Analysis of Liquidity Ratios
Liquidity ratios measure the company ability to meet its short-term obligations.
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Liquidity Ratios (Summary)
International Business Machines Corp., liquidity ratios
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Current ratio | ||||||
| Quick ratio | ||||||
| Cash ratio |
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
The liquidity position of the company demonstrates a generally improving trend from 2021 through 2024, followed by a slight pullback in 2025. All three liquidity ratios – current, quick, and cash – exhibited increases over the initial period, suggesting a strengthening ability to meet short-term obligations. However, the most recent year shows a modest decline in two of the three ratios.
- Current Ratio
- The current ratio increased steadily from 0.88 in 2021 to 1.04 in 2024, indicating a growing capacity to cover current liabilities with current assets. The ratio in 2025 decreased slightly to 0.96, but remains above the 2021 level. This suggests the company’s short-term financial flexibility remains reasonably strong despite the recent dip.
- Quick Ratio
- The quick ratio, which excludes inventory from current assets, followed a similar pattern to the current ratio. It rose from 0.69 in 2021 to 0.90 in 2024, demonstrating an improved ability to meet short-term obligations with the most liquid assets. A decrease to 0.83 was observed in 2025, but the ratio still indicates a healthy level of immediate liquidity.
- Cash Ratio
- The cash ratio, the most conservative liquidity measure, showed the most substantial relative improvement. It increased from 0.22 in 2021 to 0.45 in 2024, signifying a growing proportion of current assets held as cash. The ratio decreased to 0.37 in 2025, but remains significantly higher than the 2021 and 2022 values. This suggests an increased capacity to cover immediate liabilities with readily available funds.
Overall, the company’s liquidity appears to have strengthened between 2021 and 2024. The slight declines observed in 2025 do not appear to represent a significant deterioration in the short-term financial position, but warrant continued monitoring.
Current Ratio
International Business Machines Corp., current ratio calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current assets | ||||||
| Current liabilities | ||||||
| Liquidity Ratio | ||||||
| Current ratio1 | ||||||
| Benchmarks | ||||||
| Current Ratio, Competitors2 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| AppLovin Corp. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Datadog Inc. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| ServiceNow Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
| Current Ratio, Sector | ||||||
| Software & Services | ||||||
| Current Ratio, Industry | ||||||
| Information Technology | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 2025 Calculation
Current ratio = Current assets ÷ Current liabilities
= ÷ =
2 Click competitor name to see calculations.
The current ratio exhibited a generally improving trend from 2021 to 2024, followed by a slight decrease in the most recent year presented. Initial values indicated a potentially concerning liquidity position, but subsequent years show improvement, though recent developments warrant monitoring.
- Current Ratio Trend
- In 2021, the current ratio stood at 0.88. This value suggests that the entity had 88 cents of current assets for every dollar of current liabilities, potentially indicating a limited ability to meet short-term obligations. The ratio improved to 0.92 in 2022, and continued to rise to 0.96 in 2023. A further increase was observed in 2024, reaching 1.04, signifying that current assets exceeded current liabilities. However, in 2025, the ratio decreased slightly to 0.96.
The increase in the current ratio from 2021 to 2024 suggests improved liquidity management, potentially through increases in current assets, decreases in current liabilities, or a combination of both. The slight decline in 2025, while not substantial, could indicate a potential shift in working capital management or an increase in short-term obligations. Further investigation into the components of current assets and current liabilities would be necessary to determine the underlying drivers of these changes.
- Key Observations
- The entity moved from a position where it potentially faced challenges in covering immediate liabilities to a position of greater short-term solvency by 2024. The recent decrease in the current ratio in 2025, however, suggests that this improvement may not be sustained without continued attention to liquidity.
Continued monitoring of the current ratio, alongside other liquidity metrics and cash flow analysis, is recommended to assess the entity’s ongoing ability to meet its short-term financial obligations.
Quick Ratio
International Business Machines Corp., quick ratio calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cash and cash equivalents | ||||||
| Restricted cash | ||||||
| Marketable securities | ||||||
| Notes and accounts receivable, trade, net of allowances | ||||||
| Short-term financing receivables, held for investment, net of allowances | ||||||
| Short-term financing receivables, held for sale | ||||||
| Other accounts receivable, net of allowances | ||||||
| Total quick assets | ||||||
| Current liabilities | ||||||
| Liquidity Ratio | ||||||
| Quick ratio1 | ||||||
| Benchmarks | ||||||
| Quick Ratio, Competitors2 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| AppLovin Corp. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Datadog Inc. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| ServiceNow Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
| Quick Ratio, Sector | ||||||
| Software & Services | ||||||
| Quick Ratio, Industry | ||||||
| Information Technology | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 2025 Calculation
Quick ratio = Total quick assets ÷ Current liabilities
= ÷ =
2 Click competitor name to see calculations.
The quick ratio exhibited an improving trend from 2021 to 2024, followed by a slight decrease in the most recent year presented. This indicates a changing capacity to meet short-term obligations with the most liquid assets.
- Quick Ratio Trend
- The quick ratio increased from 0.69 in 2021 to 0.90 in 2024, representing a strengthening of the company’s ability to cover its current liabilities with highly liquid assets. This improvement suggests enhanced short-term financial flexibility during this period.
- However, in 2025, the quick ratio decreased to 0.83. While still above the 2021 and 2022 levels, this represents a reversal of the prior positive trend and warrants further investigation.
- Underlying Components
- Total quick assets consistently increased over the five-year period, rising from US$23,327 million in 2021 to US$32,110 million in 2025. This growth in liquid assets contributed to the initial improvement in the quick ratio.
- Current liabilities decreased from 2021 to 2022, then increased in 2023, decreased slightly in 2024, and then increased significantly in 2025. The substantial increase in current liabilities in 2025 likely contributed to the decline in the quick ratio observed in that year.
The combination of increasing quick assets and fluctuating current liabilities resulted in the observed trend in the quick ratio. The decrease in the quick ratio in 2025, despite continued growth in quick assets, suggests that the growth in current liabilities outpaced the growth in liquid assets during that year.
Cash Ratio
International Business Machines Corp., cash ratio calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cash and cash equivalents | ||||||
| Restricted cash | ||||||
| Marketable securities | ||||||
| Total cash assets | ||||||
| Current liabilities | ||||||
| Liquidity Ratio | ||||||
| Cash ratio1 | ||||||
| Benchmarks | ||||||
| Cash Ratio, Competitors2 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| AppLovin Corp. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Datadog Inc. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| ServiceNow Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
| Cash Ratio, Sector | ||||||
| Software & Services | ||||||
| Cash Ratio, Industry | ||||||
| Information Technology | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 2025 Calculation
Cash ratio = Total cash assets ÷ Current liabilities
= ÷ =
2 Click competitor name to see calculations.
The cash ratio exhibited an increasing trend from 2021 to 2024, followed by a slight decrease in 2025. This indicates a changing capacity to meet short-term obligations with only the most liquid assets.
- Cash Ratio Trend
- In 2021, the cash ratio stood at 0.22. It increased to 0.28 in 2022, representing a notable improvement in the company’s immediate liquidity position. The ratio continued its upward trajectory, reaching 0.39 in 2023 and peaking at 0.45 in 2024. A subsequent decline to 0.37 was observed in 2025.
- Total Cash Assets
- Total cash assets increased from US$7,557 million in 2021 to US$8,841 million in 2022, and then experienced a more substantial increase to US$13,462 million in 2023. This growth continued into 2024, reaching US$14,805 million, before decreasing slightly to US$14,471 million in 2025. This suggests a general pattern of increasing cash reserves, with a minor reduction in the most recent period.
- Current Liabilities
- Current liabilities decreased from US$33,619 million in 2021 to US$31,505 million in 2022. An increase to US$34,122 million was then observed in 2023, followed by a slight decrease to US$33,142 million in 2024. In 2025, current liabilities rose significantly to US$38,658 million. This indicates fluctuations in short-term obligations, with a notable increase in the latest year.
The combined effect of increasing cash assets and fluctuating current liabilities contributed to the observed trend in the cash ratio. The peak ratio in 2024 suggests a strengthened ability to cover immediate liabilities with available cash, while the 2025 decrease, despite a slight reduction in cash, is primarily driven by the substantial increase in current liabilities.