Lenovo Financial Paper

I. Introduction
1. Background
Lenovo Group Limited is a Chinese multinational computer hardware and electronics company with its operational headquarters in Morrisville, North Carolina, United States and its registered office in Hong Kong. Its products include personal computers, tablet computers, mobile phones, workstations, servers, electronic storage devices, IT management software and smart televisions. Lenovo is the world’s second-largest PC vendor by 2011 market share (after Hewlett-Packard) and markets the ThinkPad line of notebook computers and the Think Centre line of desktops. Lenovo was founded in Beijing in 1984 and incorporated in Hong Kong in 1988 under its previous name, Legend. Lenovo is listed on the Hong Kong Stock Exchange and is a constituent of the Hang Seng China-Affiliated Corporations Index. While the Lenovo brand came into existence only in 2004, the company has a much longer history. In 1984, Legend Holdings was formed with 25,000 RMB in a guard house in China. The company was incorporated in Hong Kong in 1988 and would grow to be the largest PC Company in China. Legend Holdings changed its name to Lenovo in 2004 and, in 2005, acquired the former Personal Computer Division of IBM, the company that invented the PC industry in 1981.

Today, Lenovo is a US$21 billion personal technology company and the world’s second-largest PC vendor. They have more than 26,000 employees in more than 60 countries serving customers in more than 160 countries. A global Fortune 500 company, they have headquarters in Beijing, China and Morrisville, North Carolina, U.S.; major research centers in Yokohama, Japan; Beijing, Shanghai and Shenzhen, China; and Morrisville; and they have manufacturing around the world from Greensboro, North Carolina and Monterrey, Mexico to India, China and Brazil. History of Lenovo

1981 IBM Personal Computer Division (PCD) introduces its first personal computer, the IBM PC 1984 IBM PCD introduces its first portable computer, the IBM Portable PC, weighing 30 pounds. With an initial capital outlay of only RMB200,000, (US$25,000) Lenovo’s founding chairman Liu Chuanzhi, together with 10 like-minded colleagues, launches the New Technology Developer Inc. (the predecessor of the Legend Group) funded by the Chinese Academy of Sciences. 1986 IBM PCD announces its first laptop computer, the PC Convertible, weighing 12 pounds. 1987 IBM PCD announces the Personal System/2 personal computer. 1988 Legend’s Chinese-character card receives the highest National Science-Technology Progress Award in China.Legend Hong Kong is established. 1989 IBM PCD announces the Personal System/2 personal computer. 1990 The very first Legend PC is launched in the market. Legend changes its role from that of an agent for imported computer products into that of a producer and seller of its own branded computer products.

Legend PCs are ratified and accepted by the China Torch Program. 1992 IBM PCD introduces ThinkPad, the industry’s first notebook with a 10.4 inch color Thin Film Transistor (TFT) display and a TrackPoint (red ball) pointing device. 1993 Legend enters the Pentium era, producing China’s first “586” PC. Legend establishes 1+1 retail network. 1994 IBM PCD introduces the industry’s first notebook with integrated CD-ROM, the ThinkPad 755CD. 1995 IBM PCD introduces the “butterfly” keyboard.IBM PCD moves from Boca Raton, Florida, to Raleigh, North Carolina. Legend introduces the first Legend-brand server. 1996 Legend becomes the market share leader in China for the first time.Legend introduces the first Legend brand laptop. 1997 IBM PCD introduces the industry’s first notebook equipped with a DVD-ROM, the ThinkPad 770.

Legend signs an Intellectual Property agreement with Microsoft, the most valuable deal ever made in China at the time. 1998 IBM PCD introduces the industry’s first Think Light, a small light that illuminates the keyboard in low-light work environments, such as onboard an airplane. The millionth Legend PC comes off the production line. Intel Chairman Andy Grove attends the ceremony, and takes the PC for Intel’s museum collection. Legend establishes the first Legend Shop. 1999 IBM PCD introduces the industry’s first mini-notebook, weighing less than three pounds, with standard ports and a keyboard that is 95 percent of full-size. IBM PCD announces its exit from the retail business.

IBM PCD introduces the industry’s first PC with an embedded security chip. Legend becomes the top PC vendor in the Asia-Pacific region and heads the Chinese national Top 100 Electronic Enterprises ranking. Legend launches pioneering Internet PC, with its “one-touch-to-the-net” feature, which enables millions of Chinese PC users to easily access the Internet. 2000 IBM PCD ships its 10-millionth ThinkPad notebook PC.

Legend becomes a constituent stock of the Hang Seng Index – HK. Legend ranked in top 10 of world’s best managed PC venders. 2001 An IBM notebook with an embedded security chip becomes the industry’s first notebook to be certified by the Trusted Computing Platform Alliance, an industry body setting data security standards.

Legend successfully spins off Digital China Co. Ltd., which is separately listed on the Hong Kong Stock Exchange. Legend appoints Yuanqing Yang President and CEO.  Legend first introduces “digital home” concept and launches accessories-enabling PC. 2002 IBM PCD introduces Image Ultra and Rapid Restore, the first automatic data recovery technologies of their kind. IBM PCD announces desktop PC outsourcing pact with Sanmina-SCI. Legend launches its first technological innovation convention, “Legend World 2002,” which opens up Legend’s “Technology Era”. Legend introduces its visionary concept for the future of technological development and applications, its Collaborating Applications project, as well as its strategies for implementing Collaborating Applications. Legend’s supercomputer, the DeepComp 1800 makes its debut. It is China’s first computer with 1,000 GFLOP (floating point operations per second) and China’s fastest computer for civilian use, ranked 43rd in the Top 500 list of the world’s fastest computers. 2003 IBM PCD introduces the industry’s first notebook with an extended battery life of up to 11 hours. IBM PCD introduces its ThinkCentre desktop PC line.

IBM PCD introduces its Active Protection System, the industry’s first notebook with an airbag for hard drive and data protection in case the system is dropped. IBM PCD ships its 20-millionth ThinkPad notebook PC.

IBM PCD introduces its ThinkCentre desktop PC line.
Legend announces the birth of its new “Lenovo” logo to prepare for its expansion into the overseas market. Based on the collaborative application technology, Lenovo initiates IGRS Working Group, in cooperation with a few large companies and the Chinese Ministry of the Information Industry, to promote the formation of the industrial standard.

Lenovo launches a Tech RoadShow 2003 nationwide to promote Lenovo’s innovation. Lenovo successfully develops DeepComp 6800 in November 2003. It ranks 14th on the global list. 2004 IBM PCD introduces the ThinkCentre ultra small desktop PC, no larger than a box of corn flakes. IBM PCD introduces the first notebook with an integrated fingerprint reader. IBM PCD ships its 100-millionth PC (counting both desktop and notebook computers). Lenovo becomes an Olympic worldwide partner. It is the first Chinese company to become a computer technology equipment partner of the IOC. Lenovo decides to develop the rural market by launching the “Yuanmeng” PC series designed for township home users. Lenovo and IBM announce an agreement by which Lenovo will acquire IBM’s Personal Computing Division, its global PC (desktop and notebook computer) business. The acquisition forms a top-tier (third-largest) global PC leader. 2005 Lenovo completes the acquisition of IBM’s Personal Computing Division, making it a new international IT competitor and the third-largest personal computer company in the world. Lenovo announces the closing of a US$350 million strategic investment by three leading private equity firms: Texas Pacific Group, General Atlantic LLC and Newbridge Capital LLC.

Lenovo establishes a new Innovation Center in Research Triangle Park, N.C., to enable customers, business partners, solution providers and independent software vendors to collaborate on new personal computing solutions. Lenovo introduces the industry’s thinnest, lightest and most secure Tablet PC, the ThinkPad X41 Tablet. Lenovo introduces the first widescreen ThinkPad with embedded wireless WAN, the ThinkPad Z60, available for the first time with a titanium cover. Lenovo becomes the world’s largest provider of biometric-enabled PCs by selling its one-millionth PC with an integrated fingerprint reader. William J. Amelio is appointed as CEO and President of Lenovo. 2006 Lenovo introduces the first dual-core ThinkPad notebook PCs, improving productivity and extending battery life for up to 11 hours. Lenovo technology flawlessly supports the 2006 Olympic Winter Games in Torino, Italy, supplying 5,000 desktop PCs, 350 servers and 1,000 notebook computers. Lenovo also hosts seven Internet lounges for use by Olympic athletes and visitors. The first Lenovo-branded products outside of China debut worldwide. Researchers, scientists and product design teams from around the world combine Lenovo’s heritage in enterprise and consumer PC technology to design the Lenovo 3000 product line, which features new desktop and notebook models specifically designed to provide worry-free computing to the small business market segment.

2007 The Beijing Organizing Committee for the Olympic Games selects a Lenovo-designed Olympic Torch as the winning design from among 300 entries. Named the “Cloud of Promise,” the Lenovo-designed torch will travel the world at the front of the global Olympic Torch Relay. Lenovo delivers a supercomputer for a Formula One racing team that will provide eight teraflops of computing power. Lenovo introduces first EPEAT Gold Monitor with new visuals portfolio. 2008 Lenovo enters the worldwide consumer PC market with new Idea brand. Lenovo’s ThinkPad X300 is called “the best laptop ever” by BusinessWeek magazine. Lenovo becomes the first PC manufacturer to announce a client virtualization platform. Lenovo provides a smooth, error-free performance at the Beijing Olympic Games. The Lenovo solution – which included more than 30,000 pieces of equipment and nearly 600 Lenovo engineers – powered the largest sporting event in history. 2009 Lenovo leads PC industry in using recycled material.

Lenovo becomes senior sponsor of Computing Equipment and System Operation Service for the World Expo 2010 in Shanghai. Lenovo debuts Enhanced Experience for Windows 7, delivering significantly better performance for the new operating system. Lenovo sells its 1 millionth Idea Product.

2010 Lenovo achieves its highest ever worldwide market share and becomes the world’s fastest growing major PC manufacturer. Lenovo create and build exceptionally engineered personal technology, but they are much more than a tech company. Lenovo are defining a new way of doing things as a next generation global company. Lenovo have their core strength in China, rapid growth in emerging markets and a unique global footprint. Lenovo builds on its dominant position in China to grow globally. The expansion from East to West— introducing their newest products in China and then spreading across the globe— is a new way of viewing the world, one they believe will be the way of the future. 2. Nature of business

The business model of Lenovo is to design, produce and distribute personal computer, tablet computers, mobile phones, workstations, servers, electronic storage devices. Lenovo also provide IT management software and smart televisions. Now Lenovo is the second –largest markets share of globe personal computer. The PC market is mature; and during the past 10 years, Competition in the PC market is fierce, with many players competing mainly on price. In the past 10 years, there are just several vendors Survived. Now most of them have changed their business models from price to qualify a PC as business-class models, which include elements such as long image stability, long product life cycles and three-year standard warranty, are eroded and shortened by vendors to maintain margins. 3. Description of product/services

Lenovo is the No.1 computer manufacturer and IT management software provider in China. Products: Laptops and Ultrabooks, Tablets, Desktop and All-in-ones, workstations and other accessories. For Laptops and Ultrabooks, they provide 3 kinds of series for the clients, THINKPAD, IDEAPAD and ESSENTIAL. For the Tablets, the best sales are their idea pad tablet A1 and ThinkPad Tablet. The next good products of Lenovo are their Desktops and All-in-ones which Lenovo have integrated all of the parts to form them in. the two main products are Thinkcentre and Ideacenter. The last products are their workstations, including THINKSTATION, THINKSERVER and ACCESSORIES

Lenovo Services have a very good service solution for their products. According to Lenovo ‘service standard, we see that “Let you get the most out of your Lenovo PC – no matter how you use it. Whether you have a thousand PCs or just one, Lenovo delivers the quality, reliability and peace of mind to get you and keep you up and running, no matter where you are, no matter when you need us”. Their three main services are as follow; * Transition Services – can help save you time by creating an optimized solution to manage everyday transitions happening in your organization. * Warranty Support Services – provide flexible options to meet your variable support needs. * Protection Services – are designed to keep your PC safe, protect your data and help maintain productivity.

From the consolidated sales of first quarter of 2012, Lenovo’s Laptop computers continued to be the largest contributor to the Company’s sales worldwide, generating 54 percent of Lenovo’s total sales revenue. Consolidated sales for Lenovo’s laptop PC business worldwide in the first fiscal quarter totaled US$4.3 billion, an increase of 23 percent year-over-year. The Company’s laptop shipments worldwide in the quarter were up 27 percent year-over-year, helping Lenovo to gain 3.2 share points and achieve a record-high laptop market share of 15.4 percent. Across the industry, laptop shipments were flat year-over-year. During the first quarter, Lenovo announced the worldwide availability of its first ultrabooks, the IdeaPads U310 and U410, featured in the Company’s new, global “Book of Do” advertising campaign. Lenovo’s new ultrabooks, combine the best features of traditional laptops – processing performance, large storage capacity and rich audio – with the sleek aesthetics and desirable qualities of tablets, such as fast boot-up, instant resume and all-day battery life. Consolidated sales of Lenovo Desktop PCs worldwide increased 26 percent year-over-year in the first fiscal quarter to US$2.5 billion, or 32 percent of Lenovo’s total sales revenue.

The Company’s desktop PC shipments worldwide in the first quarter increased 21 percent year-over-year worldwide, compared to an overall industry decrease of four percent worldwide. As a result, Lenovo gained three share points year-over-year and achieved a record-high market share of 14.4 percent. During the first quarter, Lenovo announced its new ThinkCentre M92p “tiny” desktop PC, the industry’s first one-litre desktop measuring just the width of a golf ball (34.5mm). The ThinkCentre M92p exhibits an innovative tiny form factor allowing it to fit into practically any space while maintaining first-class productivity. In physical environments where space is limited, customers are particularly interested in the “tiny” desktops capabilities. Having completed its first full-year of operations, Lenovo’s Mobile Internet Digital Home (MIDH) group reported that sales increased 173 percent year-over-year during the first fiscal quarter to US$587 million, comprising 7% of the Company’s total sales revenue.

Lenovo’s smartphone shipments increased 44 times year-over-year, helping the Company achieve its first-ever double-digit smartphone market share at 11.2 percent. Lenovo’s smartphone gains propelled the Company to improve its overall mobile phone business by 5.1 share points year-over-year to finish the quarter at a record-high 9.8 percent market share in China. Overall, Lenovo is now the second largest mobile phone vendor in China. During the first fiscal quarter, Lenovo announced its latest tablet, the IdeaTab S2109, designed for entertainment with features like four SRS surround-sound speakers. The Company also announced its first smart TV, the 55-inch K91 Smart TV in China, the world’s Google-certified TV to adopt the Android 4.0 operating system. 4. Current Revenue size and Profit

From its first fiscal quarter ended June 30, 2012 Lenovo Group is with quarterly sales of US$8 billion, a 35 percent increase year-over-year. At the same time, Lenovo’s first quarter net-income increased by 30 percent year-over-year, to US$141 million, demonstrating the Company’s ability to maintain profitable growth in a challenging market. As the world’s second-largest PC vendor, Lenovo achieved its highest-ever quarterly market share of 15%* helping the Company to make significant gains against its competitors. In an industry where overall PC shipments were down almost two percent year-over-year, Lenovo’s PC shipments for the first fiscal quarter increased 24.4 percent compared to last year, the 13th quarter in a row that Lenovo’s growth has outpaced the PC industry as a whole.

And for the 11th quarter in a row, Lenovo grew faster than any of the top four PC vendors. Lenovo’s growth was balanced across all geographies, customers segments and products lines, a result of the Company’s continued focus on executing its “protect and attack” strategy of reinforcing its business in established markets while going after potential new markets. As the industry evolves to the PC Plus era, Lenovo has moved aggressively to ensure that the Company is well-positioned as the industry shifts to include more tablets, Smart TVs and smartphones in the product mix.

The Company’s gross profit for the first fiscal quarter increased 30 percent year-over-year, with gross margin at 12 percent. Operating profit for the quarter grew 48 percent year-over year to US$182 million. Basic earnings per share for the first fiscal quarter it was 1.37 US cents, or 10.63 HK cents. Net cash reserves as of June 30, 2012, totaled US$3.7 billion. Lenovo announced a global partnership with EMC, forming a server technology development program that will help drive innovation and extend Lenovo’s capabilities in x86 industry-standard servers. As part of this agreement, Lenovo will bring these servers to market on its own, and embed them in select EMC storage systems over time. Lenovo replaced a major competitor to establish an OEM and reseller relationship where Lenovo will provide EMC’s industry-leading networked storage solutions to Lenovo customers worldwide, starting with China. Lenovo and EMC have also agreed to a joint venture, majority-owned by Lenovo, bringing certain assets and resources from EMC’s Iomega business to develop and sell Network Attached Storage (NAS) products to small/medium businesses and distributed enterprise sites worldwide.

During the first fiscal quarter, Lenovo also announced the establishment of the Lenovo Industrial base in Wuhan, China, where the Company will build an integrated facility focused on the research, development and production of Lenovo mobile internet and digital home product lines. The facility is expected to open in October 2013. “Although the economic environment is somewhat similar to the 2008-2009 downturn, Lenovo’s results are much stronger because we have the right strategy and great execution,” said Yang Yuanqing, Lenovo Chairman and CEO. “Our businesses in emerging markets outside of China, our consumer business and MIDH business all achieved rapid expansion, providing the balanced pillars to support our overall performance. Our business in China and our global commercial business maintained strong profitability, which allows us to secure plenty of resources to invest in growth areas and ensure the company’s overall healthy performance. Although we’re in a challenging environment, we are confident that by continuing to execute our Protect and Attack strategy, Lenovo can achieve sustainable growth and healthy returns in the PC+ era.” 2006-2011

Global PC Market Share by Units, Percent. 2006-2011.|
Rank| 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | | | | | | | 1| Dell| 15.9| HP| 18.2| HP| 18.4| HP| 19.3| HP| 17.9| HP| 17.2| | | | | | | 2| HP| 15.9| Dell| 14.3| Dell| 14.3| Acer| 13.0| Dell| 12.9| Lenovo| 13.0| | | | | | | 3| Lenovo| 7.0| Acer| 8.9| Acer| 11.1| Dell| 12.2| Acer| 12.0| Dell| 12.1| | | | | | | 4| Acer| 5.8| Lenovo| 7.4| Lenovo| 7.2| Lenovo| 8.1| Lenovo| 9.7| Acer| 11.2| | | | | | | 5| Toshiba| 3.8| Toshiba| 4.0| Toshiba| 4.5| Toshiba| 5.1| Toshiba| 5.4| Asus| 5.9| | | | | | | Others| | 51.6| | 47.1| | 44.5| | 42.3| | 42.1| | 40.6| | | | | | | Global PC market share

5. Major Market Served

For the market severed, it will be analysis by types of Clients and Geographic. In the types of clients, Lenovo separate into four kinds of clients, Large enterprises, Small Business, Personal and Home office, Government and Education. In Geographic, from the data of Lenovo, Lenovo China recorded US$3.5 billion in consolidated sales in the first fiscal quarter of 2012, an increase of 24 percent year-over-year, and accounting for 44 percent of the Company’s worldwide sales. Lenovo further strengthened its number-one position in China by 3.9 points, which resulted in an industry-leading market share in China of a record 35 percent, further widening the gap between Lenovo and its nearest rivals. Lenovo’s PC shipments in China increased nine percent year-over-year in the quarter, compared to an overall industry decrease of PC shipments in China of 2.8 percent. In the Asia Pacific/Latin America region, Lenovo’s PC shipments for the first fiscal quarter of 2012 increased 59.2 percent, significantly outperforming the overall industry, which saw a decrease of 3.9 percent year-over-year. Consolidated sales totaled US$1.7 billion for the first quarter, or 21 percent of the Company’s worldwide sales.

Lenovo recorded double-digit market share in the region with 11 percent, gaining 4.4 share points year-over-year. Highlights for the quarter included a number one position in Japan with 25.4 percent market share, attributable to Lenovo’s successful integration of its NEC joint venture, which is entering just its second year of operation. In addition, Lenovo recorded an all-time high in India of 17 percent share while growing more than five times faster than the industry as a whole there, and PC shipments in Brazil increased more than 20 times the overall industry growth rate in that country. Lenovo’s PC shipments in Europe Middle East/Africa increased an impressive 62.3 percent in the first fiscal quarter year-over-year, more than six times an overall industry growth rate in the region of 9.1 percent.

Consolidated sales increased 62 percent year-over-year during the first quarter, to US$1.6 billion in consolidated sales, or 20 percent of the Company’s worldwide sales. Despite the economic challenges faced by several European countries, Lenovo gained 2.9 share points year-over-year. Lenovo’s successful integration of its Medion acquisition has helped the Company improved its position in Western Europe. In Russia, Lenovo doubled its PC shipments year-over-year. North America consolidated sales totaled US$1.2 billion year-over-year for the first fiscal quarter, an increase of seven percent year-over-year, comprising 15 percent of the Company’s worldwide sales. In an overall market that dropped ten percent year-over-year, Lenovo’s PC shipments grew at an 8.6 percent clip in the first quarter, with a balanced strong showing in sales to both commercial and consumer customers. With a record high market share in the United States of eight percent, Lenovo was able to recapture the number four share position in the region.

6. Ownership

From Lenovo`s investor relationship, 57.77% of Lenovo stock was held by the general public, 33.58% by Legend Holdings Limited, and 8% by other entities. The Chinese Academy of Sciences owns 36% of Legend Holdings. The share of the Chinese Academy of Sciences, a PRC state science think tank, has the founding share and the largest share. Share Outstanding

As of June 30, 2012
Ordinary shares outstanding| 10,334,198,596|
Nominal value of ordinary share (HK$ per share)| 0.025|

Shareholding Structure

as of June 30, 2012
Public| 57.77%|
Legend Holdings Limited| 33.58%|
Mr. Yang Yuanqing| 8.40%|
Other Directors| 0.25%|

Other relevant basic information
Here are some principal subsidiaries from Lenovo as knowledge

7. Company`s business strategy
Lenovo’s business is built on product innovation, a highly efficient global supply chain and strong strategic execution. The company develops, manufactures and markets reliable, high-quality, secure and easy-to-use technology products and services for customers who want technology that does more— because people have a lot more to do. Their product lines include legendary Think-branded commercial PCs and Idea-branded consumer PCs, as well as servers, workstations and a family of mobile internet devices, including tablets and smart phones. Lenovo have a long-term goal of becoming the leading personal technology company in the world. They aspire to achieve this goal by leading in three key areas: Personal Computers: Lead in PCs and be respected for our product innovation and quality. Convergence: Lead the industry with an ecosystem of devices, services, applications and content for people to seamlessly connect to people and Web content. Culture: Become recognized as one of the best, most trusted and most well-respected companies to work for and do business with. And they want to do it the right way— the Lenovo Way— with their own perspective, their own global point of view and thire own commitment to building technology for people who view technology as a tool to accomplish great things.

II. Analysis of Company Performance
1. Company Growth
Revenues for the year 2011 grew by 30.11% to USD 21.5billion from USD 16.6 in 2010 on account of higher sales volume, Shelf off-take across the company`s core personal computer was robust, underpinned by the new technology model PC products and promotional activities combined with the new developed oversea market. Meanwhile in 2012, Net sales grew by 36.9% to USD29.5billion from USD 21.5 billion in 2011 significantly outperforming the overall industry, which saw a decrease of 3.9 percent year-over-year. Lenovo continue to keep a high double-digit growth, underpinned by their core value and business strategy with a global partnership with EMC.

Today, Lenovo has a dominant position in the personal computer in China with 35% market share, Japan with a 25.4% market share. And Lenovo recorded an all-time high in India of 17% market share, increased an impressive 62.3% share in Europe Middle East and Africa. In North America, Lenovo also have a 8.6% market share increasing. Now Lenovo has been the second largest computer producers with a 14.7 percent， Market share in the whole world after Hewlett-Packard’s 14.9 percent. Compared with Key competitors

From the latest data of Gartner, for most manufacturers the news isn’t good: of the companies named, only Lenovo and Asus performed better in this year’s Q3 than they did last year’s. HP has given up so much market share that Lenovo was able to pass the company to become the largest PC OEM worldwide. This is the first time that Lenovo has taken the worldwide market share crown, and the first time that HP has lost it since the end of 2006. 2. Financial ratios

Operating Efficiencies
Financial Ratios| Formula| Results| Expresse |
| | | 2012| 2011| 2010| Das|
Fixed Asset turnover| Net Income| Ave.PPE| 44.42 | 42.02 | 34.97 | TIMES| Inventory Turnover| Cost of Goods Sold| Average Inventory| 2| 2 | 2 | TIMES| Days Sales in inventory| 365| Inventory Turnover| 197 | 203 | 274| DAYS|

Fixed Asset Turnover
The fixed-turnover ratio measures a company`s ability to generate net sales from fixed-asset investments, specifically property, plant and equipment (PPE)-net of depreciation. Fixed asset turnover of Lenovo is 44.42, really good numbers. These mean the company has been more effective in using the investment in fixed assets to generate revenues. Inventory Turnover and Days sales in inventory

According to ycharts.com, the inventory turnover standard ratio of personal computer makers should be 15. Lenovo is 2. In other side, Lenovo have a lower days sales in inventory, which mean the company really have a good sale system and lower investment in the inventory. We have seen lower days sales in inventory but the number is still high at 197 days. 3. Liquidity

Financial Ratios| Formula| Results| Expresse |
| Numerator| Numerator| 2012| 2011| 2010| Das|
Current Ratio| Current Assets| Current Liabilities| 1.00 | 1.01 | 1.05 | Ratio| Quick Ratio| Quick Assets| Current Liabilities| 0.63 | 0.63 | 0.64 | Ratio| Cash Ratio| Cash+Cash Equivalents| Current Liabilities| 0.40 | 0.43 | 0.45 | Ratio|

Current Ratio
The ration is mainly used to give an idea of the company`s ability to pay back its short-term liabilities with its short term assets. The higher the current ratio, the more capable the company is of paying its obligations. A ratio under 1 suggests that the company would be unable to pay off its obligations if they came due at that point. While this shows the company is not in good financial health, it does not necessarily mean it will go bankrupt-as there are many ways to access financing-but it is definitely not a good sign. Current Ratio of Lenovo is at 1.00. Given that it is equal to 1, it means that the company`s short-term assets (cash, cash equivalents, income tax recoverable, deposits, derivative financial assets, notes receivable, trade receivables and inventories) are just readily available to pay off short term liabilities (Trade payables, Notes payable, derivative financial liabilities, provisions, income tax payable, short term bank loans and current portion of non-current liabilities). The current ratio of Lenovo decrease to 1.00 in 2012 from 1.05 in 2010. But it was still same as the industry average. From ycharts.com, current ratio industry average for personal computer makers is 1.0. Quick ratio

The quick ratio is more conservative version of another well-known liquidity metric-the current ratio. Although the two are similar, the quick ratio provides a more rigorous assessment of a company`s ability to pay its current liabilities. It does this by eliminating all but the most liquid of current assets from consideration. Inventory is the most notable exclusion, because it is not as rapidly convertible to cash and is often sold on credit. Without inventory, quick ratio of Lenovo is 0.63 in 2012. It was lower than 1.0. But it is good enough; due to the industry standard quick ratio for personal computer is 0.60 from ycharts.com. Lenovo have a good control in the inventory with a quick turnover ratio? Cash Ratio

Cash Ratio is the most conservative liquidity ratio. It excludes all current assets except the most liquid which is cash and its equivalents. The cash ratio is an indication of the firm`s capacity to pay just in case immediate payment is demand. In the case of Lenovo, with only 0.4 cash ratio, the company will only be able to pay a third of its current liabilities with its cash on hand.