Apple corporation financial analysis

Introduction

Financial ratios are the financial analysis tools that are mostly used by investors to basically analyze the activities of a company (Baker and Powell 2009, 46). It involve scrutinizing if the company is in a better financial position and also if it’s very competitive at the present value or present time and how it will be in future. It is basically used to forecast the future operation of a business, (Lee, A. C., Lee, J. C., & Lee, C. F. 2009, pg.67).

Liquidity ratios

Current ratios

=current asset/current liability

Year 2012

57,653/38,542=1.50

Year 2011

44,988/27970=1.60

 

Working capital

Current asset-current liabilities

Year 2012

57653-38542=19111

Year 2011

44988-27970=17018

The ratios mean that the company is in a position to cater for its financial current obligation, using its current asset.

 

2.) Profitability ratios

Gross margin

Year 2012

Gross profit/net sales

46,333/20703=2.24

Year 2011

26741/10298=2.60

Total asset to sale

Total asset/total sale

176,064/156508=1.1

116,371/108249=1.1

From the ratio above, the company is making a lot of profit and also their assets are equal to its sales in both years.

Trend analysis

Horizontal analysis does involve comparing the financial ratio, benchmark or the line of item over which a number of the accounting periods. Also, it does allow the assessment of the basic relative difference which does fluctuate time by time. This does include the behavior changes of the revenue turnover, the expenses e.t.c.

Revenue in 2012 and 2011

41733-25922=15811

2011 and 2010

25922-14013=11909

2010 and 2009

14013-8235=5778

2009 and 2008

8235-6119=2116

From the above information, it can be concluded that the company revenue has been increasing year by year.

Earnings per share

Year 2012 and 2011

44.64-28.05=16.59

Year 2011 and 2010

28.05-15.41=12.64

From this, it means that the company does maximize their shareholders equity and in turn the investors invest a lot with the company, (UNITED STATES, SECURITIES AND EXCHANGE COMMISSION, Washington, D.C. 20549, Form 10-K),

 

Apple inc, Financial Ratios[1]:   2014 2013 2012 2011

Net Profit margin                  22         22       27      24

Debt Equity ratio 0.32      0.14    –       –

Liquidity current ratio   1.08   1.68   1.50   1.61

Market Value Ratio            2.58     1.86    2.64    2.57

Apple Inc, Financial Trends[2]:

 

Ratio Description The company
Net profit margin

 

current Liquidity ratio

 

Debt ratio

 

Market value Margin

An indicator of profitability, calculated as net income divided by revenue.

Liquidity ratio calculated As current asset  divided by current liabilities

 

A solvency ratio calculated as total debt divided by total shareholders’ equity

The share of market increase in sales

The net profit margin deteriorated from 2012 to 2013 and from 2013 to 2014.

Its current ratio improved from 2012 to 2013 but then deteriorated significantly from 2013 to 2014.

Apple Inc.’s current ratio decreased in 2011 and 2012 and increased in 2013 but slightly decreased in  2014.

Apple Inc.’s current ratio decreased in 2013 but improved in 2014.

 

Competitor: EMC Corp[3]

EMC corporation is a company that is technologically advanced and its  operation differ with that of apple corporation. But it should be noted that, this corporation deals with data storage. It mainly targets big company and also smes. It also provides computers as its more recognized as a computer company. This means that, it is a bigger threat to the apple corporation because many companies will opt to deal with emc for its technological services and also for computer products than that of apple. This is because this company has been listed among the 100 best companies in united state of America. Although apple is diversified, it should be in a position to deal with this company to avoid its computer products and technological services to elapse with the company. Since, its market share is large and its competitive position in the market is high.

 

Financial Ratios:            2014     2013    2012 2011

Profitability ratio        19            18         17          16

Debt Equity ratio           0.25     0.32    0.08   0.18

Current ratio                   1.04      1.60    1.40     1.50

Market value margin     1.97        2.76    2.50     1.98

Ratio Description The company
Net profit margin

 

current Liquidity ratio

 

Debt ratio

 

An indicator of profitability, calculated as net income divided by revenue.

Liquidity ratio calculated As current asset  divided by current liabilities

A solvency ratio calculated as total debt divided by total shareholders’ equity

The share of market translated in sales

Emccorp, net profit margin deteriorated from 2012 to 2013 and from 2013 to 2014 it improved.

EmcCorp,current ratio has been decreasing from 2011 to 2014.

Emc Debt ratio has decreased  from 2011 to 2014

EmcCorp,market value margin has improved slightly in 2014

NB: An increase in Profit margin indicates that the company is doing well because this makes the company to grow in terms of competitiveness and employees satisfaction

Debit ratio It indicates what proportion of equity and debt the company is using to finance its assets, An increase means that there has been an increase in the total liabilities and a decrease means there has been an increase in equity liability
An increase in current ratio indicates there is an rise in being able for the company to pay its short-term debts and the opposite is true

An increase in market share indicates that the company is gaining more sales within a period of time and this normally translates into profits

We can therefore see that the financial strength in Apple INC, is in current and market value ratio Because the investors still can invest and that the company is not at a risk of being bankrupt and hence investors still have confidence in investing in the company.

While their financial ratio weakness is in the Profits between the year2013 and 2014which can translate into the employees feeling the pinch due to pressure on performance and threat of being fired

I would advise the company to sell new share to stocks rather than sell bonds because the market share is still doing well and by having more shareholders they will be more loyal to the brand that they have invested in and this translates  to them making more purchases from apple as opposed to selling the bonds which will only concentrate on a particular class of people with good finances and chances are they have already bought the products anyway they only want to make profits from the company hard work.

As an investor with large sum of money I would consider investing with apple because their financial statement seem to show that the company still has got something to offer to investors like me and because they still have got a good market share as oppose to their competitors I would prefer to invest in them until their financial statement starts to decline.

 

From the information of the above companies, it can be concluded that, this two particular companies are leaders and in case of any to slake, the other one will take over (TechNewsWorld 2015, 87). The future financial position of this two particular company will be increasing at an increasing rate. This is because there financial turnover has been increasing from one fiscal year to another. for example, apple corporation horizontal analysis, it is concluded that the revenue and also the shareholders equity has been increasing and this live the company to be competitive i the market and also secure a competitive place in the market.

The corporation should use basically cost of equity to finance its project which are at time less than a year (Ehrhardt and Brigham 2013, 95). This is because the company is in a position to finance its current asset and also be able to sort out its current obligation without having any financial stress. Also, the company is supposed to use the cost of debt to finance its long term project since its current asset cannot finance for its long term project, (Herwitt, 2014, pg. 87)

As a banker, I would loan the company money to the company because its future financial position is outstanding and the pattern from the past financial position of the company can be used to forecast that the company is in full position to pay for the loans and also its sales equal to the total asset.

As an investor, I would definitely invest with the company because according to the company earnings per share are increasing at an increasing rate, it means that the company always obeys the rule of the company which is always maximize their shareholders equity. Also from the shareholders equity, it has been increasing drastically and this can be forecasted in future.

 

 

 

 

References

Baker, H Kent, and Gary Powell. Understanding Financial Management: A Practical Guide. Hoboken, NJ: John Wiley & Sons, 2009.

Ehrhardt, Michael, and Eugene Brigham. Corporate Finance: A Focused Approach. New York: Cengage Learning, 2013.

TechNewsWorld. June 20, 2015. http://www.technewsworld.com/story/63122.html (accessed June 19, 2015).

UNITED STATES, SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549, Form 10-K

http://ccbn.10kwizard.com/cgi/convert/pdf/APPLEINC10K.pdf?pdf=1&repo=tenk&ipage=4589126&num=-2&pdf=1&xml=1&cik=320193&odef=8&rid=12&quest=1&dn=2&dn=3

Lee, A. C., Lee, J. C., & Lee, C. F. (2009). Financial analysis, planning & forecasting: Theory and application. Singapore: World Scientific

Herwitt, (2014). Cost of capital: cost of equity & debt analysis. Plunkett Research Ltd, print

Plunkett Research Ltd,

http://www.sec.gov/Archives/edgar/data/790070/000079007015000062/emc-2014123110xk.htm

 

http://www.acemyhw.com

 

 

 

 

 

 

Question two

We were differentiating the liquidity ratio of 2011 and 2012

Question three

Its division method

Question four

Substation method

Question five

Division method

Question six

Substation method

Question seven

Its the link as provided from the annual reports of apple corporation by the investors relation

Question eight

They are for previous fiscal years

Question nine

Its cited

 

 

 

 

 

 

http://ccbn.10kwizard.com/cgi/convert/pdf/APPLEINC10K.pdf?pdf=1&repo=tenk&ipage=4589126&num=-2&pdf=1&xml=1&cik=320193&odef=8&rid=12&quest=1&dn=2&dn=3

 

http://www.sec.gov/Archives/edgar/data/790070/000079007015000062/emc-2014123110xk.htm