Profitability Analysis
Difficulty level: Basic
Profitability ratios measure the company's ability to generate profitable sales from its resources (assets).
Ratios (Summary)
International Business Machines Corp., profitability ratios
| Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | Dec 31, 2010 | ||
|---|---|---|---|---|---|---|
| Return on Sales | ||||||
| Gross profit margin | 50.01% | 48.63% | 48.13% | 46.89% | 46.07% | |
| Operating profit margin | 19.97% | 19.65% | 20.59% | 20.01% | 19.33% | |
| Net profit margin | 12.96% | 16.52% | 15.89% | 14.83% | 14.85% | |
| Return on Investment | ||||||
| Return on equity (ROE) | 101.30% | 72.32% | 88.04% | 78.73% | 64.36% | |
| Return on assets (ROA) | 10.23% | 13.06% | 13.93% | 13.62% | 13.07% | |
Source: Based on data from International Business Machines Corp. Annual Reports
| Ratio | Description | The company |
|---|---|---|
| Gross profit margin | Gross profit margin indicates the percentage of revenue available to cover operating and other expenditures. | International Business Machines Corp.'s gross profit margin improved from 2012 to 2013 and from 2013 to 2014. |
| Operating profit margin | A profitability ratio calculated as operating income divided by revenue. | International Business Machines Corp.'s operating profit margin deteriorated from 2012 to 2013 but then slightly improved from 2013 to 2014. |
| Net profit margin | An indicator of profitability, calculated as net income divided by revenue. | International Business Machines Corp.'s net profit margin improved from 2012 to 2013 but then deteriorated significantly from 2013 to 2014. |
| ROE | A profitability ratio calculated as net income divided by shareholders' equity. | International Business Machines Corp.'s ROE deteriorated from 2012 to 2013 but then improved from 2013 to 2014 exceeding 2012 level. |
| ROA | A profitability ratio calculated as net income divided by total assets. | International Business Machines Corp.'s ROA deteriorated from 2012 to 2013 and from 2013 to 2014. |
Gross Profit Margin
International Business Machines Corp., gross profit margin calculation
| Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | Dec 31, 2010 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (USD $ in millions) | ||||||
| Gross profit | 46,407 | 48,505 | 50,298 | 50,138 | 46,014 | |
| Revenue | 92,793 | 99,751 | 104,507 | 106,916 | 99,870 | |
| Ratio | ||||||
| Gross profit margin1 | 50.01% | 48.63% | 48.13% | 46.89% | 46.07% | |
Source: Based on data from International Business Machines Corp. Annual Reports
2014 Calculations
1 Gross profit margin = 100 × Gross profit ÷ Revenue
= 100 × 46,407 ÷ 92,793 = 50.01%
| Ratio | Description | The company |
|---|---|---|
| Gross profit margin | Gross profit margin indicates the percentage of revenue available to cover operating and other expenditures. | International Business Machines Corp.'s gross profit margin improved from 2012 to 2013 and from 2013 to 2014. |
Operating Profit Margin
International Business Machines Corp., operating profit margin calculation, comparison to benchmarks
| Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | Dec 31, 2010 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (USD $ in millions) | ||||||
| Operating income | 18,532 | 19,599 | 21,517 | 21,394 | 19,305 | |
| Revenue | 92,793 | 99,751 | 104,507 | 106,916 | 99,870 | |
| Ratio | ||||||
| Operating profit margin1 | 19.97% | 19.65% | 20.59% | 20.01% | 19.33% | |
| Benchmarks | ||||||
| Operating Profit Margin, Industry | ||||||
| Technology | –% | 23.53% | 21.45% | 24.19% | 23.86% | |
Source: Based on data from International Business Machines Corp. Annual Reports
2014 Calculations
1 Operating profit margin = 100 × Operating income ÷ Revenue
= 100 × 18,532 ÷ 92,793 = 19.97%
| Ratio | Description | The company |
|---|---|---|
| Operating profit margin | A profitability ratio calculated as operating income divided by revenue. | International Business Machines Corp.'s operating profit margin deteriorated from 2012 to 2013 but then slightly improved from 2013 to 2014. |
Net Profit Margin
International Business Machines Corp., net profit margin calculation, comparison to benchmarks
| Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | Dec 31, 2010 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (USD $ in millions) | ||||||
| Net income attributable to IBM | 12,022 | 16,483 | 16,604 | 15,855 | 14,833 | |
| Revenue | 92,793 | 99,751 | 104,507 | 106,916 | 99,870 | |
| Ratio | ||||||
| Net profit margin1 | 12.96% | 16.52% | 15.89% | 14.83% | 14.85% | |
| Benchmarks | ||||||
| Net Profit Margin, Industry | ||||||
| Technology | –% | 18.95% | 16.59% | 18.85% | 18.48% | |
Source: Based on data from International Business Machines Corp. Annual Reports
2014 Calculations
1 Net profit margin = 100 × Net income attributable to IBM ÷ Revenue
= 100 × 12,022 ÷ 92,793 = 12.96%
| Ratio | Description | The company |
|---|---|---|
| Net profit margin | An indicator of profitability, calculated as net income divided by revenue. | International Business Machines Corp.'s net profit margin improved from 2012 to 2013 but then deteriorated significantly from 2013 to 2014. |
Return on Equity (ROE)
International Business Machines Corp., ROE calculation, comparison to benchmarks
| Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | Dec 31, 2010 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (USD $ in millions) | ||||||
| Net income attributable to IBM | 12,022 | 16,483 | 16,604 | 15,855 | 14,833 | |
| Total IBM stockholders' equity | 11,868 | 22,792 | 18,860 | 20,138 | 23,046 | |
| Ratio | ||||||
| ROE1 | 101.30% | 72.32% | 88.04% | 78.73% | 64.36% | |
| Benchmarks | ||||||
| ROE, Industry | ||||||
| Technology | –% | 23.13% | 21.80% | 26.37% | 25.65% | |
Source: Based on data from International Business Machines Corp. Annual Reports
2014 Calculations
1 ROE = 100 × Net income attributable to IBM ÷ Total IBM stockholders' equity
= 100 × 12,022 ÷ 11,868 = 101.30%
| Ratio | Description | The company |
|---|---|---|
| ROE | A profitability ratio calculated as net income divided by shareholders' equity. | International Business Machines Corp.'s ROE deteriorated from 2012 to 2013 but then improved from 2013 to 2014 exceeding 2012 level. |
Return on Assets (ROA)
International Business Machines Corp., ROA calculation, comparison to benchmarks
| Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | Dec 31, 2010 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (USD $ in millions) | ||||||
| Net income attributable to IBM | 12,022 | 16,483 | 16,604 | 15,855 | 14,833 | |
| Total assets | 117,532 | 126,223 | 119,213 | 116,433 | 113,452 | |
| Ratio | ||||||
| ROA1 | 10.23% | 13.06% | 13.93% | 13.62% | 13.07% | |
| Benchmarks | ||||||
| ROA, Industry | ||||||
| Technology | –% | 12.47% | 11.62% | 13.60% | 13.29% | |
Source: Based on data from International Business Machines Corp. Annual Reports
2014 Calculations
1 ROA = 100 × Net income attributable to IBM ÷ Total assets
= 100 × 12,022 ÷ 117,532 = 10.23%
| Ratio | Description | The company |
|---|---|---|
| ROA | A profitability ratio calculated as net income divided by total assets. | International Business Machines Corp.'s ROA deteriorated from 2012 to 2013 and from 2013 to 2014. |