Apple Inc Financial Analysis
Apple Computers For Fiscal Year Ending December 31,2010 Overview: Apple started in Steve Job’s bedroom when Jobs and Steve Wozniak began work on the Apple I. Since it’s start Apple has had it’s ups and downs and today has come out on top. Apple designs, manufactures and markets a range of personal computers, mobile communication and media devices, and portable digital music players, and sells a variety of related software, services, peripherals, networking solutions and third party digital content and applications. Apple is constantly changing and adapting to what consumers ask for.They have an innate ability to sense what the market wants and seize the opportunity to be the first to offer said product. Apple did not start in a competitive market, however this changed as the 1980’s need for PC’s grew to not only just businesses but to schools.
Through the last thirty years demand for PC’s has steadily increased, as a result, Apple steadily attempts to change as the demand for new programs, products and utilities increases. There have not been any stated legislation and regulation issues for Apple, however they as a company have had to hire other companies to provide processors, software and operating systems.Which lead to them contracting others such as Microsoft to create and operating system for their computers. This leads to more competitor threat due to other computer makers soliciting the companies used by Apple.
More currently the company had to appeal to major record labels, recording artists and phone suppliers to sell their products or invest in them. Apple has had a significant impact on our technological business. Products such as the IPhone, IPod, IMac and most recently the IPad have all stemmed out of customer demand for particular products to perform specific duties, either in the workplace, home or school.As of September 25, 2010 Apple had approximately 46,600 full time employees and an additional 2,800 part time employees and contractors. It is believed that Steve Jobs is the key to Apple’s success and without him there are worries that Apple will not thrive as it has been under his reign.
Business Strategy: Apple’s business strategy is to bring the best user experience to its customers through its innovative hardware, software, peripherals, services, and Internet offerings.Apple leverages it’s unique ability to design and develop it’s own operating systems, hardware, application software, and services to provide it’s customers new products and solutions with superior ease of use, seamless integration, and innovative industrial design. Apple believes in continual investment in research and development and that these factors are critical to the development and enhancement of innovative products and technologies. Financial Position: Current Ratio Current Ratio= Current Assets/ Current Liabilities 41,678/20,722= 2. 01times With a ratio of 2.
01, creditors would know that a company could meet its liabilities.This means that Apple has $2. 01 in current assets to every dollar in liability. Quick Ratio Quick Ratio = Current Assets-Inventory/Current Liabilities 41,678-1051/20,722=40627/20722=1. 96 times The desired quick ratio is usually at least 1. 1, which means that Apple’s quick ratio of 1.
96, is more liquid. Cash Ratio Cash ratio =Cash/Current Liabilities 51,011/20,722=2. 46 times The cash ratio is another way for creditors to determine liquidity. This means the company has enough cash to pay for its supplies. Net Working Capital to Total Assets Current Assets-Current Liabilities/Total Assets 41,678-20,722/75,183=20,956/75,183=. 78=28% Inventory Turnover Inventory Turnover= Cost of Goods Sold/Inventory 39,541/1051=37.
6 times With the industry average for inventory turnover being 11. 51 (seekingalpaha. com) Apple is far over that with 37. 6 times meaning their inventory does not sit around for long. Days Sales In Inventory Day’s Sales in Inventory=365/Inventory Turnover 365/37. 6=9.
7 Days This tells us that Apple has its inventory only 9. 7 days. That’s pretty fantastic and speaks wonders for how high of a demand there is for Apple products. Receivable Turnover Sales/Accounts Receivable 62,225/5,510=11. 29 times Days In Receivables 65/Reveivable Turnover 365/11.
29= 32 Days This tells us how long it takes for Apple to collect its accounts. With only 32 days, most companies are not collecting as fast as Apple. Net Working Capital Turnover Net Working Capital Turnover= Sales/Current Assets-Current Liabilities 65,255/41,678-20,722=65,255/20,956= 3. 1 times Total Asset Turnover Total Asset Turnover= Sales/Total Assets 65,225/75,183= . 867=. 87 times Total Debt Ratio Total Debt Ratio= Total Assets-Total Equity/Total Assets 75,183-47,791/75,183=27,392/75,183=.
364=. 36 times This means that for every dollar in assets they have. 36 cents in debt and . 4 cents in equity. Debt to Equity Ratio Debt to Equity Ratio= Total Debt/Total Equity 0/47,791=0 *According to CNN. com, Yahoo Finance and Apple’s Financial Statements Apple has zero debt.
This puts them in an elite category of 15 other companies with NO DEBT! Debt to Equity Ratio Debt to Equity Ratio=Total Debt/Total Equity 0/47,791=0 Equity Multiplier Equity Multiplier=Total Assets/Total Equity 75,183/47,791=1. 57 times Long Term Debt Ratio Long Term Debt Ratio=Long-Term Debt/Long-Term Debt + Total Equity 0/0+47,791=0 * Again, Apple has no long -term debt according to the financial statement and Yahoo Finance.Times Interest Earned Ratio Times Interest Earned Ratio= EBIT/Interest 18,540,000/0(according to Yahoo Finance) *No debt equals no ability to compute this ratio Cash Coverage Ratio Cash Coverage Ratio=EBIT + Depreciation/Interest 18. 54+1. 03/0 *Interest not available due to no debt issue! Profit Margin Profit Margin=Net Income/ Sales 14,013/65,225= .
214=21. 4% With a profit margin of 21. 4% Apple is creating . 21 cents for every dollar in sales. Return On Assets Return on Assets=Net Income/Total Assets 14,013/75,183=. 186=18.
6% Return on Equity Return on Equity=Net Income/Total Equity 14,013/47,791=. 93=29. 3% Price/Earnings Ratio Price/Earnings Ratio=Price per Share/Earnings per Share 314. 80/15. 41=20.
79 times Market to Book Value Market to Book Value= Market Value per Share/Book Value per Share Market Cap/#of outstanding shares=288. 76/917. 3+ .3147/52. 17=. 00603 The Du-Pont Identity ROE=Net Income/Sales*Sales/Total Assets*Total Assets/Total Equity 14,013/65225*65225/75,183*75,183/47,791 .
2148*. 8675*1. 573=. 186339*1. 573. 2931=29.
3% Apple has a very high Du Pont Identity at 24% meaning they have great financial leverage using all their resources successfully. Competitive Analysis:Apple competes with large competitors such as Dell, Hewlett-Packard and Microsoft. When comparing these companies side by side the numbers show Apple with a higher quarterly growth by far more than it’s competitors. With Apple at 66. 7%, Dell at 21.
70%, Hewlett-Packard at 11. 40% and Microsoft having a quarterly growth of 25. 3%. However, when looking at the company’s net income it is hard to believe that at 14. 01 billion Apple is only in second place to Microsoft’s 20.
60 billion. With HP coming in at 8. 64 billion and Dell at 1. 56 billion. In terms of who is the leader in the industry the numbers would confuse you.
However, if you ask people what the newest gadgets at the top of their list, most of them are Apple products. Apple has saturated the market with their catchy commercials and advertising mix. Even the competitor commercials make reference to Apple products. Stock Valuation: Apple went public on December 12th, 1980. Apple paid dividends on its common stock from June 15th of 1987 to December 15th of 1995.
However, they do not currently pay dividends to its shareholders. With Apple not carrying any debt this makes the stockholder’s equity grow. Apple has the highest stock price out of all its industry at 317. 2 (yahoo finance) and IBM in second with 144. 56.
Quite a drastic difference in price between competitors. Recommendations: I would recommend that the company stay on its same innovative path with regard to its new products. Apple has clearly been a leader in their products from the start of the personal pc all the way up to the I Pad. With many competitors trying to emulate Apple’s products none seem to be able to knock Apple off the top spot. However, some detract away from Apple due to its price and worry of learning something new. Apple could make them more readily available to consumers at a better price.
Steve Jobs has the right attitude, he believes nothing is impossible; he admits to any product flaws and is always raising the bar for innovative tools. He is consistently looking for the next best thing for Apple. He also has very hands on approach that more companies should adapt to. He has a vested interest since he has been with the company from its inception with the exception of his small time with another company, that he started NeXT, which he was again successful with and that has now merged with Apple. Apple’s total revenues have climbed steadily over the past years.
Since 2008, it has gone from 11,145,000 dollars in revenue to 25,684,000 in 2010. Quite a climb, in just two years. It seems Apple has it figured out. However, not consistently providing new, innovative products would seriously impact Apple’s revenues and cause the company’s future to fade.Works CitedYahoo Finance. Retrieved November 15th 2010,from