Financial Analysis

Apple Inc.

Tunzala Z.Ramila J.Jalil H.Farhan R.Javid M.

OverviewIntroduction Financial Statement Ratio Analysis Profitability Analysis Conclusion

Apple is an American corporation that designs and manufactures computer hardware, software and other consumer electronics. The company is best known for their Macintosh personal computer line, Mac OS X, extremely loyal user-base, iTunes media application and the iPod personal music player. The company was established in 1976. And company headquarters is in Cupertino, California.CEO and co-founder is Steve Jobs and the company boasts 284 retail locations spanning 10 different countries.

History

Apple Inc. | Americas | Europe | Greater China | Japan | Rest of Asia

• iPhone®• iPad®• Mac® • iPod® • Apple TV®• iOS and OS X® operating systems• iCloud®• Apple Watch™ • Apple Pay™

2015/09

2014 2013 2012

Balance sheet

2015/09

2014 2013 2012Balance sheet

2015/09

2014 2013 2012Income statement

2015/09

2014 2013 2012Cash Flow

Ratio Analys

is

Liquidity

Leverage/

Solvency

Turnover/

Activity

Profitability

RATIO ANALYSIS

Liquidity | Current Ratio• Indicates whether current liabilities are adequately

covered by current assets• Measures ability to meet current obligations• Flavors

• Current Ratio

• Quick Ratio

• Cash Ratio

Current Ratio/Working Capital RatioCurrent Asset : Current Liabilities

2013 2014Current Asset 73,286,000 68,531,000Current Liabilities 43,658,000 63,448,000Current Ratio 1.67 1.08

Here, it shows that the firm has 1.08 which is not quite satisfactory and can be improved by better turnover and profit and also by decreasing liabilitiesApple can pay 108 % of its liability

Quick Ratio/ Acid Test Ratio(cash + short-term marketable securities + accounts receivable) ÷ current liabilities

2013 2014Cash & cash equivalents 64,640,000 56,614,000Current Liabilities 43,658,000 63,448,000Quick Ratio 1.48 0.89

A quick ratio of 89% means that a company has $0,89 of liquid assets available to cover each $1 of current liabilities. The higher the quick ratio, the better the company's liquidity position. Ability to pay 89 %

Cash Ratio / Super Quick Ratio(cash + short-term marketable securities ) ÷ current liabilities

2013 2014cash + short-term marketable securities

40,546,000 25,077,000

current liabilities 43,658,000 63,448,000Cash Ratio 0.928 0.395

The cash ratio is generally a more conservative look at a company's ability to cover its liabilities than many other liquidity ratios.Apple can pay 39.5% of its current liabilities using cash

Leverage Ratio• Shows dependence of firm on outside long term

finance• Measures firm’s ability to pay interest & principle

regularly when due

• Debt - Assets ratio• Debt - Equity ratio• Debt - Total fund ratio• Interest coverage ratio

Debt-to-assets Ratio

2013 2014Total Liabilities 83,451,000 120,292,000Total Assets 207,000,000 231,839,000Debt-to-assets Ratio 0.4031 0.5188

total liabilities ÷ total assets

>0.5 indicates that equity position by Apple is less than 50%From the above 51,8% of Apple Inc assets have been financed by debt, Apple Inc in 2014 has a much higher degree of leverage than in 2013.

Debt - Equity ratio

2013 2014Total liability 123,549,000 111,391,000Total equity 163,342,000 168,391,000Debt-assets Ratio 0.675 0.673

(Total liability : Total equity)

67.3% assets of Apple are financed by equity

Income from operations(EBIT) ÷ interest expenses

2013 2014EBIT 48,999,000 52,503,000Interest expenses 0 0Interest-coverage-ratio Ratio 48,999,000 52,503,000

Interest-coverage-ratio Ratio

Interest expense is zero.High ratio, high strength.

Activity Ratio• Measures how effectively firm is managing its assets

• Inventory Turnover• Asset Turnover ratio• Days Accounts Payable

cost of goods sold ÷ average inventory

2013 2014Cost of goods sold 106,606,000 112,258,000Average inventory 1,277,500 987,500Inventory Turnover 83.44 57.94

Inventory Turnover

Measures how fast the company turns over its inventory within a year.

Sales ÷ Average Total Assets

2013 2014Net Sales 170,910,000 182,795,000Average total assets 191,532,000 219,419,500Asset-turn-over Ratio 0.8923 0.8330

Asset-turn-over Ratio

The Asset Turnover ratio can often be used as an indicator of the efficiency with which a company is deploying its assets in generating revenue. Generally speaking, the higher the asset turnover ratio, the better the company is performing.

Accounting payable ÷ Cost of sales * Days in Period

2013 2014Accounting payable 36,223,000 48,649,000Cost of sales * days in period 39,017,796,000 40,974,170,000Days-accounts-payable Ratio 0.0009283712 0.001187309

Days-accounts-payable Ratio

Days Accounts Payable indicates the number of days that the accounts payable relative to cost of goods sold the company has.Delays in paying to suppliers .

Profitability Ratio• Shows different factors contribution towards making

profit

• Net profit margin• Return on assets (ROA)• Return on equity (ROE)

Net-profit-margin RatioNet income ÷ Net revenue

2013 2014Net income 37,037,000 39,510,000Net revenue 106,606,000 112,258,000Net-profit-margin 0.347 0.351

35.1% - translates sales into earning.

Return-on-assets (ROA) Ratio

2013 2014Net income 37,037,000 39,510,000Total assets 207,000,000 231,839,000ROA 0.17 0.15

Net income ÷ Total Assets

An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings.Assets contribution towards making profit is 15 %

Return-on-equity (ROE) Ratio

2013 2014Net income 37,037,000 39,510,000T.Stockholder’s equity 123,549,000 111,547,000Roe 0.299 0.354

Net income ÷ total stockholder’s equity

Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested.

Based on the findings in the trend and common size analysis Apple’s overall performance is above average.

Analysis of company’s Balance sheet showed that Apple’s growth in Total Assets, Common Equity and Retained Earnings was above industry average.

Analysis of company’s income statement showed that Apple’s Net Cash Flow from operating activities was above the industry average and it resulted in a positive Net Change in Cash.

Observations

SuggestionsFor Company :1.Continous innovation to expand.2.Knowledge management for consumers.3. To make a waterproof and non-cracked products

For Consumers:1.Do not compromise on price for quality.2.Choose the products on individual needs.3.Be unique and different.

ConclusionBased on the performed analysis , Apple is financially strong and healthy.The company’s growth has been extraordinary during the past four years.Apple is able to finance its operations by current liabilities only.It is financial structure is outstanding with 100 % equity.Apple does not have any long term debt,which it makes company very financially independent.Revenues and net income are increasing each year.In terms of ROA, ROE and profit margins, Apple strengthened financially and now has better ratio than its competitors and the overall computer industry.As they have a lot of invest and they are ready to compete with their competitors in the industry.They don’t need to wait for people buy their product only when they are on salebut they need to focus more on the customer support and improve the areas they already have problems.

Thanks For Attention