Financial Analysis (Submitted by) Abstract The following paper aims at discussing the financial position of the American multinational corporation, Apple inc. , which designs and markets consumer electronics, computers and personal computers mobile communication devices, and portable digital music and video players, as well as sells various related software, services, peripherals, and networking solutions. Apple Inc. together with subsidiaries sells its products worldwide through its online stores, retail stores, direct sales force, third-party wholesalers, resellers, and value-added resellers.
The company sells its products to consumer, small and mid-sized business, education, enterprise, government, and creative customers. As of September 26, 2009, it had 273 retail stores, including 217 stores in the United States and 56 stores internationally. In the paper, the financial analysis has been done for the latest 3-5 years and the resulting ratios are examined for trends and also compared to industry ratios for those years. Profitability and solvency ratios are the two ratios taken to measure company performance. Key words: liquidity ratios, profitability ratios, trends etc.
Main Body The financial position of Apple Inc. with personal computer systems industry is shown below: Growth Rates %| Company| Industry| S&P 500| Sales (Qtr vs year ago qtr)| 48. 60| 46. 50| 15. 80| Net Income (YTD vs YTD)| 66. 50| 61. 10| 90. 50| Net Income (Qtr vs year ago qtr)| 89. 80| 82. 60| 121. 60| Sales (5-Year Annual Avg. )| 38. 97| 35. 01| 7. 78| Net Income (5-Year Annual Avg. )| 98. 68| 86. 79| 8. 56| Dividends (5-Year Annual Avg. )| NA| NA| 5. 16| Financial data in U. S. dollars Industry: Personal Computer Systems From the above data, (yahoo finance.
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Com) it can be seen that Apple has been an industry outperformer. Since the last five years if we average out the performance of Apple inc. we can see that the sales and net income of Apple Inc. are higher than that of industry and S&P 500. Financial Analysis The financial strength and performance of the company over the last three years i. e. 2009, 2008 & 2007 is determined through the following ratios: Liquidity Analysis | | | | | | S. No. | Detail| Working| 2009| 2008| 2007| a. | Current Ratio| $36,265/$19,282| 1. 88| 2. 29| 2. 36| b. | Quick ratio| $36265-$455/$19,282| 1. 6| 2. 26| 2. 32| c. | Collection Period(in days)| $3361*365/$36,537| 34| 27| 25| d. | No. of day’s sales in| $455*365/$23,397| 7| 9| 8| | ending inventory (in days)| | | | | The company is still highly liquid but this liquidity trend is in declining trend as current ratio 2. 36 in 2007 is declined to 2. 29 in 2008 and further declined to 1. 88 in 2009. This declining trend is mainly due to increase in collection period of the sale and decrease in number of day’s sale in ending inventory as depicted above. Profitability Analysis: S. No. | Detail| Working| 2009| 2008| 2007| . | Gross Profit percentage| $13,140/$36,537| 35. 96%| 34. 31%| 33. 97%| b. | Operating income percentage| $7,658/$36,537| 20. 96%| 19. 32%| 18. 37%| c. | Return on Equity| $5,704/$27,832| 20. 49%| 22. 99%| 24. 06%| d. | Return on Assets| $5,704/$53,851| 10. 59%| 12. 22%| 13. 79%| e. | Cash return on assets| $10,159/$53,851| 0. 19| 0. 24| 0. 22| f. | Quality of income| $10,159/$5,704| 1. 78%| 1. 99%| 1. 56%| There is an increasing trend in profit of the company over the last three years i. e. 2007 to 2009. The gross profit percentage has increased from 33. 97% in 2007 to 34. 1% in 2008 and then 35. 96% in 2009. Operating income percentage has also increased from 18. 37% in 2007 to 19. 32% in 2008 and then 20. 96% in 2009. Return on equity and on assets has decreased due to accumulation of profits in retained earnings and investment in long term marketable securities respectively. The same is with cash return on assets. In short, the company is enjoying with strong profitability and is in upward growth with respect to profit. Conclusion: Investment must be made in the company as the company is financially very strong and has increasing trend in earning.
Further the company is financially sound and the share of the company is being traded over the book value of the share that depicts the investor trust on the company’s performance. References 1. (Stilgar, 2007), Apple financial analysis, retrieved from: http://blogs. indews. com/financial_analysis/apple_financial_analysis. php on, 18-06-2010. 2. Jonathan Richey, Craig Maddron, “Financial analysis of Apple Inc. ”, retrieved from: http://web. mac. com/jonathanrichey/My_Portfolio/Publications_;_Papers_files/apple%20analysis. pdf on, 18-06. 2010. 3. http://www. scribd. com/doc/31945598/Apple-Company-Analysis. retrieved on 18-06-2010
