Analysis Of Financial Statements Of Ibm Harvard Case Solution & Analysis

Return on equity of IBM
The return on equity of IBM is 5.94% in the third quarter of 1996.The earning per share of the company is volatile as in some quarters it is increasing significantly while in other quarters decreasing sharply and the volatility gives the evidence that the profit earned in the equity invested is sometimes high. The investments made sometimes prove to be bad and the company gets lower return compared to what it got in the last quarter.
• Trend Analysis:
The trend analysis of the company for the return on equityas in Sep 1996 quarter ending was not good.The return was only increasing by 3.41% whereas in December 1999, the return was declining and it was declining by 3.36%. The return is very volatile for the company as again in March 1997 quarter ending the return was growing by 1.2% in comparison to the previous quarter.However, in June 1997 quarter ending the return was declining by 0.31%.
Analysis Of Financial Statements Of Ibm Harvard Case Solution & Analysis

On the other hand, in September 1997 the return was growing by 3.68% and the return again started declining in December 1997 quarter ending by 5.07%. In the quarter ending March1998, the growth slowed down and the return became 2.32% i.e. the profit earned was 2.32% of the equity invested in the company. In June 1998, the return was 0.20% and there was a sharp increase in the quarter ending September 1998 whenthe return was 4.06% and again the return declined by 4.04%. The company gained some good return of 4.45% in March 1999 quarter end. The returns again started declining and the returns became -3.70% as it seems that the company was havingloss on its investment.However., in September 1999, the increase was 1.40% and in thequarter ending in Dec 1999, the return became -2.40%. On average the company’s return was declining in one- quarter and increased sharply in another quarter. The reason for this trend was the cost control by the company as in some quarters the costs were lower and in some quartersthere were higher costs being incurred by the company. In addition to this, the company also had an increasing trend in its return due to an increase in its revenue which was also growing but the costs were not carefully controlled by the company.This was the reason for lower profits and this resulted in a decrease in return of the company.However.,in some quarters the return was increasing due to a good control of cost whereas in other quarters it was decreasing due to bad control of cost namely the operating costs and the cost of production. (Kennon, 2016)...................

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