest the intel processers are good.
The company may grow if the company merge or acquit the companies
like HCL and Infosys as there turnover is huge.

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Bibliography: -
Websites - http://en.wikipedia.org/wiki/IBM
http://www.business-ethics.com/100best.htm
http://www.flickr.com/photos/22816639@N04/2417456908/
http://www.moneycontrol.com/financials/IBM/balance-sheet/
Books - R.P.Trivedi-Management Accounting

A.K.Bhattacharyya – Financial Accounting
Rahul publications – Financial Accounting
Himalaya Publications – Financial Management

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Annexure
Balance sheet of IBM

2008 2007 2006 2004
In Millions of U.S. Dollars 2005
2008-12- 2007-12- 2006-12- 2004-12-31
(except for per share items) 2005-12-31
31 31 31
Cash -- -- -- -- --
Cash & Equivalents 12,741.0 14,991.0 8,022.0 12,568.0 10,053.0
Short Term Investments 166.0 1,155.0 2,634.0 1,118.0 517.0
Cash and Short Term Investments 12,907.0 16,146.0 10,656.0 13,686.0 10,570.0
Accounts Receivable - Trade, Net 27,555.0 28,789.0 26,848.0 24,428.0 28,136.0
Notes Receivable - Short Term -- -- -- -- --
Receivables – Other -- -- -- -- --
Total Receivables, Net 27,555.0 28,789.0 26,848.0 24,428.0 28,136.0
Total Inventory 2,700.0 2,664.0 2,810.0 2,841.0 3,316.0
Prepaid Expenses 4,299.0 3,891.0 2,539.0 2,941.0 2,708.0
Other Current Assets, Total 1,542.0 1,687.0 1,806.0 1,765.0 2,413.0
Total Current Assets 49,003.0 53,177.0 44,659.0 45,661.0 47,143.0
Property/Plant/Equipment, Total - Gross 38,444.0 38,585.0 36,521.0 34,261.0 36,385.0
Accumulated Depreciation, Total (24,140.0) (23,503.0) (22,082.0)(20,505.0) (21,210.0)
Property/Plant/Equipment, Total - Net 14,304.0 15,082.0 14,439.0 13,756.0 15,175.0
Goodwill, Net 18,226.0 14,285.0 12,854.0 9,441.0 8,437.0
Intangibles, Net 2,879.0 2,107.0 2,203.0 1,663.0 1,789.0
Long Term Investments 5,058.0 5,248.0 4,501.0 3,142.0 2,444.0
Note Receivable - Long Term 11,183.0 11,603.0 10,068.0 9,628.0 10,950.0
Other Long Term Assets, Total 8,871.0 18,930.0 14,509.0 22,457.0 25,065.0
Other Assets, Total -- -- -- -- --
Total Assets 109,524.0 120,432.0 103,233.0 105,748.0 111,003.0
Accounts Payable 7,014.0 8,054.0 7,964.0 7,349.0 9,444.0

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Payable/Accrued -- -- -- -- --
Accrued Expenses 11,203.0 10,546.0 9,967.0 8,558.0 10,340.0
Notes Payable/Short Term Debt 2,295.0 8,545.0 6,134.0 4,228.0 4,491.0
Current Port. of LT Debt/Capital Leases 8,942.0 3,690.0 2,768.0 2,988.0 3,608.0
Other Current liabilities, Total 12,982.0 13,475.0 13,257.0 12,029.0 11,903.0
Total Current Liabilities 42,436.0 44,310.0 40,090.0 35,152.0 39,786.0
Long Term Debt 22,689.0 23,039.0 13,780.0 15,425.0 14,828.0
Capital Lease Obligations -- -- -- -- --
Total Long Term Debt 22,689.0 23,039.0 13,780.0 15,425.0 14,828.0
Total Debt 33,926.0 35,274.0 22,682.0 22,641.0 22,927.0
Deferred Income Tax 270.0 1,064.0 665.0 1,616.0 1,770.0
Minority Interest -- -- -- -- --
Other Liabilities, Total 30,664.0 23,548.0 20,192.0 20,457.0 22,931.0
Total Liabilities 96,059.0 91,961.0 74,727.0 72,650.0 79,315.0
Redeemable Preferred Stock, Total -- -- -- -- --
Preferred Stock - Non Redeemable, Net -- -- -- -- --
Common Stock, Total 39,129.0 35,188.0 31,271.0 28,926.0 26,673.0
Additional Paid-In Capital -- -- -- -- --
Retained Earnings (Accumulated Deficit) 70,353.0 60,640.0 52,432.0 44,734.0 38,148.0
Treasury Stock – Common (74,171.0) (63,945.0) (46,296.0)(38,546.0) (31,072.0)
ESOP Debt Guarantee -- -- -- -- --
Unrealized Gain (Loss) -- -- -- -- --
Other Equity, Total (21,845.0) (3,414.0) (8,901.0) (2,016.0) (2,061.0)
Total Equity 13,466.0 28,469.0 28,506.0 33,098.0 31,688.0
Total Liabilities & Shareholders' Equity 109,525.0 120,430.0 103,233.0 105,748.0 111,003.0
Shares Outs - Common Stock Primary 1,339.10 1,385.23 1,506.48 1,573.98 1,645.59

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Issue
Shares Outstanding - Common Issue 2 -- -- -- -- --
Total Common Shares Outstanding 1,339.10 1,385.23 1,506.48 1,573.98 1,645.59
Total Preferred Shares Outstanding -- -- -- -- --
Income Statement
2007 2006 2005 2004
2008 2007-12-31 2006-12-31 2005-12-31 2004-12-31
In Millions of U.S. Dollars 2008-12-31 Reclassified Reclassified Reclassified Reclassified
(except for per share items) Period Length 2008-12-31 2007-12-31 2007-12-31 2006-12-31
12 Months Period Length Period Length Period Length Period Length
12 Months 12 Months 12 Months 12 Months
Revenue 103,630.0 98,785.0 91,423.0 91,134.0 96,225.0
Other Revenue, Total -- 1.0 -- -- 68.0
Total Revenue 103,630.0 98,786.0 91,423.0 91,134.0 96,293.0
Cost of Revenue, Total 57,969.0 57,057.0 53,129.0 54,602.0 60,724.0
Gross Profit 45,661.0 41,728.0 38,294.0 36,532.0 35,501.0
Selling/General/Admin.
23,386.0 22,060.0 20,259.0 21,314.0 20,079.0
Expenses, Total
Research & Development 6,337.0 6,153.0 6,107.0 5,842.0 5,874.0
Depreciation/Amortization -- -- -- -- --
Interest Expense, Net –

-- -- -- -- --
Operating
Interest/Investment Income –
-- -- -- -- --
Operating
Interest Expense(Income) - Net

-- -- -- -- --
Operating

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Unusual Expense (Income) -- -- -- -- --
Other Operating Expenses, Total -- -- -- -- --
Total Operating Expense 87,692.0 85,270.0 79,495.0 81,758.0 86,677.0
Operating Income 15,938.0 13,516.0 11,928.0 9,376.0 9,616.0
Interest Expense, Net Non-

(673.0) (611.0) (278.0) (220.0) (139.0)
Operating
Interest/Invest Income - Non-

92.0 394.0 571.0 -- --
Operating
Interest Income(Exp), Net Non-

-- -- -- -- --
Operating
Gain (Loss) on Sale of Assets 26.0 18.0 41.0 -- --
Other, Net 1,332.0 1,172.0 1,054.0 3,070.0 1,192.0
Net Income Before Taxes 16,715.0 14,489.0 13,316.0 12,226.0 10,669.0
Provision for Income Taxes 4,381.0 4,071.0 3,901.0 4,232.0 3,172.0
Net Income After Taxes 12,334.0 10,418.0 9,415.0 7,994.0 7,497.0
Minority Interest -- -- -- -- --
Equity In Affiliates -- -- -- -- --
U.S. GAAP Adjustment -- -- -- -- --
Net Income Before Extra. Items 12,334.0 10,418.0 9,415.0 7,994.0 7,497.0
Accounting Change -- 0.0 0.0 (36.0) 0.0
Discontinued Operations 0.0 0.0 76.0 (24.0) (18.0)
Extraordinary Item -- -- -- -- --
Tax on Extraordinary Items -- -- -- -- --
Net Income 12,334.0 10,418.0 9,491.0 7,934.0 7,479.0
Preferred Dividends -- -- -- -- --
General Partners' Distributions -- -- -- -- --
Miscellaneous Earnings
-- -- -- -- --
Adjustment
Pro Forma Adjustment -- -- -- -- --

INSTITUTE
Interest Adjustment - Primary

-- -- -- -- --
EPS
Income Available to Com Excl

12,334.0 10,418.0 9,415.0 7,994.0 7,497.0
ExtraOrd
Income Available to Com Incl

12,334.0 10,418.0 9,491.0 7,934.0 7,479.0
ExtraOrd
Basic Weighted Average Shares 1,359.77 1,423.04 1,530.81 1,600.59 1,674.96
Basic EPS Excluding

9.071 7.321 6.150 4.994 4.476
Extraordinary Items
Basic EPS Including Extraordinary

9.071 7.321 6.200 4.957 4.465
Items
Dilution Adjustment (1.0) -- -- -- --
Diluted Weighted Average

1,381.77 1,450.57 1,553.54 1,627.63 1,707.23
Shares
Diluted EPS Excluding ExtraOrd

8.925 7.182 6.060 4.911 4.391
Items
Diluted EPS Including ExtraOrd

8.925 7.182 6.109 4.875 4.381
Items
DPS - Common Stock Primary

1.900 1.500 1.100 0.780 0.700
Issue
Gross Dividends - Common Stock 2,585.0 2,147.0 1,683.0 1,250.0 1,174.0
Total Special Items (26.0) (18.0) (41.0) -- --
Normalized Income Before Taxes 16,689.0 14,471.0 13,275.0 12,226.0 10,669.0
Effect of Special Items on

(7.0) (5.0) (12.0) -- --
Income Taxes
Inc Tax Ex Impact of Sp Items 4,374.0 4,066.0 3,889.0 4,232.0 3,172.0
Normalized Income After Taxes 12,315.0 10,405.0 9,386.0 7,994.0 7,497.0
Normalized Inc. Avail to Com. 12,315.0 10,405.0 9,386.0 7,994.0 7,497.0
Basic Normalized EPS 9.057 7.312 6.131 4.994 4.476
Diluted Normalized EPS 8.912 7.173 6.042 4.911 4.391

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MASTER OF BUSINESS ADMINISTRATION 1

AURORA’S TECHNOLOGICAL AND

COMPANY ANALYSIS REPORT

UNDER THE GUIDANCE OF

AURORA’S TECHNOLOGICAL AND RESEARCH

INTRODUCTION TO THE PROJECT

OBJECTIVE OF THE STUDY

AURORA’S TECHNOLOGICAL AND RESEARCH

NEED FOR STUDY:

AURORA’S TECHNOLOGICAL AND RESEARCH

METHODOLOGY OF THE STUDY:

AURORA’S TECHNOLOGICAL AND RESEARCH

Financial Statement Analysis

Financial statement analysis is largely a study of relationship among various

The purpose of financial analysis is to diagnose the information contained in

Methods or devices for Research methodology

AURORA’S TECHNOLOGICAL AND RESEARCH

The analysis and interpretation of financial statements is used to determine the

The following are the methodologies used:

AURORA’S TECHNOLOGICAL AND RESEARCH

A ratio is simple arithmetical expression of the relationship of one number to

Ratio analysis is a technique of analysis and interpretation of financial statements

The observation of the ratio is an important factor. Observation needs skills,

Guidelines for use of ratios:

AURORA’S TECHNOLOGICAL AND RESEARCH

1. Accuracy of financial statements:

Use and significance of ratios:

Limitations of ratio analysis:

1) Limited use of single ratio:

AURORA’S TECHNOLOGICAL AND RESEARCH

Liquidity refers to the ability of a concern to meet its current obligation as

To measure the liquidity of a firm, the following ratios can be calculated:

1> Current ratio

1) Current ratio: Current ratio may be defined as relationship between current

Current ratio = Current assets/Current liabilities.

Ideal ratio is 2:1.

bills receivables, sundry debtors, marketable securities and shot term or

Quick assets = Current assets – inventory – prepaid expenses.

Quick assets ratio = Quick assets/Current liabilities.

Ideal ratio is 1:1.

1) Inventory turnover ratio: Inventory turnover ratio is also known as stock

Inventory turnover ratio = Net sales/ Inventory.

2) Debtors turnover ratio: A concern may sell goods on cash as well as on

Debtors turnover ratio = Net sales/ Debtors.

3) Working capital turnover ratio: Working capital of a concern is directly

Working capital = current assets – current liabilities.

AURORA’S TECHNOLOGICAL AND RESEARCH

Working capital ratio = Net sales/Avg working capital.

1) Debt equity ratio

Debt equity ratio = Long term debt/ Shareholders Equity.

Proprietary ratio or equity ratio = Shareholders Equity/Total assets.

AURORA’S TECHNOLOGICAL AND RESEARCH

Fixed assets ratio = Net sales/Fixed assets.

1) Gross profit ratio

Gross profit = Net sales – cost of goods sold.

Gross profit ratio = Gross profit x 100/Net sales.

AURORA’S TECHNOLOGICAL AND RESEARCH

Net profit ratio = Net profit after tax x 100/Net sales.

Return on equity capital = Net profit after tax – preference dividends.

4) Earnings per share: Earnings per share is a small variation of return on

Earnings per share = Net profit after tax-preference dividends

AURORA’S TECHNOLOGICAL AND RESEARCH