08 Aug What are three financial facts that you have determined so far in your work in this course that you believe are critical in determining whether to recommend an investment in this c
In one-two pages answering the following questions:
- What are three financial facts that you have determined so far in your work in this course that you believe are critical in determining whether to recommend an investment in this company? Justify your answer.
- At this point, do you think you will end up with a buy, hold, or sell recommendation for your chosen company? Explain your answer.
Apendix A
| Apple .Inc | |||
| 12 Months Ended | |||
| Income statement | |||
| Sep. 25, 2021 | Sep. 26, 2020 | Sep. 26, 2019 | |
| Net sales | |||
| Cost of sales | 365817 | 274515 | 260174 |
| Gross margin | 212981 | 169559 | 161782 |
| Operating expenses: | |||
| Research and development | 21914 | 18752 | 16217 |
| Selling, general and administrative | 21973 | 19916 | 18245 |
| Total operating expenses | 43887 | 38668 | 34462 |
| Operating income | 108949 | 66288 | 63930 |
| Other income/(expense), net | 258 | 803 | 1807 |
| Income before provision for income taxes | 109207 | 67091 | 65737 |
| Provision for income taxes | 14527 | 9680 | 10481 |
| Net income | 94680 | 57411 | 55256 |
| CONSOLIDATED BALANCE SHEETS – USD ($) $ in Millions | Sep. 25, 2021 | Sep. 26, 2020 | Sep. 26, 2019 |
| Current assets: | |||
| Cash and cash equivalents | 34940 | 38016 | 48844 |
| Marketable securities | 27699 | 52927 | 51713 |
| Accounts receivable, net | 26278 | 16120 | 22926 |
| Inventories | 6580 | 4061 | 4106 |
| Vendor non-trade receivables | 25228 | 21325 | 22878 |
| Other current assets | 14111 | 11264 | 12352 |
| Total current assets | 134836 | 143713 | 162819 |
| Non-current assets: | |||
| Marketable securities | 127877 | 100887 | 105341 |
| Property, plant and equipment, net | 39440 | 36766 | 37378 |
| Other non-current assets | 48849 | 42522 | 32978 |
| Total non-current assets | 216166 | 180175 | 175697 |
| Total assets | 351002 | 323888 | 338516 |
| Current liabilities: | |||
| Accounts payable | 54763 | 42296 | 46236 |
| Other current liabilities | 47493 | 42684 | 37720 |
| Deferred revenue | 7612 | 6643 | 5522 |
| Commercial paper | 6000 | 4996 | 5980 |
| Term debt | 9613 | 8773 | 10260 |
| Total current liabilities | 125481 | 105392 | 105718 |
| Non-current liabilities: | |||
| Term debt | 109106 | 98667 | 91807 |
| Other non-current liabilities | 53325 | 54490 | 50503 |
| Total non-current liabilities | 162431 | 153157 | 142310 |
| Total liabilities | 287912 | 258549 | 248028 |
| Commitments and contingencies | |||
| Shareholders’ equity: | |||
| Common stock and additional paid-in capital, | 57365 | 50779 | 45174 |
| $0.00001 par value: 50,400,000 shares | |||
| authorized; 16,426,786 and 16,976,763 | |||
| shares issued and outstanding, respectively | |||
| Retained earnings | 5562 | 14966 | 45898 |
| Accumulated other comprehensive income/(loss) | 163 | -406 | -584 |
| Total shareholders’ equity | 63090 | 65339 | 90488 |
| Total liabilities and shareholders’ equity | $ 351,002 | $ 323,888 | $ 338,516 |
Apendix B
| Apple .Inc | |||
| 12 Months Ended | |||
| Income statement | |||
| Sep. 25, 2021 | Sep. 26, 2020 | Sep. 28, 2019 | |
| Net sales | 100% | 100% | 100% |
| Cost of sales | 58% | 62% | 62% |
| Gross margin | 42% | 38% | 38% |
| Operating expenses: | |||
| Research and development | 6% | 7% | 6% |
| Selling, general and administrative | 6% | 7% | 7% |
| Total operating expenses | 12% | 14% | 13% |
| Operating income | 30% | 24% | 25% |
| Other income/(expense), net | 0% | 0% | 1% |
| Income before provision for income taxes | 30% | 24% | 25% |
| Provision for income taxes | 4% | 4% | 4% |
| Net income | 26% | 21% | 21% |
| CONSOLIDATED BALANCE SHEETS – USD ($) $ in Millions | Sep. 25, 2021 | Sep. 26, 2020 | Sep. 26, 2019 |
| Current assets: | |||
| Cash and cash equivalents | 9.95% | 11.74% | 14.43% |
| Marketable securities | 7.89% | 16.34% | 15.28% |
| Accounts receivable, net | 7.49% | 4.98% | 6.77% |
| Inventories | 1.87% | 1.25% | 1.21% |
| Vendor non-trade receivables | 7.19% | 6.58% | 6.76% |
| Other current assets | 4.02% | 3.48% | 365.00% |
| Total current assets | 38.41% | 44.37% | 48.10% |
| Non-current assets: | |||
| Marketable securities | 36.43% | 31.15% | 31.12% |
| Property, plant and equipment, net | 11.24% | 11.35% | 11.04% |
| Other non-current assets | 13.92% | 13.13% | 9.74% |
| Total non-current assets | 61.59% | 55.63% | 51.90% |
| Total assets | 100.00% | 100.00% | 100.00% |
| Current liabilities: | |||
| Accounts payable | 19.02% | 16.36% | 18.64% |
| Other current liabilities | 16.50% | 16.51% | 15.21% |
| Deferred revenue | 2.64% | 2.57% | 2.23% |
| Commercial paper | 2.08% | 1.93% | 2.41% |
| Term debt | 3.34% | 3.39% | 4.14% |
| Total current liabilities | 43.58% | 40.76% | 42.62% |
| Non-current liabilities: | |||
| Term debt | 37.90% | 38.16% | 37.01% |
| Other non-current liabilities | 18.52% | 21.08% | 20.36% |
| Total non-current liabilities | 56.42% | 59.24% | 57.38% |
| Total liabilities | 100.00% | 100.00% | 100.00% |
,
12
Apple Inc. Financial Statement Analysis
Kevin Sessions
The University of Arizona Global Campus
BUS 401 Principles of Finance
Phillip Sarakatsannis
August 1, 2022
Apple Inc. financial analysis
Part 1: Overview of the company
Apple Inc. is one of the leading tech firms not only in the United States but also globally. The company is known for manufacturing smart devices such as smartwatches, smartphones, smart glasses, and computers. It also manufactures software that runs on the mentioned devices (Reuters, 2022). The company currently takes the highest market share of 51% of mobile and computer devices.
Part 2: Income statements
The income statements record the income of the company every year.
The income statement records the net sales (revenues), operating income, and net sales. Apple's revenues have increased over the last three years. It was $ 260, 174, $274, 515, and $ 365, 817 in 2019, 2020, and 2021 respectively.
The operating expenses also increased in the last three years. The company recorded $34, 462, $36, 668, and $ 43, 887 in the years 2019, 2020, and 2021 respectively. With the increase in net sales, the net income also increased significantly over the past three years. The company managed to increase. In 2019 the company had $55,256; in 2020, the company had $ 57,411; in 2021, the company registered a net income of $ 94,680.
Part 3: Common size income statements
The common size income statement is used to determine how each line component in the business affects the company's financial position. The company's gross margin in the last three years has been increasing: it was 38 % in 2019 and 2020 and 42% at the end of the 2021 fiscal year. The operating income also increased in the last financial year (2021) compared to the preceding 2020, a drop compared to the 2019 operating margin (Arnold, Ellis, & Krishnan, 2018). The operating margin in the last three years was 30%, 24%, and 25% for 2021, 2020, and 2019 respectively.
Part 4: Balance sheets
The balance is an important company document that records the organization's assets and liabilities. These are the items that make up the company's capital. Apple's total assets have been increasing last two years. The company had $ 251,002 worth of total assets in 2021, an increase from $ 323,880 in 2020 and a decrease from $ 338,516 in 2019. The current assets have, however, dropped in the last three years. The company had $ 162,819, $143,713, $134,836 in the year 2019, 2020, and 2021 respectively.
The total liabilities of the company also increased in the last three years.
The company had $ 248, 028, $ 258, 549, and $ 287, 912 in the year 2019, 2020, and 2021 respectively. The current liabilities also increased from 105,718 in 2019 to 125,481 in 2021; the current liabilities in 2020 were $ 105,392. The shareholder equity decreased from $ 904,800 million in 2019 to $ 63,090 million in 2021.
Part 5: Common size balance sheets
The common size balance can reveal each item over the critical item. The current assets as a percentage of the current assets have been dropping over the last three years. The current asset has dropped by 10 points from the 2019 current assets (Roychowdhury, Shroff, & Verdi, 2019). The current liabilities, on the other, had increased from 16.36 % in 2020 to 19.02 % in 2021.
Part 6: Cash flow
The cash flow of an organizations shows the movement of cash in and out of an organization in a fiscal year. The cash flow record cash flow associated with the operating activities, investing activities, and financing activities. From the information provide we can calculate apple’s cash flow in the last three years using the following formula.
Cash Flow = Cash from operating activities + (-) Cash from investing activities + (-) Cash from financing activities + Beginning cash balance.
2019
Cash flow = 69,391, 000 + 45, 896, 000 + (90,976,000) + 25, 913, 000 = 50,224,000
2020
Cash flow = 80, 674,000 + (4, 289, 000) + (86,820,000) + 50, 224,000 = 39,789,000
2021
Cash flow = 104, 038, 000 + (14, 545,000) + (93,353,000) + 39, 789,000 = 35, 929,000
The cash flow has been decline in the last three years shown in the calculation.
Part 7: Financial analysis conclusion
Through the analysis of the firm’s financial information, we can see that it is performing well in most of its areas of operations. However, there is some weakness that the company needs to look into. The tables below show the company’s financial strengths and weaknesses as far as financial performance is concerned.
|
Strengths |
Weaknesses |
|
Cash flow operating activities |
Investing activities |
|
Shareholders’ equity |
Financing activities |
|
Assets |
liabilities |
|
sales |
The strengths have shown an increase in the amount of income to the organization, as shown in the financial statements—the weaknesses, on the other hand, led to the drop in Apple’s financial resources.
References
Arnold, A. G., Ellis, R. B., & Krishnan, V. S. (2018). Toward effective use of the statement of cash flows. Journal of Business and Behavioral Sciences, 30(2), 46-62.
Reuters. (2022). Apple Inc. Breaking International News & Views | Reuters. https://www.reuters.com/markets/companies/AAPL.O/
Roychowdhury, S., Shroff, N., & Verdi, R. S. (2019). The effects of financial reporting and disclosure on corporate investment: A review. Journal of Accounting and Economics, 68(2-3), 101246.
