Accenture Plc. And IBM: An Research Paper

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However, it is important to note that when it comes to the return on equity ratio, the shareholders of IBM seem better-off than those of Accenture. This is particularly the case given that the former has a higher return on equity ratio than the latter. As Needles and Powers (2012) observe, this particular ratio should be viewed as an indicator of whether or not a given entity has earned a return that can be regarded favorable to its stockholders.

Part D

Discussion/Conclusion

From the above ratio analysis, it is clear that IBM has largely been aggressive in the utilization of debt to finance its growth. While this could be a good thing if the company makes wise investments, such an aggressive utilization of debt could expose IBM to volatile earnings as it grapples with interest expenses. It should however be noted that through its utilization of more debt than Accenture, IBM could end up generating more earnings than Accenture going forward.

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This is particularly the case should the said earnings be greater than the cost of debt. Should that be the case, shareholders of IBM would end up benefiting more than those of Accenture.

With regard to the liquidity ratios, it would be prudent to point out that in some instances, a lower current ratio could be favorable to shareholders as it demonstrates that more of the firm's assets have been committed to grow the business. The asset management ratio I compute above also brings out IBM as being more efficient than Accenture (refer to the analysis section above). Lastly, the higher return on equity ratio with regard to IBM is yet another important indicator of the said firm's ability to rake in higher returns for its shareholders than Accenture. In the final analysis therefore, I would prefer owning stock in IBM as opposed to Accenture......

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