EMC Corp. (NYSE:EMC)

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EMC Corp., effective income tax rate (EITR) reconciliation

	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
Statutory federal tax rate	35.00%	35.00%	35.00%	35.00%	35.00%
State taxes, net of federal taxes	0.60%	1.20%	0.70%	0.50%	0.70%
Accounting for historical uncertain tax positions	-0.10%	1.10%	-0.40%	-0.50%	-1.70%
Tax rate differential for international jurisdictions and other international related tax items	-12.80%	-11.60%	-15.30%	-13.60%	-14.40%
U.S. tax credits	-2.70%	-1.90%	-3.80%	-0.20%	-2.80%
Changes in valuation allowance	0.60%	-2.30%	0.70%	0.80%	0.00%
U.S. domestic production activities deduction	-1.40%	-1.80%	-1.50%	-1.30%	0.00%
International reorganization of acquired companies	0.00%	0.00%	0.60%	0.30%	0.00%
Permanent items	4.30%	3.90%	3.80%	2.80%	2.50%
Other	1.10%	-0.50%	0.20%	0.30%	0.40%
Effective income tax rate	24.60%	23.10%	20.00%	24.10%	19.70%

Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).

The effective income tax rate (EITR) exhibited notable volatility between 2011 and 2015, fluctuating between a low of 19.70% and a high of 24.60%. Despite a constant statutory federal tax rate of 35.00%, the EITR remained significantly lower throughout the period, indicating a consistent reliance on various tax mitigations and jurisdictional differentials to reduce the overall tax burden.

International Tax Influence: The most substantial factor reducing the statutory tax rate was the tax rate differential for international jurisdictions and other international related tax items. This component consistently provided a significant downward adjustment, ranging from a minimum of -11.60% in 2014 to a maximum of -15.30% in 2013, underscoring the impact of lower tax rates in foreign operating environments.
U.S. Domestic Tax Mitigations: U.S. tax credits and the domestic production activities deduction served as secondary drivers for lowering the EITR. Tax credits varied significantly, peaking at -3.80% in 2013 and reaching a low of -0.20% in 2012. The domestic production activities deduction, which appears in the records from 2012 onward, provided a stable reduction between -1.30% and -1.80% annually.
Positive Adjustments and Permanent Items: Permanent items acted as a steady upward pressure on the EITR, increasing progressively from 2.50% in 2011 to 4.30% in 2015. State taxes, net of federal taxes, remained a relatively minor and stable upward contributor, generally fluctuating between 0.50% and 1.20%.
Accounting Volatility and Valuation Adjustments: Short-term fluctuations in the EITR were further influenced by accounting for historical uncertain tax positions and changes in valuation allowances. Uncertain tax positions generally provided minor reductions, except for a positive adjustment of 1.10% in 2014. Valuation allowance changes remained minimal for most of the period but experienced a notable downward shift of -2.30% in 2014.

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EMC Corp., components of deferred tax assets and liabilities

US$ in millions

	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
Accounts and notes receivable	55)	59)	96)	68)	86)
Inventory	70)	73)	73)	64)	91)
Accrued expenses	295)	305)	311)	291)	281)
Deferred revenue	987)	818)	618)	458)	274)
Equity	252)	254)	222)	242)	—)
Other non-current liabilities	—)	23)	—)	—)	—)
Credit carryforwards	281)	255)	284)	68)	73)
Net operating losses	137)	116)	106)	128)	157)
Other comprehensive loss	133)	103)	109)	120)	134)
Gross deferred tax assets	2,210)	2,006)	1,819)	1,439)	1,097)
Valuation allowance	(144)	(126)	(211)	(4)	(5)
Deferred tax assets	2,066)	1,880)	1,608)	1,434)	1,092)
Deferred revenue	—)	—)	—)	—)	(11)
Property, plant and equipment, net	(325)	(323)	(291)	(286)	(246)
Intangible and other assets, net	(569)	(605)	(680)	(663)	(610)
Equity	—)	—)	—)	—)	(39)
Other non-current liabilities	(8)	—)	(13)	(54)	(56)
Deferred tax liabilities	(902)	(928)	(984)	(1,002)	(962)
Deferred tax assets and liabilities	1,164)	952)	624)	432)	130)

Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).

The net deferred tax position shifted significantly from a relatively balanced state in 2011 to a substantial net asset position by 2015. Net deferred tax assets and liabilities grew from 130 million US dollars in 2011 to 1,164 million US dollars in 2015, reflecting a consistent upward trajectory in the company's future tax benefits relative to its future tax obligations.

Growth and Composition of Deferred Tax Assets: Gross deferred tax assets experienced continuous growth, increasing from 1,097 million US dollars in 2011 to 2,210 million US dollars in 2015. This expansion was primarily driven by a substantial increase in deferred revenue, which rose from 274 million US dollars to 987 million US dollars over the period. Additionally, credit carryforwards saw a notable spike in 2013, rising to 284 million US dollars from previous levels of approximately 70 million US dollars, contributing to the overall asset growth.
Valuation Allowance Trends: The valuation allowance remained minimal between 2011 and 2012 but increased sharply in 2013 to 211 million US dollars. While this allowance decreased slightly in 2014, it remained significant through 2015 at 144 million US dollars, indicating a periodic adjustment in the realizability of certain deferred tax assets.
Analysis of Deferred Tax Liabilities: Deferred tax liabilities remained relatively stable, showing a gradual decline from 962 million US dollars in 2011 to 902 million US dollars in 2015. The primary components of these liabilities were intangible and other assets, which decreased from 610 million US dollars to 569 million US dollars, and property, plant and equipment, which saw an increase from 246 million US dollars to 325 million US dollars. This suggests a shift in the timing differences associated with the company's long-term asset base.
Net Tax Asset Evolution: The transition from a net deferred tax asset of 130 million US dollars in 2011 to 1,164 million US dollars in 2015 highlights a growing disparity between deferred assets and liabilities. The consistent increase in deferred revenue and the stability of deferred tax liabilities have resulted in a strengthened net tax asset position, which may provide future cash flow benefits through the reduction of future income tax payments.

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EMC Corp., deferred tax assets and liabilities, classification

US$ in millions

	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
Current deferred tax assets	—)	1,070)	912)	942)	733)
Non-current deferred tax assets	1,164)	157)	133)	65)	—)
Non-current deferred tax liabilities	—)	274)	421)	575)	603)

Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).

The deferred tax profile exhibits a progressive shift toward a stronger net asset position, characterized by the growth of both current and non-current deferred tax assets and a consistent reduction in non-current deferred tax liabilities between 2011 and 2015.

Current Deferred Tax Assets: Between 2011 and 2014, current deferred tax assets demonstrated a general upward trajectory, increasing from 733 million USD to 1,070 million USD. Despite a marginal decrease in 2013 to 912 million USD, the overall trend indicates an expansion of tax benefits expected to be realized in the short term.
Non-Current Deferred Tax Assets: Non-current deferred tax assets experienced significant growth over the reported period. From an initial unreported balance in 2011, the assets grew incrementally to 157 million USD by 2014, followed by a substantial increase to 1,164 million USD in 2015. This sharp acceleration in the final year suggests a major shift in long-term tax planning or the recognition of significant future tax deductions.
Non-Current Deferred Tax Liabilities: A steady decline is observed in non-current deferred tax liabilities, which fell from 603 million USD in 2011 to 274 million USD by 2014. This persistent downward trend reflects a reduction in the company's future tax obligations resulting from temporary timing differences.

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EMC Corp., Financial Data: Reported vs. Adjusted

EMC Corp., adjustments to financial statements

US$ in millions

	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
Adjustment to Current Assets
Current assets (as reported)	15,063)	15,733)	17,278)	12,209)	11,583)
Less: Current deferred tax assets, net	—)	1,070)	912)	942)	733)
Current assets (adjusted)	15,063)	14,663)	16,366)	11,267)	10,849)
Adjustment to Total Assets
Total assets (as reported)	46,612)	45,885)	45,849)	38,069)	34,268)
Less: Current deferred tax assets, net	—)	1,070)	912)	942)	733)
Less: Noncurrent deferred tax assets, net	1,164)	157)	133)	65)	—)
Total assets (adjusted)	45,448)	44,658)	44,804)	37,062)	33,535)
Adjustment to Total Liabilities
Total liabilities (as reported)	23,893)	22,360)	22,063)	14,545)	14,341)
Less: Noncurrent deferred tax liabilities, net	—)	274)	421)	575)	603)
Total liabilities (adjusted)	23,893)	22,086)	21,642)	13,970)	13,738)
Adjustment to Total EMC Corporation’s Shareholders’ Equity
Total EMC Corporation’s shareholders’ equity (as reported)	21,140)	21,896)	22,301)	22,357)	18,959)
Less: Net deferred tax assets (liabilities)	1,164)	952)	624)	432)	130)
Total EMC Corporation’s shareholders’ equity (adjusted)	19,976)	20,944)	21,677)	21,925)	18,829)
Adjustment to Net Income Attributable To EMC Corporation
Net income attributable to EMC Corporation (as reported)	1,990)	2,714)	2,889)	2,733)	2,461)
Add: Deferred income tax expense (benefit)	(234)	(396)	(202)	(118)	(19)
Net income attributable to EMC Corporation (adjusted)	1,756)	2,318)	2,687)	2,615)	2,442)

Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).

An analysis of the financial data from 2011 to 2015 reveals a systematic difference between reported values and adjusted values resulting from the removal of deferred taxes. This adjustment consistently reduces the valuation of assets, liabilities, shareholders' equity, and net income, although the magnitude of these adjustments varies over the five-year period.

Asset Valuation Trends: Reported total assets experienced a steady increase, growing from 34,268 million US$ in 2011 to 46,612 million US$ in 2015. The adjusted total assets follow a similar growth trajectory but remain consistently lower, indicating that deferred tax assets contributed significantly to the reported totals. A notable convergence is observed in current assets by December 31, 2015, where reported and adjusted figures are identical at 15,063 million US$, suggesting the complete elimination of the deferred tax adjustment for current assets in that period.
Liability and Equity Adjustments: Reported total liabilities saw a sharp increase between 2012 and 2013, rising from 14,545 million US$ to 22,063 million US$. Adjusted liabilities are lower than reported figures throughout most of the period, although this gap closed entirely by 2015, with both figures reaching 23,893 million US$. Shareholders' equity reflects a downward trend in adjusted terms, with the adjusted equity falling from 18,829 million US$ in 2011 to 19,976 million US$ in 2015, consistently trailing the reported equity figures.
Net Income Impact: Adjusted net income is consistently lower than reported net income across all five years. The gap between reported and adjusted net income widened significantly between 2011 and 2014, increasing from a difference of 19 million US$ in 2011 to 396 million US$ in 2014. This indicates that the removal of deferred tax benefits has a progressively larger negative impact on the reported profitability of the corporation during this window, peaking in 2014 before narrowing slightly in 2015.
Overall Financial Position Stability: While reported totals suggest a growth in the balance sheet size, the adjusted figures provide a more conservative view of the corporation's financial position. The convergence of reported and adjusted values for current assets and total liabilities by 2015 suggests a shift in the tax structure or the realization of deferred tax items, effectively aligning the reported financial status with the adjusted status in those specific categories.

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EMC Corp., Financial Ratios: Reported vs. Adjusted

EMC Corp., adjusted financial ratios

	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
Current Ratio
Reported current ratio	1.17	1.34	1.46	1.18	1.12
Adjusted current ratio	1.17	1.25	1.39	1.09	1.05
Net Profit Margin
Reported net profit margin	8.06%	11.10%	12.44%	12.58%	12.30%
Adjusted net profit margin	7.11%	9.48%	11.57%	12.04%	12.20%
Total Asset Turnover
Reported total asset turnover	0.53	0.53	0.51	0.57	0.58
Adjusted total asset turnover	0.54	0.55	0.52	0.59	0.60
Financial Leverage
Reported financial leverage	2.20	2.10	2.06	1.70	1.81
Adjusted financial leverage	2.28	2.13	2.07	1.69	1.78
Return on Equity (ROE)
Reported ROE	9.41%	12.39%	12.95%	12.22%	12.98%
Adjusted ROE	8.79%	11.07%	12.40%	11.93%	12.97%
Return on Assets (ROA)
Reported ROA	4.27%	5.91%	6.30%	7.18%	7.18%
Adjusted ROA	3.86%	5.19%	6.00%	7.06%	7.28%

Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).

A comprehensive review of the financial ratios reveals a general deterioration in profitability and an increase in financial leverage over the five-year period from 2011 to 2015. The adjustment for deferred taxes consistently modifies the reported figures, typically exerting a downward pressure on profitability and liquidity metrics while slightly inflating efficiency ratios.

Liquidity Analysis: The reported current ratio exhibited volatility, peaking at 1.46 in 2013 before declining to 1.17 by the end of 2015. The adjusted current ratio followed a similar trajectory but remained lower than the reported figure for the majority of the period, indicating that the removal of deferred tax items reduces the perceived short-term liquidity position. By December 31, 2015, the reported and adjusted ratios converged at 1.17.
Profitability and Return Metrics: A consistent downward trend is observed in net profit margins, ROE, and ROA. Reported net profit margins declined from a peak of 12.58% in 2012 to 8.06% in 2015. The adjusted net profit margin shows a more pronounced decline, ending at 7.11% in 2015, which suggests that deferred tax accounting provided a positive cushion to reported earnings. Similarly, reported ROE fell from 12.98% in 2011 to 9.41% in 2015, while the adjusted ROE ended lower at 8.79%. Reported ROA also decreased steadily from 7.18% in 2011 to 4.27% in 2015, with the adjusted ROA finishing at 3.86%.
Efficiency and Financial Structure: Total asset turnover remained relatively stable, with reported values fluctuating between 0.51 and 0.58. Adjusted asset turnover consistently exceeded reported values, suggesting that the removal of deferred taxes reduces the total asset base, thereby marginally increasing the efficiency ratio. Regarding solvency, financial leverage increased steadily from 1.70 in 2012 to 2.20 in 2015. The adjusted financial leverage reflects this increasing reliance on debt, rising to 2.28 by the end of the period.

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	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
As Reported
Selected Financial Data (US$ in millions)
Current assets	15,063)	15,733)	17,278)	12,209)	11,583)
Current liabilities	12,885)	11,710)	11,799)	10,304)	10,376)
Liquidity Ratio
Current ratio¹	1.17	1.34	1.46	1.18	1.12
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted current assets	15,063)	14,663)	16,366)	11,267)	10,849)
Current liabilities	12,885)	11,710)	11,799)	10,304)	10,376)
Liquidity Ratio
Adjusted current ratio²	1.17	1.25	1.39	1.09	1.05

Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).

2015 Calculations

¹ Current ratio = Current assets ÷ Current liabilities
= 15,063 ÷ 12,885 = 1.17

² Adjusted current ratio = Adjusted current assets ÷ Current liabilities
= 15,063 ÷ 12,885 = 1.17

The liquidity position from 2011 to 2015 exhibits a cyclical trend, characterized by a significant increase in both assets and solvency ratios peaking in 2013, followed by a steady decline through 2015.

Current Asset Trends: Reported current assets increased from US$ 11,583 million in 2011 to a peak of US$ 17,278 million in 2013, before retreating to US$ 15,063 million by the end of 2015. Adjusted current assets followed a similar trajectory, rising from US$ 10,849 million in 2011 to US$ 16,366 million in 2013, and subsequently declining.
Adjusted Current Ratio Analysis: The adjusted current ratio improved from 1.05 in 2011 to a peak of 1.39 in 2013, indicating an enhanced ability to meet short-term obligations during this period. Following the 2013 peak, the ratio contracted to 1.25 in 2014 and further to 1.17 in 2015. Despite this decline, the ratio remained above 1.00 throughout the entire five-year period, signifying a maintained baseline of liquidity.
Variance and Convergence: Between 2011 and 2014, a consistent negative variance is observed between reported and adjusted figures, with the adjusted current ratio remaining lower than the reported ratio. This suggests that certain asset components were excluded to provide a more conservative assessment of liquidity. By December 31, 2015, this variance disappeared, as reported and adjusted current assets converged at US$ 15,063 million, resulting in identical current ratios of 1.17.

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	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to EMC Corporation	1,990)	2,714)	2,889)	2,733)	2,461)
Revenues	24,704)	24,440)	23,222)	21,714)	20,008)
Profitability Ratio
Net profit margin¹	8.06%	11.10%	12.44%	12.58%	12.30%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to EMC Corporation	1,756)	2,318)	2,687)	2,615)	2,442)
Revenues	24,704)	24,440)	23,222)	21,714)	20,008)
Profitability Ratio
Adjusted net profit margin²	7.11%	9.48%	11.57%	12.04%	12.20%

Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).

2015 Calculations

¹ Net profit margin = 100 × Net income attributable to EMC Corporation ÷ Revenues
= 100 × 1,990 ÷ 24,704 = 8.06%

² Adjusted net profit margin = 100 × Adjusted net income attributable to EMC Corporation ÷ Revenues
= 100 × 1,756 ÷ 24,704 = 7.11%

Between 2011 and 2015, the profitability metrics exhibit a trajectory characterized by an initial period of relative stability followed by a significant downward trend in both absolute income and profit margins.

Net Income Trends: Both reported and adjusted net income followed a similar growth pattern from 2011 to 2013, with reported net income peaking at 2,889 million US$ and adjusted net income peaking at 2,687 million US$. A subsequent contraction occurred over the next two years, resulting in a decrease to 1,990 million US$ for reported income and 1,756 million US$ for adjusted income by the end of 2015.
Reported Net Profit Margin: The reported net profit margin remained stable for the first three years, oscillating slightly between 12.30% in 2011 and 12.58% in 2012. This stability ended after 2013, with the margin falling to 11.10% in 2014 and experiencing a sharp decline to 8.06% in 2015.
Adjusted Net Profit Margin: The adjusted net profit margin shows a continuous and uninterrupted decline throughout the entire five-year period. Starting at 12.20% in 2011, the margin decreased annually, reaching 9.48% in 2014 and ending at 7.11% in 2015. This indicates a steady erosion of adjusted profitability relative to total revenue.
Comparative Margin Analysis: A consistent gap is observed between reported and adjusted net profit margins, with the adjusted margin remaining lower in every analyzed year. The disparity between the two metrics widened significantly toward the end of the period; while the difference was only 0.10 percentage points in 2011, it expanded to 0.95 percentage points by 2015.

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	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
As Reported
Selected Financial Data (US$ in millions)
Revenues	24,704)	24,440)	23,222)	21,714)	20,008)
Total assets	46,612)	45,885)	45,849)	38,069)	34,268)
Activity Ratio
Total asset turnover¹	0.53	0.53	0.51	0.57	0.58
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Revenues	24,704)	24,440)	23,222)	21,714)	20,008)
Adjusted total assets	45,448)	44,658)	44,804)	37,062)	33,535)
Activity Ratio
Adjusted total asset turnover²	0.54	0.55	0.52	0.59	0.60

Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).

2015 Calculations

¹ Total asset turnover = Revenues ÷ Total assets
= 24,704 ÷ 46,612 = 0.53

² Adjusted total asset turnover = Revenues ÷ Adjusted total assets
= 24,704 ÷ 45,448 = 0.54

Between 2011 and 2015, a consistent expansion in the asset base occurred, while asset turnover ratios exhibited a period of decline followed by relative stabilization. The adjusted figures consistently present a more favorable view of operational efficiency compared to the reported metrics.

Asset Growth Trends: Total assets experienced a steady upward trajectory over the five-year period. Reported total assets increased from 34,268 million US$ in 2011 to 46,612 million US$ by 2015. Similarly, adjusted total assets grew from 33,535 million US$ to 45,448 million US$ in the same timeframe. The growth was most pronounced between 2012 and 2013, where reported assets rose by approximately 20%.
Total Asset Turnover Analysis: A general downward trend in asset efficiency was observed from 2011 to 2013. The reported total asset turnover decreased from 0.58 to 0.51, while the adjusted ratio fell from 0.60 to 0.52. Following this decline, the turnover ratios stabilized, with the reported ratio holding at 0.53 and the adjusted ratio fluctuating slightly between 0.55 and 0.54 during 2014 and 2015.
Impact of Adjustments: The adjusted total asset turnover remained consistently higher than the reported turnover throughout the analyzed period. This divergence is attributed to the adjusted total assets being consistently lower than the reported total assets. The delta between reported and adjusted turnover suggests that the removal of certain asset components results in a higher perceived efficiency of asset utilization in generating revenue.

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	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
As Reported
Selected Financial Data (US$ in millions)
Total assets	46,612)	45,885)	45,849)	38,069)	34,268)
Total EMC Corporation’s shareholders’ equity	21,140)	21,896)	22,301)	22,357)	18,959)
Solvency Ratio
Financial leverage¹	2.20	2.10	2.06	1.70	1.81
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted total assets	45,448)	44,658)	44,804)	37,062)	33,535)
Adjusted total EMC Corporation’s shareholders’ equity	19,976)	20,944)	21,677)	21,925)	18,829)
Solvency Ratio
Adjusted financial leverage²	2.28	2.13	2.07	1.69	1.78

Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).

2015 Calculations

¹ Financial leverage = Total assets ÷ Total EMC Corporation’s shareholders’ equity
= 46,612 ÷ 21,140 = 2.20

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted total EMC Corporation’s shareholders’ equity
= 45,448 ÷ 19,976 = 2.28

A comprehensive review of the financial position between 2011 and 2015 reveals a significant expansion in the asset base coupled with a gradual contraction in shareholders' equity after 2012. This divergent trend has led to a steady increase in the company's financial leverage over the analyzed period.

Asset Growth Patterns: Reported total assets demonstrated a consistent upward trajectory, increasing from 34,268 million US$ in 2011 to 46,612 million US$ by 2015. A substantial acceleration in growth was observed between 2012 and 2013, where assets increased by approximately 20%. Adjusted total assets followed a nearly identical pattern, ending the period at 45,448 million US$.
Shareholders' Equity Trends: Equity levels reached a peak in 2012 at 22,357 million US$ (reported) and 21,925 million US$ (adjusted). Following this peak, a steady decline is observed, with reported equity falling to 21,140 million US$ by 2015. This indicates that the growth in total assets was not supported by a proportional increase in equity, suggesting that the expansion was financed through other means.
Financial Leverage Analysis: The financial leverage ratio exhibited a brief decline in 2012 before entering a period of sustained growth. Adjusted financial leverage rose from 1.78 in 2011 to 2.28 in 2015. This increase confirms a higher reliance on liabilities relative to equity to fund the expanded asset base. The adjusted leverage ratio remained consistently higher than the reported ratio from 2013 through 2015, indicating that adjustments to the financial statements slightly amplify the perceived leverage of the organization.

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	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to EMC Corporation	1,990)	2,714)	2,889)	2,733)	2,461)
Total EMC Corporation’s shareholders’ equity	21,140)	21,896)	22,301)	22,357)	18,959)
Profitability Ratio
ROE¹	9.41%	12.39%	12.95%	12.22%	12.98%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to EMC Corporation	1,756)	2,318)	2,687)	2,615)	2,442)
Adjusted total EMC Corporation’s shareholders’ equity	19,976)	20,944)	21,677)	21,925)	18,829)
Profitability Ratio
Adjusted ROE²	8.79%	11.07%	12.40%	11.93%	12.97%

Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).

2015 Calculations

¹ ROE = 100 × Net income attributable to EMC Corporation ÷ Total EMC Corporation’s shareholders’ equity
= 100 × 1,990 ÷ 21,140 = 9.41%

² Adjusted ROE = 100 × Adjusted net income attributable to EMC Corporation ÷ Adjusted total EMC Corporation’s shareholders’ equity
= 100 × 1,756 ÷ 19,976 = 8.79%

An analysis of the financial performance from 2011 to 2015 reveals a period of relative stability in profitability and equity followed by a significant contraction in the final year. While reported figures show a degree of resilience, adjusted figures highlight a more pronounced decline in the efficiency of capital utilization over the five-year period.

Net Income Trends: Reported net income exhibited growth from 2011 to 2013, peaking at US$ 2,889 million before declining to US$ 1,990 million by 2015. Adjusted net income followed a similar trajectory but remained consistently lower than reported values, reaching a period low of US$ 1,756 million in 2015. This indicates a consistent gap between reported and adjusted profitability that widened in the final two years of the analysis.
Shareholders' Equity Evolution: Total shareholders' equity experienced a sharp increase between 2011 and 2012, rising from US$ 18,959 million to US$ 22,357 million. Following this peak, a gradual downward trend occurred, with reported equity ending at US$ 21,140 million in 2015. Adjusted equity mirrored this pattern, concluding the period at US$ 19,976 million.
Return on Equity (ROE) Analysis: The reported ROE remained relatively stable, fluctuating between 12.22% and 12.98% from 2011 through 2014, before dropping sharply to 9.41% in 2015. In contrast, the adjusted ROE demonstrated a more persistent and linear downward trend, decreasing from 12.97% in 2011 to 8.79% in 2015. The consistent negative variance between reported and adjusted ROE suggests that the adjustments applied to the financial statements consistently reduced the perceived return on equity, with the most significant deterioration occurring in 2015.

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	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to EMC Corporation	1,990)	2,714)	2,889)	2,733)	2,461)
Total assets	46,612)	45,885)	45,849)	38,069)	34,268)
Profitability Ratio
ROA¹	4.27%	5.91%	6.30%	7.18%	7.18%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to EMC Corporation	1,756)	2,318)	2,687)	2,615)	2,442)
Adjusted total assets	45,448)	44,658)	44,804)	37,062)	33,535)
Profitability Ratio
Adjusted ROA²	3.86%	5.19%	6.00%	7.06%	7.28%

Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).

2015 Calculations

¹ ROA = 100 × Net income attributable to EMC Corporation ÷ Total assets
= 100 × 1,990 ÷ 46,612 = 4.27%

² Adjusted ROA = 100 × Adjusted net income attributable to EMC Corporation ÷ Adjusted total assets
= 100 × 1,756 ÷ 45,448 = 3.86%

A comprehensive evaluation of the financial performance between 2011 and 2015 reveals a divergence between asset growth and profitability, resulting in a consistent decline in return on assets (ROA).

Net Income Trends: Reported net income exhibited growth from 2011 to 2013, peaking at 2,889 million US dollars, before declining to 1,990 million US dollars by 2015. Adjusted net income followed a similar trajectory, peaking in 2013 at 2,687 million US dollars and ending the period at its lowest point of 1,756 million US dollars.
Asset Accumulation: Total assets demonstrated a steady upward trend throughout the five-year period. Reported assets increased from 34,268 million US dollars in 2011 to 46,612 million US dollars in 2015. Adjusted assets mirrored this expansion, rising from 33,535 million US dollars to 45,448 million US dollars.
Return on Assets (ROA) Analysis: A sustained downward trend is observed in both reported and adjusted ROA. Reported ROA remained stable at 7.18% through 2012 before declining to 4.27% by 2015. Adjusted ROA showed a continuous decline, starting at 7.28% in 2011 and falling to 3.86% by 2015. This contraction indicates that asset growth occurred at a rate that exceeded the growth of net income, particularly in the latter half of the period.
Comparison of Reported and Adjusted Metrics: Adjusted net income and adjusted assets remained consistently lower than their reported counterparts. The adjusted ROA remained lower than the reported ROA from 2012 through 2015, highlighting that the adjustments applied to the financial statements further diminished the perceived efficiency of asset utilization over time.

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