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Module 4: simple analysis and parsimonious forecasting

Module 4: simple analysis and parsimonious forecasting. International Business Machines Corporation F rank H uang. Brief introduction of IBM. incorporated in the State of New York on June 16, 1911 In the computer manufacturing and IT consulting industries

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Module 4: simple analysis and parsimonious forecasting

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  1. Module 4:simple analysis and parsimonious forecasting

    International Business Machines Corporation Frank Huang
  2. BriefintroductionofIBM incorporated in the State of New York on June 16, 1911 InthecomputermanufacturingandITconsultingindustries Creates value through integrated solutions that leverage information technology and deep knowledge of business processes IBM solutions reduces a client‘s operational costs or enablesnew capabilities that generate revenue
  3. Corporate recognition and brand In 2012, Fortune ranked IBM the No. 2 largest U.S. firm in terms of number of employees, the No. 4 largest in terms ofmarket capitalization, the No. 9 most profitableand the No. 19 largest firm in terms of revenue. Globally, the company was ranked the No. 31 largest firm in terms of revenue by Forbes for 2011.
  4. Major operation components The company's major operations consists of five business segments: Global Technology Services and Global Business Services, which the company collectively calls Global Services, Software, Systems and Technology, Global Financing
  5. Return on Enterprise Operations
  6. Enterpriseprofitmarginrevealshowmuchoperatingprofitthefirmearnsfromeachsalesdollar. Enterpriseprofitmarginrevealshowmuchoperatingprofitthefirmearnsfromeachsalesdollar.
  7. Forecast revenues via forecasts of sales growthrates
  8. Forecast EPAT via forecasts of EPM ForeachdollarofIBMsalesduring2010to2012,thefirmearnedroughly12.9centsprofitafterallenterpriseexpensesandtaxes.
  9. Forecast EPAT via forecasts of “EPMfromsales” Excludetheimpairmentcharge,discontinuedoperations,financialstatementtranslation,andgains/losesoncashflowhedges Hopetogainsmootherresults
  10. EPMIndustryAverage
  11. Forecast NEA via forecasts of EATO Enterpriseassetturnovermeasurestheproductivityofthefirm’senterpriseassets. Revealsthelevelofsalesthefirmrealizesfromeachdollarinvestedinenterpriseassets. Foreachdollarofenterpriseassetsemployed,IBMgeneratedanaverageof$14.11insales.
  12. Assumptions for parsimonious forecasting Sales growth rate 1.13% Enterprise profit margin (EPM) 15.1% Enterprise asset turnover (EATO) 14.11
  13. Discounted Cash Flow Model Assumption: growthrate:1.13% Discountrate:10.00%
  14. Discounted Cash Flow Model
  15. Conclusion Improvementthatcouldbemade: a more accurate discount rate growthrateistheaverageofpreviousyears’growthrates FY13 sales number not yet released
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