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Apple Corporation’s Balance Sheet, Research Paper Example

Pages: 3

Words: 934

Research Paper

One April 22, 2009 Apple® announced revenue of $8.16 billion and a net quarterly profit of $1.21 billion, or $1.33 per diluted share in its second quarter of 2009. At the height of the global economic crisis, the results astounded investors to with positive confirmation of the Company’s robust position with an increase in revenue from the $7.51 billion and net quarterly profit of $1.05 billion, or $1.16 per diluted share, in the year-ago quarter. International sales impacted the corporation’s accounting, at forty six percent apportionment of the quarter’s revenue (Apple 2009). By year’s end in 2009, the Company reported total sales at $36,537.0 billion.

Significant to this discussion is Apple Inc. decision to designate most product line income as immediate revenue subject to Non-GAAP accounting measures, with some remaining financial offset in the areas of short life products that are calculated as future retained earnings. The foregoing essay describes the delineation of that decision, and also looks to the pronounced success of the Company’s asset holdings from industry and investor perspectives, and also to potential liabilities and reactionary impact of those risks on shareholder value.

Since the 1970s, when College dropouts Steve Jobs and Steve Wozniak founded Apple in a garage in California’s Santa Clara Valley, the company has been creating innovative computer systems IT technologies and sustainable growth business strategies (Hoovers 2010). Considered ‘revolutionary’ in a field of naysayers, Apple Inc. carved new directions in entertainment and digital media distribution and now offers products such as its digital music players (iPod) and online music store (iTunes), mobile (iPhone), servers (Xserve), wireless networking equipment (AirPort), and publishing and multimedia software, in addition to its desktop and laptop computers. More than half of the Company’s sales are derived from the U.S. market. In 2009, the Company improved its position with a 38.08% profit margin, compared to competition Dell at 17.51% and Hewlett Packard at 23.59% and an industry average of 25.9%. Only software conglomerate Microsoft Corporation reported gross profit earnings higher, at 80.16%.

Consideration of the Apple Corporation’s assets reveals a healthy financial position to investors, with promise of continued investment due to the Company’s reported higher than industry average return on assets at 16.5% (Hoovers 2010). The state of Apple’s assets from the perspective of inventory and liquidity is well defined, and evaluation of the Company’s assets is calculated according to growth potential of products, shelf life, and accountability of both earnings and logistics according to mitigating factors affecting the Company’s position in the product sales market, and in response to cash reporting impacted by future innovations or developments as articulated in Apple’s iPhone and Apple TV. Due to the economic lives of these products are estimated to be 24 months. Application of subscription accounting results in ‘the deferral of almost all of the revenue and cost of goods sold during the quarter in which the products are sold to the customer’ (Apple 2009). Added value costs related to these products include expenses for engineering, marketing, sales and warranty. Research and development of unspecified features and additional software products impact full cost pricing to customers, as the Company does not calculate those projected costs to those customers free of charge. To this end, Apple employs GAAP measures exclusively in the case of such products on a ‘straight line’ basis as the economic life of the products impacts losses, and Apple seeks to avoid those reductions to the Company’s revenue base at point-of-sale.

In all other product areas, the Company uses Non-GAAP accounting standards to audit and measure fiscal performance, and this is partially done to avoid future liabilities that may emerge in response to sale existing high risk liability product sales (Apple 2009). Concurrent to this consideration, product revenues are accounted for within their quarter, and lowered financial risk is sought in regard to the performance of products. Adjusted Cost of Sales,” “Adjusted Gross Margin” and “Adjusted Operating Margin” is used to measure the Company’s operating performance based on a current period; hence eliminating the effects of deferred revenue and offering the provision of transparent insight into underlying sales trends. The adjusted figures are considered metrics or ‘meaningful indicators of current business performance’ in support of determination of management compensation and environmental performance with industry competition. Ultimately, both legal and market liabilities decrease without advanced projection of performance. The proof is in the performance with advancement in shareholder equity which saw 26.0% in investment capital returns in 2009. Apple Inc. refined accounting strategies reflect a progressive approach to financial planning that has become increasingly important to definition of capital growth within high tech manufacturing and especially in distribution of those products in the international market. For investors, Apple offers nothing short of a sure bet on returns.

Appendix

Competitive Landscape KEY: Best of Group. Companies listed are Top Competitors. www.hoovers.com

Key Numbers Apple Inc. Dell Hewlett-Packard Microsoft
Annual Sales ($ mil.) 36,537.0 52,902.0 114,552.0 58,437.0
Employees 36,800 96,000 304,000 93,000
Market Cap ($ mil.) 221,296.9 25,019.7 106,490.7 217,255.6
Profitability Apple Inc. Dell Hewlett-Packard Microsoft Industry2 Market3
Gross Profit Margin 38.08% 17.51% 23.59% 80.16% 25.99% 28.77%
Pre-Tax Profit Margin 24.86% 3.83% 8.22% 38.85% 12.32% 8.48%
Net Profit Margin 18.50% 2.71% 6.69% 29.03% 8.25% 5.53%
Return on Equity 26.0% 28.9% 19.3% 41.8% 22.3% 10.1%
Return on Assets 16.5% 4.8% 6.7% 22.5% 10.0% 1.5%
Return on Invested Capital 26.0% 17.9% 13.5% 36.6% 20.2% 4.4%
Valuation Apple Inc. Dell Hewlett-Packard Microsoft Industry2 Market3
Price/Sales Ratio 4.98 0.47 0.94 3.73 2.49 3.15
Price/Earnings Ratio 26.88 17.51 13.68 12.84 29.15 23.15
Price/Book Ratio 5.62 4.19 2.45 4.75 5.53 6.12
Price/Cash Flow Ratio 16.53 6.42 7.52 9.95 15.63 19.57
Operations Apple Inc. Dell Hewlett-Packard Microsoft Industry2 Market3
Days of Sales Outstanding 19.65 36.46 53.32 56.15 28.01 34.66
Inventory Turnover 58.3 45.5 12.5 20.4 50.4 8.1
Days Cost of Goods Sold in Inventory 6 8 29 18 7 45
Asset Turnover 0.9 1.8 1.0 0.8 1.2 0.3
Net Receivables Turnover Flow 18.6 10.0 6.8 6.5 13.0 10.5
Effective Tax Rate 25.6% 29.2% 18.6% 25.3% 37.9%
Financial Apple Inc. Dell Hewlett-Packard Microsoft Industry2 Market3
Current Ratio 1.88 1.28 1.22 1.82 1.78
Quick Ratio 1.4 1.0 0.8 1.6 1.5
Leverage Ratio 1.93 5.97 2.83 1.97 2.17
Total Debt/Equity 0.72 0.39 0.15 0.11
Interest Coverage 13.65 14.06 10.64 17.33
Per Share Data ($) Apple Inc. Dell Hewlett-Packard Microsoft Industry2 Market3
Revenue Per Share 48.83 26.96 48.16 6.65 32.68 7.60
Fully Diluted Earnings Per Share
from Total Operations
9.19 1.95 2.72 1.08
Dividends Per Share 0.00 0.52 0.00 0.25
Cash Flow Per Share 14.72 1.99 6.04 2.49 5.21 1.22
Working Capital Per Share 18.66 2.70 4.07 2.54 8.42
Long-Term Debt Per Share 1.75 5.96 0.43 1.26
Book Value Per Share 43.24 3.05 18.55 5.22 14.72 3.91
Total Assets Per Share 59.18 17.19 48.95 8.89 29.28
Growth Apple Inc. Dell Hewlett-Packard Microsoft Industry2 Market3
12-Month Revenue Growth 12.5% (13.4%) (3.2%) (3.3%) (5.0%)
12-Month Net Income Growth 18.0% (42.2%) (8.0%) (17.6%) (11.1%)
12-Month EPS Growth 17.4% (41.6%) (3.4%) (13.4%) (14.3%)
12-Month Dividend Growth 0.0% 16.3%
36-Month Revenue Growth 23.7% (2.7%) 7.7% 9.7% 4.8%
36-Month Net Income Growth 42.1% (17.8%) 7.3% 5.0% 9.3%
36-Month EPS Growth 40.5% (13.8%) 12.9% 10.5% 11.0%
36-Month Dividend Growth 0.0% 13.7%

References

Apple Inc. Hoovers. Retrieved at: http://www.hoovers.com

Data Summary: Apple Reports Second Quarter Results Best March Quarter Revenue and Earnings in Apple History. Apple Inc. Retrieved from: http://www.apple.com/pr/library/2009/04/22results.html

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