IBM

Definition

IBM (International Business Machines Corporation) is a global technology and consulting company known for its hardware, software, and service solutions. In finance, it serves as an example of a large corporation raising capital through various means such as equity, debt, and hybrid instruments.

5 Must Know Facts For Your Next Test

1. IBM issues bonds to raise capital, impacting its debt-to-equity ratio.
2. The company's stock performance influences its cost of equity in calculating the Weighted Average Cost of Capital (WACC).
3. IBM uses retained earnings as part of their internal financing strategy.
4. IBM's credit rating affects the interest rate it pays on newly issued debt.
5. The firm's diverse revenue streams can stabilize its financial metrics used in WACC calculations.

Review Questions

• How does IBM's bond issuance impact its WACC?
• What role does IBM's stock performance play in determining its cost of equity?
• Why is IBM's credit rating important when assessing their cost of debt?

Related terms

Cost of Equity: The return required by shareholders for investing in a company's equity.

Cost of Debt: The effective rate that a company pays on its borrowed funds.

Retained Earnings: The portion of net income that is not distributed to shareholders but reinvested in the business or kept as reserves.