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Analysis of Apple Inc.'s Financial Statements

analyzing the financial statements
by

Eunice C. Marks

on 25 June 2013

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Transcript of Analysis of Apple Inc.'s Financial Statements

Through operating efficiency, ROA was enhanced in the same manner as ROE.
Apple’s Profitability:
ROE was improved year over year by climbing from 26% in 2009 to 29.3% and 33.8% in 2010 and 2011.
ROE were driven by high operating efficiency (net profit %) and financial leverage (equity multiplier).
Asset-use efficiency was acceptable at 0.9x, 0.87x and 0.93x in these three years.
Ratio Analysis
Based on Market research firm Strategy Analytics

For March quarter 2013:
Samsung = 69.4 million smartphones = 33% of the
global
smartphone market.
Apple = 37.4 million iPhones worldwide = 17.9%
(
market share
fell from 22.8% in the same quarter last year.)
Comparison of sales in the global market
Market Analysis - SWOT
Apple Inc. is an American multinational corporation headquartered in Cupertino, California.
They design, develop, and sell consumer electronics, computer software and personal computers.
Lineup of products include the Mac line of computers, the iPod music player, the iPhone smartphone, and the iPad tablet computer.
Its software includes the OS X and iOS operating systems, the iTunes media browser, the Safari web browser, and the iLife and iWork creativity and production suites.
The company was founded on April 1, 1976 and is the world's second-largest information technology company by revenue after Samsung.

Working capital days was negative indicating Apple was very sufficient in meeting their working capital requirement.
Their trade creditors were even larger than the combination of debtors and stocks.
This was a big part leading to strong growth in cash flow from operation.
Apple is one of the most liquid companies net cash after operation of $18.1b in ‘10 and $35.6b in ‘11.
Current ratio was 2.74x, 2.01x and 1.61x in these 3 years.
It was good because it was highly contributed by cash and short-term liquid investment (74%, 61%, and 58% of current assets in the studied years) .
Given the stock level was low, current ratios and quick ratios did not differ much.
Ratio Analysis – Liquidity
Detailed Financial Statement for 2012/2013
Through operating efficiency, ROA was enhanced in the same manner as ROE.
Apple’s Profitability:
ROE was improved year over year by climbing from 26% in 2009 to 29.3% and 33.8% in 2010 and 2011
ROE was driven by high operating efficiency (net profit %) and financial leverage (equity multiplier)
Ratio Analysis
Financial Statements Analysis
Apple is a company with
no debt
reported at the end of their financial year.
Most of their liabilities were in current ones which were mainly contributed trade creditors, accrued expenses, and deferred revenue.
Non-current liabilities consisted of non-current deferred revenue, deferred tax liabilities, and other non-current liabilities.
Ratio Analysis - Leverage
Income Statement
GDP
2011:
2012:
15,094
billion US dollars
Inflation
Apple spends huge amount of budget on it marketing.
Stealth Marketing being often used.
Show their products in most of the popular movies.
IPhone is not just an IPhone.
It is style
It is fashion
It is everything
Apple’s other expenses
Apple has and maintains a steady cash flow.
The cash and cash equivalents at year end figures show Apple remains liquid as well as flexible even through slower years.
Free cash flow allows Apple the ability to expand its fleet of stores, continue to develop new pr oducts, continue investments and invest in new property, plant and equipment.
Readily available cash to invest into R&D which it so heavily depends on, as well as make investing opportunities available.
This allows Apple to continue is its aggressive business strategy.
Recommendations
The total cost amounts to $292.75 per piece including Royalties and shipping, as compared to the estimated average selling price of $650 per piece. this translates to a gross margin of $357.25 per unit, or ~55%. With manufacturing expense of $7
IPhone 4S
“The entry-level (16GB) version of the iPhone 3GS carries a BOM (bill of materials) cost of $172.46 and a manufacturing expense of $6.50, for a total of $178.96, said Andrew Rassweiler, director and principal analyst, teardown services, for iSuppli, in a statement.”
iPhone 3S
Customer’s demand for product or services.
The 3 Fundamental Cost Drivers
Structural Cost Driver
Organizational Cost Drivers
Activity Cost Drivers
Cost drivers
Unemployment rates
P/E Ratio (price/earnings) 9,96
14,582
billion
Analysis of Apple Inc.'s Financial Statements
Eunice C. Marks
Financial Statement Analysis
Dr. Gracer Yung
MG 770 101


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