Analysis of Apple Inc, Term Paper Example

Apple Inc. has been chosen for this analysis, through Forbes, an American-based global media company that focuses on business, technology, leadership, and entrepreneurship. The company was ranked 41 in 2017 among Canada’s best employers (Forbes Media LLC, 2017). To find the SEC 10-K the SEC site, www.sec.gov, was used. The EDGAR company filings search tool was used to retrieve the document through, https://www.sec.gov/edgar/edgar/searchedigar/companysearch.html. Apple’s latest Form 10-K (Annual Report), filed on the 26^th of October, 2016 for the period ending 24 September, 2016 was retrieved for analysis.

The company’s income statement and balance sheet show no surprising account names. The reason for this is that common account names for items in the consolidated income statement and balance sheet. The fiscal year of Apple ends in the 52^nd or 53^rd week, on the last Saturday of September, each year. Therefore, each fiscal year lasts for 52 weeks. The company includes an additional week in the first fiscal quarter after every five or six years to ensure realignment of fiscal quarters with calendar quarters. The company is incorporated in the State of California and its headquarters are in Cupertino, California (Apple Inc., 2017).

Apple’s income statement and balance sheet are profitable. The reason for this is that the income statement exhibits positive gross margin, net income, and earnings per share. Moreover, cash dividends have been declared for the last three years. The company’s comprehensive income is also positive. On the other hand, Apple’s balance sheet portrays profitability because the value of total assets exceeds total liabilities. For instance, the owner’s equity value was $119,355 million and $128,249 million for fiscal years 2015 and 2016 respectively (EDGAR Online, 2016). A company’s balance sheet is profitable if the value of its assets is greater than its liabilities.

The company uses the first in first out inventory method. The reason for this is that the industry in which Apple competes is characterized by uncertain obsolescence and changes in demand.  The company adopts a multi-step income statement preparation approach as there are various steps used to arrive at the net income. First, the cost of goods sold is subtracted from sales to get gross profit, after which operating expenses and taxes are subtracted from the gross profit while other incomes are added back to obtain the net income. The company’s gross profit for 2014, 2015, and 2016 was $70,537 million, $93,626 million, and $84,263 million respectively (EDGAR Online, 2016). The gross profit rate for the three fiscal years was 38.6%, 40.1%, and 39.1%, for 2014, 2015, and 2016 respectively.

Ernest & Young LLP, an independent registered public accounting firm audited Apple Inc.’s consolidated financial statements and statements of operations for the three years under analysis. According to the aforementioned external auditor’s opinion, the financial statements fairly represented the financial position of the company (EDGAR Online, 2016). The auditors examined the company’s internal control and expressed an unqualified opinion (EDGAR Online, 2016).

According to the information provided on the notes section, Apple’s cellular network carriers, manufacturing vendors owes the company money. The company sets an allowance for uncollectible accounts to cater for bad debts. For instance, allowances of $16,849 and $15,754 were created for accounts receivables (EDGAR Online, 2016). Therefore, there is a provision for bad debts.       

In summary, Apple Inc is a profitable company with a guaranteed going concern. The gross profit rate, net income, earnings per share, and declared dividends are indicators of a company that has a positive financial performance. Therefore, Apple Inc.’s stockholders are guaranteed of financial rewards for their investments. In addition, creditors can be assured of receiving payments of the money owed by the company because the liquidity level of Apple Inc. is substantial. Finally, it is important to note that Apple adheres to accounting principles in the preparation of its financial statements. Therefore, Apple Inc. is an ideal company to invest in.

References

Apple Inc. (2017). Apple Info. Retrieved from https://www.apple.com/about/

EDGAR Online. (2016). Apple Inc: Form 10-K. Retrieved from http://files.shareholder.com/downloads/AAPL/4350374774x0xS1628280%2D16%2D20309/320193/filing.pdf

Forbes Media LLC. (2017). Canada’s best employers: 2017 ranking. Retrieved from https://www.forbes.com/companies/apple/