Financial Statement Analysis Project, Research Paper Example
Words: 2190Research Paper
Apple Inc. is a worldwide technology firm founded in the United States with its headquarters in Cupertino, California. On January 3, 1977, the company was officially established as a corporation in California, and on December 12, 1980, it went public. The website of the company can be found at www.apple.com. On the NASDAQ Global Select Market, Apple’s common stock shares are traded using the ticker symbol AAPL. September 25 marks the end of the current financial year for the company (Apple, 2019). According to the 10-K that the company filed for the fiscal year that ended on September 25, 2022, the independent accountant and auditor for the company are Ernst & Young LLP. Apple is a company that creates, manufactures, and sells various goods, including personal computers, portable digital music and video players, and mobile communication devices. Through developing cutting-edge technology, software, and services, the company’s main mission is to provide its clientele with the very best possible user experience.
Section 2: Balance Sheet Analysis
|2022||% of Total Assets||2021||% of Total Assets||2020||% of Total Assets|
|Cash and cash equivalents||95,607||8.72%||38,846||3.89%||38,998||3.87%|
|Short-term marketable securities||12,515||1.15%||22,939||2.29%||45,994||4.57%|
|Accounts receivable, net||24,835||2.28%||24,044||2.40%||17,902||1.78%|
|Vendor non-trade receivables||14,085||1.29%||11,290||1.13%||9,305||0.93%|
|Other current assets||5,876||0.54%||4,353||0.43%||4,501||0.45%|
|Total current assets||156,108||14.28%||104,894||10.48%||119,075||11.84%|
|Property and equipment, net||57,645||5.28%||59,474||5.94%||64,299|
|Account||Current Year/Base||Prior Year/Base||Base Year|
|Cash and cash equivalents||246.64%||99.63%||100%|
|Short-term marketable securities||27.20%||49.86%||100%|
|Accounts receivable, net||138.88%||134.36%||100%|
|Vendor non-trade receivables||151.30%||121.35%||100%|
|Other current assets||130.64%||96.69%||100%|
|Total current assets||131.20%||88.12%||100%|
|Property and equipment, net||89.61%||92.56%||100%|
Comments on changes you see in the balance sheet with regards to Apple.Inc company over the three years.
Over the period under consideration (2020-2022), Apple Inc. had a significant rise of 112.09% in the total value of all its assets. The firm has also made large outlays in investments in fixed assets like machinery and equipment, intangibles like goodwill, and other non-current assets. Total Apple.Inc. liabilities increased by 131.43% between the base and current years. Current liabilities such as accounts payable, accrued expenses, and deferred revenue increased substantially, which was the key factor in the overall rise in liabilities (“Apple | AAPL Stock Price, Company Overview & News,” 2023). Non-current liabilities have not grown at an alarming rate for the corporation. Over the previous three years, Apple has kept its accounts payable, cash flows, and short-term liquid assets relatively constant. Accounts payable, accrued expenses, and deferred revenue have all increased during the period, contributing significantly to the company’s current obligations. The increasing importance of Apple Inc.’s vendors and suppliers in financing its operations suggests that the business has been delaying payments to these parties to improve its liquidity in the short term. Apple.Inc’s most important asset holdings are cash and short-term marketable securities, followed by accounts payable and retained earnings. These assets are used in Apple’s day-to-day operations and the acquisition of shares in other businesses. A rise in Apple. Accounts Inc’s receivable is an encouraging indicator, as it represents money the company has yet to be paid by customers for goods and services they have purchased.
Apple, Inc. relies heavily on stockholder investments rather than debt financing. Over the past three years, the company’s total shareholders’ equity has climbed by 107.83%, while its total liabilities have increased by 131.43%. This suggests that rather than taking on new debt, Apple.Inc has been using stock funding to fuel its expansion and growth. Most of Apple.com, Inc.’s debt is of the long-term variety. The corporation has taken on long-term debt of treasuries and other instruments to finance its day-to-day operations and investments. This strategy enables the organization to secure more favorable interest charges and long payback periods, resulting in greater financial flexibility for the company. The company’s long-term debt has increased by 112.75% during the previous three years, but its short-term debt has remained the same.
Section 3: Income Statement
|Account||Current Year %||Prior Year %||Two Years Ago %|
|Cost of sales||61.60%||61.00%||62.18%|
|Research and development||7.88%||8.12%||7.59%|
|Selling, general and administrative||12.71%||12.45%||12.20%|
|Total operating expenses||20.59%||20.57%||19.79%|
|Other income/(expense), net||1.04%||0.92%||0.76%|
|Income before provision for income taxes||18.85%||19.35%||18.79%|
|Provision for income taxes||3.25%||3.80%||3.79%|
|Account||Current Year/Base||Prior Year/Base||Two Years Ago/Base|
|Cost of sales||119.75%||108.88%||100%|
|Research and development||121.98%||110.06%||100%|
|Selling, general and administrative||119.62%||106.91%||100%|
|Total operating expenses||120.52%||107.70%||100%|
|Other income/(expense), net||152.52%||168.42%||100%|
|Income before provision for income taxes||118.02%||108.21%||100%|
|Provision for income taxes||122.67%||142.33%||100%|
Apple Inc.’s total income has steadily risen over the previous three years. Apple’s revenue for the current year was 119.44% of the base year’s (the previous two years), representing a rise of 19.44% from the revenue for the base year. During the past three years, Apple Inc.’s gross profit has been marked by significant swings. In the most recent year, gross profit amounted to 118.90% of the base year, down 0.54% from the previous year. Apple Inc.’s net income has grown annually during the past three years.
To put it another way, this year’s net income was 15.26% higher than last year’s, reaching 115.26% of last year’s Total. It’s been a bumpy three years for Apple Inc.’s profit margin. There was a decline of 2.73% in the profit margin from the previous year to this year, bringing it down to 22.09%. The rise in demand for Apple’s iPhones and Mac computers is one factor that contributed to the company’s improved financial performance. However, the corporation has invested much in R&D to create new items and improve upon old ones, which has a negative impact on their profit. Throughout the past three years, the financial statements issued for Apple Inc. do not reveal any material shifts in either the ceased operations or extraordinary items or any changes in accounting policy. The income statement for each year details the organization’s typical business activities and does not mention any unusual occurrences or adjustments to the accounting principles.
Section 4: Ratio Analysis
|Ratio||Most recent year||Prior year|
|Days Sales in Receivables||32.32||30.15|
|Accounts Receivable Turnover||11.28||12.11|
Long-term Paying Ability Ratios
|Ratio||Most recent year||Prior year|
|Times Interest Earned||28.03||27.42|
|Fixed Charge Coverage Ratio||17.38||16.08|
|Ratio||Most recent year||Prior year|
|Net Profit Margin||21.18%||21.69%|
|Return on Assets||12.33%||13.19%|
|Sales to Fixed Assets||10.12||8.35|
|Return on Investment||19.22%||21.74%|
|Gross Profit Margin||38.40%||39.00%|
|Ratio||Most recent year||Prior year|
|EPS – Basic||$5.64||$3.31|
|EPS – Diluted||$5.56||$3.28|
|Price / Earnings Ratio||25.15||35.51|
|Percentage of Earnings Retained||52.88%||50.09%|
|Market Value per share (date)||$141.96||$117.24|
|Book Value per share (date)||$3.88||$3.71|
In regards to the first part, the four categories being measured are liquidity ratios, long-term paying ability, profitability ratios, and investor ratios:
The cash and long-term paying ability ratios are two indicators of a company’s overall financial health that can be measured. Investor ratios evaluate the performance of a business’s stock on the market, whereas profitability ratios determine whether or not a company can generate a profit from its operations (Al Mheiri et al., 2021). Different ratios can be used to compare one firm to others in the same industry or the whole market to understand where a particular business stands with its competitors. If a company’s ratios are better than its competitors or the market average, it might be a better bet financially. In contrast, if a company’s ratios are lower than the market average or its competitors, this may indicate financial trouble.
Liquidity ratio analysis shows that Apple’s current ratio has dropped from 1.40 to 1.07, showing a deterioration in the company’s ability to meet short-term obligations. The decline in working capital, from $65,410 to $39,835, indicates a decline in short-term liquidity (AAPL.OQ – | Stock Price & Latest News | Reuters, 2021). In contrast, Apple is taking significantly longer to collect consumer payments, as evidenced by a decline in the accounts receivable turnover ratio from 12.11 to 11.28. Apple’s long-term paying ability measures, such as its times’ interest earned ratio and fixed charge coverage ratio, have improved over the prior year. Apple has increased its reliance on debt as measured by the debt ratio and the debt-to-equity ratio, which indicates a greater use of debt relative to stockholders’ equity.
Apple’s profit measures indicate a small decline in the company’s profitability and assets ratios but an increase in the company’s capital investment. There has also been a minor decline (from 39.0 percent to 38.5 percent) in gross profit margin (Al Mheiri et al., 2021). Apple’s price-to-earnings ratio has dropped, but the company’s earnings per share and market value per share have both climbed, suggesting that the stock is undervalued. As a result, Apple is now distributing a lesser proportion of its profits to shareholders in dividends than it did a year ago, as seen by the decline in the dividend yield. A rise in a company’s earnings per share suggests that its assets have increased in value compared to its liabilities.
Section 5: Conclusions/Recommendations
Apple has maintained its status as a highly successful, financially secure, and prominent business. Although the company’s liquidity and profitability ratios have declined somewhat from the previous year, the long-term paying ability ratios have increased, indicating a good financial situation. Investor ratios for the company support the idea that its stock is underpriced, making it a potentially lucrative investment.
Several metrics point to the company’s success. Roi, interest earned, net profit margin and fixed charge coverage all seem in good shape. The company’s current ratio and accounts receivable turnover have been dropping, and it has a comparatively high debt-to-equity ratio (Li, 2021). Based on the financial analysis findings, the company has successfully met its primary objectives. It has achieved high profitability, effectively used its assets, and had a solid capacity to meet its long-term responsibilities.
The numbers suggest that investing in this company would be a safe bet. Before deciding whether or not to purchase shares in the company, shareholders may want to consider its many advantages. There may be an elevated danger for the corporation because the current debt-to-equity ratios are declining. There is a large gap between operating cash flow and total debt, the interest earned ratio is significant relative to the debt, and the ratio of fixed charge coverage is high, all of which point to a high creditworthiness for the company (Investor Relations, 2018). However, the current ratio has been falling, and the debt-to-equity ratio is relatively high, so some risk may be involved.
The stock has been on a generally increasing trajectory, with occasional swings, for the past 24 months. The stock price grew from about $74 in February 2021 to about $141 in February 2023, with minor volatility in between, as reported by Yahoo Finance. Therefore, investors should not base their judgments solely on historical success but on extensive research and analysis.
Section 6: Public Perception and Recent Results
A recent analysis by Yahoo Finance indicates that Apple is generally well-liked. Many things have contributed to this success, including the company’s solid financial performance, its product line’s ongoing advancement, and its consumer base’s devotion.
As a result of its steady financial performance, high brand awareness and reputation, and constant product innovation, Apple Inc. is currently seen favorably by the financial sector. Investors and lenders are interested in the company because of its robust balance sheet and healthy cash flow (Heater, 2022). According to recent reports, the ongoing global epidemic has been rumored to cause supply chain disruptions and probable delays in product releases. Increased smartphone market rivalry has also been a source of worry and potential regulatory implications. While these issues may be problematic for the company, we remain confident in our analysis and recommendations due to the company’s solid financial position, history of innovation, and generally positive industry and public perception.
Section 7: Other Findings/Other Closing Thoughts?
This analysis uses financial ratios and other data to examine Apple Inc.’s financial performance. The investigation showed that Apple Inc. has great liquidity, good long-term payment capabilities, high profitability, and a positive public and financial sector perception. The organization has continuously met its goals emphasizing innovation and client happiness. Apple Inc. is in a strong financial position due to its expanding product lines, which have helped it capture a greater proportion of the market. This solid position makes it an appealing borrower, while its status as a technology pioneer gives it a positive public image. In Total, these two factors contribute to the company’s positive public image. The company’s high financial status and dominant market position are reflective of the positive reception it has received. Recent supply chain interruptions and component shortages may hurt Apple Inc.’s financial performance (Li, 2022). Yet, the company’s excellent financial position and strategic approach to innovation and product development create a solid platform for future growth and success. In conclusion, Apple Inc. is a financially healthy and well-managed corporation with a great public and financial industry image. Apple Inc. to investors should now focus on innovation and client happiness.
Apple. (2019). Apple. Apple. https://www.apple.com/
Apple | AAPL Stock Price, Company Overview & News. (2023). Forbes. https://www.forbes.com/companies/apple/?sh=49a235385355
AAPL.OQ – | Stock Price & Latest News | Reuters. (2021, May 28). Reuters.com; Reuters. https://www.reuters.com/markets/companies/AAPL.OQ/
Al Mheiri, R., Al Hosani, N., & Saif, E. (2021). Ratio Analysis of Apple. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3895231
Li, Y. (2021). Apple Inc. Analysis and Forecast Evaluation. Proceedings of Business and Economic Studies, 4(4), 71–78. https://doi.org/10.26689/pbes.v4i4.2389
Investor Relations. (2018). Investor Relations – Apple. Apple.com. https://investor.apple.com/investor-relations/default.aspx
Li, X. (2022). Financial Analysis of Apple Inc. Based on the 2021 Apple Annual Report. Proceedings of the 2022 2nd International Conference on Financial Management and Economic Transition (FMET 2022), 63–72. https://doi.org/10.2991/978-94-6463-054-1_9
Heater, B. (2022, March 28). Apple cutting iPhone SE production. TechCrunch. https://techcrunch.com/2022/03/28/apple-said-to-be-cutting-iphone-se-production-20-over-ukraine-inflation-concerns/
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