Apple Inc.: Financial Statement

Transcription

1 HIGHER COLLEGES OF TECHNOLOGY Computer and Information Science Apple Inc.: Financial Statement Ala Ahmed H Batol Nasser H Fatma Jassim H CIB 4103 Professor Hesham Allam October 12th 2017

2 Table of Contents Executive Summary... 1 Introduction:... 1 Balance sheet for Apple:... 2 Income statement for Apple:... 3 Ratio Calculations:... 4 Liquidity:... 4 Assets Utilization:... 4 Debt Utilization:... 4 Profitability:... 4 Ratio Analysis... 5 LIQUIDITY... 5 ASSET UTILIZATION... 5 DEBT UTILIZATION... 7 PROFITABILITY... 8 References:... 10

3 Executive Summary In this project, we will analyze Apple s financial statement for four years from 2013 to Also, we will make calculation in how the company is doing in their business in each of these years by using calculation methods such as, liquidity, assets utilization, debt utilization and profitability. According to the results of these calculations we will analyze and find out the reasons behind it and will write a feedback about each result. Introduction: Apple Inc. is an American multinational corporation that designs and manufactures consumer electronics and computer software products. The company's best-known hardware products include Macintosh computers, the ipod and the iphone. Apple software includes the Mac OS X operating system, the itunes media browser, the ilife suite of multimedia and creativity software, the iwork suite of productivity software, Final Cut Studio, a suite of professional audio and film-industry software products, and Logic Studio, a suite of audio tools. The company operates more than 250 retail stores in nine countries and an online store where hardware and software products are sold. Established in Cupertino, California on April 1, 1976 and incorporated January 3, 1977, The Company was called Apple Computer, Inc. for its first 30 years, but dropped the word "Computer" on January 9, 2007 to reflect the company's ongoing expansion into the consumer electronics market in addition to its traditional focus on personal computers. Apple has about more than 35,000 employees worldwide and had worldwide annual sales of US$32.48 billion in its fiscal year. For reasons as various as its philosophy of comprehensive aesthetic design to its distinctive advertising campaigns, Apple has established a unique reputation in the consumer electronics industry. This includes a customer base that is devoted to the company and its brand, particularly in the United States. 1 P a g e

4 Balance sheet for Apple: Period Ending: 9/24/2016 9/26/2015 9/27/2014 9/28/2013 Current Assets Apple company Cash and Cash Equivalents $20,484,000 $21,120,000 $13,844,000 $14,259,000 Short-Term Investments $46,671,000 $20,481,000 $11,233,000 $26,287,000 Net Receivables $29,299,000 $30,343,000 $31,537,000 $24,094,000 Inventory $2,132,000 $2,349,000 $2,111,000 $1,764,000 Other Current Assets $8,283,000 $15,085,000 $9,806,000 $6,882,000 Total Current Assets $106,869,000 $89,378,000 $68,531,000 $73,286,000 Long-Term Assets Long-Term Investments $170,430,000 $164,065,000 $130,162,000 $106,215,000 Fixed Assets $27,010,000 $22,471,000 $20,624,000 $16,597,000 Goodwill $5,414,000 $5,116,000 $4,616,000 $1,577,000 Intangible Assets $3,206,000 $3,893,000 $4,142,000 $4,179,000 Other Assets $8,757,000 $5,422,000 $3,764,000 $5,146,000 Deferred Asset Charges $0 $0 $0 $0 Total Assets $321,686,000 $290,345,000 $231,839,000 $207,000,000 Current Liabilities Accounts Payable $59,321,000 $60,671,000 $48,649,000 $36,223,000 Short-Term Debt / Current Portion of Long-Term Debt $11,605,000 $10,999,000 $6,308,000 $0 Other Current Liabilities $8,080,000 $8,940,000 $8,491,000 $7,435,000 Total Current Liabilities $79,006,000 $80,610,000 $63,448,000 $43,658,000 Long-Term Debt $75,427,000 $53,329,000 $28,987,000 $16,960,000 Other Liabilities $36,074,000 $33,427,000 $24,826,000 $20,208,000 Deferred Liability Charges $2,930,000 $3,624,000 $3,031,000 $2,625,000 Misc. Stocks $0 $0 $0 $0 Minority Interest $0 $0 $0 $0 Total Liabilities $193,437,000 $170,990,000 $120,292,000 $83,451,000 Stock Holders Equity Common Stocks $31,251,000 $27,416,000 $23,313,000 $19,764,000 Capital Surplus $0 $0 $0 $0 Retained Earnings $96,364,000 $92,284,000 $87,152,000 $104,256,000 Treasury Stock $0 $0 $0 $0 Other Equity $634,000 ($345,000) $1,082,000 ($471,000) Total Equity $128,249,000 $119,355,000 $111,547,000 $123,549,000 Total Liabilities & Equity $321,686,000 $290,345,000 $231,839,000 $207,000,000 Table 1: Balance sheet for apple 2 P a g e

5 Income statement for Apple: Period Ending: 9/24/2016 9/26/2015 9/27/2014 9/28/2013 Total Revenue $215,639,000 $233,715,000 $182,795,000 $170,910,000 Cost of Revenue $131,376,000 $140,089,000 $112,258,000 $106,606,000 Gross Profit $84,263,000 $93,626,000 $70,537,000 $64,304,000 Operating Expenses Research and Development $10,045,000 $8,067,000 $6,041,000 $4,475,000 Sales, General and Admin. $14,194,000 $14,329,000 $11,993,000 $10,830,000 Non-Recurring Items $0 $0 $0 $0 Other Operating Items $0 $0 $0 $0 Operating Income $60,024,000 $71,230,000 $52,503,000 $48,999,000 Add'l income/expense items $1,348,000 $1,285,000 $980,000 $1,156,000 Earnings Before Interest and Tax $61,372,000 $72,515,000 $53,483,000 $50,155,000 Interest Expense $0 $0 $0 $0 Earnings Before Tax $61,372,000 $72,515,000 $53,483,000 $50,155,000 Income Tax $15,685,000 $19,121,000 $13,973,000 $13,118,000 Minority Interest $0 $0 $0 $0 Equity Earnings/Loss Unconsolidated Subsidiary $0 $0 $0 $0 Net Income-Cont. Operations $45,687,000 $53,394,000 $39,510,000 $37,037,000 Net Income $45,687,000 $53,394,000 $39,510,000 $37,037,000 Net Income Applicable to Common Shareholders Table 2: Income statement for apple $45,687,000 $53,394,000 $39,510,000 $37,037,000 3 P a g e

6 Ratio Calculations: Apple company Liquidity: Ratio Formula Current Assets 1) Current Ratio Current Liability ) Quick Ratio Current Assets Inventory Current Liability Assets Utilization: Ratio Formula Cost of Goods Sold 3) Inventory Turnover Inventory ) Inventory Holding Period 5) Fixed Asset Turnover 365 Days Inventory Turnover Sales Fixed Assets 6) Total Asset Turnover Sales Total Assets 7) Receivable Turnover Sales Accounts Receivables 8) Days Sales in Receivables 365 Days Receivables Turnover Debt Utilization: Ratio Formula ) Total Assets Total Equity Total Debit Ratio Total Assets ) Time Interest Earned Earnings before Interest and Taxes (EBIT) Interest Profitability: Ratio Formula Net Income 11) Profit Margin Ratio Sales ) Return on Assets 13) Return on Shareholder's Equity 14) Equity multiplier Net Income Total Assets Net Income Total Equity Total Assets Total Equity P a g e

7 Ratio Analysis LIQUIDITY 1) The current ratio is mainly used to give an idea of the company's ability to pay back its shortterm liabilities with its short-term assets. In general Apple have a current ratio above 1 so it have an indication that the company is well-positioned to cover its current or short-term liabilities. In details, the current ratio in years does not differ much but it have small different by decimal point. In 2013 Apple has the highest current ratio which is This means that Apple Company in 2013 has larger amounts of current assets so this will more easily be able to pay off current liabilities when they become due without having to sell off long-term, revenue generating assets. But the lowest current ratio was in 2014 this is because the company has a limited amount of time in order to raise the funds to pay for the liabilities. 2) The quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets. The quick ratio for Apple, Inc. is similar to the current ratios of the same years. This shows deterioration from 2013 to 2014 with a slight improvement in 2014 to 2015.And in the comparison of the current ratio to the quick ratio, because the numbers are similar, it is a clear indication that Apple, Inc. s current assets are not completely dependent on inventory. And they have fewer current assets that can be liquidated. ASSET UTILIZATION 3) Inventory turnover ratio is used to assess how efficiently a business is managing its inventories. The highest ratio is in 2016 which is This indicates that Apple Company have efficient operations in this year. Apple Company buys too often in small quantities, therefore the buying price is year by year is getting higher and higher so the cost of goods sold will increase so this will lead to increase the inventory turnover. As you see the cost of goods sold in 2014 was $112,258,000 so it s small number comparing with its inventory. Because Apple Company in 2014 has orders for the iphone 5S were stronger than expected, so it took some time for Apple to make enough of the smartphones to meet customer demand. 5 P a g e

8 4) Inventory holding period measures the number of days a company takes to sell its average balance of inventory. The best number of days in inventory was in 2016 which is this is means that the company is carrying excess inventory. An increasing number of days in inventory can be a good thing if sales are rising and the company is building inventory to meet an anticipated increase in demand as Apple Company did. Apple is constantly updating its ipod, imac, Mac mini, and Mac Pro lines, so one may expect the company to continually build up its inventory prior to these updates. 5) Fixed Asset Turnover is an activity ratio that measures how successfully a company is utilizing its fixed assets in generating revenue. Apple Inc. s fixed asset turnover improved from 2014 to 2015 but then deteriorated significantly from 2015 to Apple Company has the highest fixed asset turnover ratio in 2015 this illustrates that apple has been effective in using capital expenditures to generate revenue. And it reduces in 2016 because Apple Company has too much of investment in fixed assets, so it was $27,010,000 fixed asset in ) Total Asset Turnover measures how quickly a company turns over its asset through sales. It calculated as Sales divided by Total Assets. Apple Inc. s total asset turnover decreased little bit from 2013 to 2016 but then deteriorated significantly from 2015 to And that is not a good sign since apple has high profit margins, this result to have low assets turnover. To solve this issue, Apple can increase its asset turnover by continuously using its assets and not letting its merchandise storage. It should also limit purchases of inventory until it needs it. Additionally, it should focus on increasing revenue increase its sales by more promotions and by quick movements of the finished goods. 7) Receivable Turnover Accounts receivable turnover measures the efficiency of a business in collecting its credit sales. In 2013, 2015 and 2016 does not differ much but it has small different by decimal point. But in 2014 deteriorated significantly by compared to This low account receivable turnover indicates a collection problem from its customer. So, people for some reason are having trouble paying back its debt, which in turn make Apple revenue to be lower. 6 P a g e

9 8) Days Sales in Receivables Receivable turnover per day ratio illustrates how well the company is managing the assets on the daily basis. The best Days Sales in Receivables is in 2015 because Apple Company collect the Bills of its receivables once every 47 days, which is good comparing with other years. Apple average day s sale receivable decreases by from 2013 to This means that people took longer to pay its debt to Apple Inc. DEBT UTILIZATION 9) Total Debt Ratio The debt ratio indicates a company's degree of leverage, which is calculated by dividing its total debt by its total assets during an accounting period. Apple had total assets of $ billion and $ billion for the fiscal periods ending on Dec. 26 and Sept. 26, 2015, respectively. Therefore, it had debt ratios of 58.91% and 56.27% for the same fiscal periods. The company's debt ratio indicates it only uses a moderate degree of leverage and only carries a moderate degree of risk. 10) Time interest earned The times interest earned ratio is an indicator of a company's ability to meet the interest payments on its debt and it s a key metric to determine the credit worthiness of a business. Times Interest Earned would be calculated by Earnings before Interest divided by Interest Income. Since, Apple does not finance the operations from the loan, it makes sense that Apple does not have interest, however, some interest is persisting in the off-balance sheet account. In case, Apple maintain long term debt, the lower time interest the better since it shows the credibility of the company pays its obligation on timely manner. 7 P a g e

10 PROFITABILITY 11) Profit margin Profit margin is the most basic profitability ratio that measures the percentage of net income of an entity to its net sales. It represents the proportion of sales that is left over after all relevant expenses have been adjusted. Apple Inc.'s profit margin has been having a little sinking from 2013 to 2014 by 0.01% indicating that their product cost was increasing more than their sales. Then it improved from 2014 to 2015 which means that Apples earnings have increased but then deteriorated significantly from 2015 to 2016 indicating that the cost of their products are higher than their sales. If Apple doesn t do something fast like take new products to market its stock may go down even farther. 12) A Return on Assets Return on Assets is an indicator of how profitable a company is relative to its total assets. Its calculated as net income divided by total assets. Apple Inc.'s ROE improved from 2014 to 2015 but then slightly deteriorated from 2015 to 2016 not reaching 2014 level. The ROA gives investors an idea of how effectively the company is converting the money it must invest into net income. The higher the ROA number, the better, because the company is earning more money on less investment. So, if apple want to have high ROA the management should make wise choices in allocating its resources. Anybody can make a profit by throwing a ton of money at a problem, but very few managers excel at making large profits with little investment. 8 P a g e

11 13) Return on equity. Return on equity or return on capital is the ratio of net income of a business during a year to its stockholders' equity during that year. It is a measure of profitability of stockholders' investments. It shows net income as percentage of shareholder equity. Apple Inc.'s ROE improved from 2013 to 2015 but then slightly deteriorated from 2015 to 2016 not reaching 2014 level. Apple's return on equity (ROE) is near the upper end of its 10-year range, which makes the stock very attractive. The company increased its net income from $39.51 billion during the 2014 fiscal year to $53.39 billion during the 2015 fiscal year. Its shareholders' equity only increased from $ billion to $ billion over the same period. Apple had a 35.4% ROE for the fiscal period in 2014, which is down from 44.7% during the 2015 fiscal year, though that was its 10-year high point. The Return on Equity has also declined from 44.7% to 35.6 in 205 and 2016 respectively, this due to greater amount of increase in shareholders fund and less increase in profit when compared to shareholders fund. 14) Equity multiplier ratio helps in analyzing the financial leverage of a company. It examines the use of debt and shareholder s equity to purchase the assets that are held by a company. Equity multiplier calculated as Total Assets divided by Total equity. Higher equity multiplier ratio shows that majority of assets are financed through debt. Apple's equity multiplier has risen steadily to in 2016, representing the highest value of the past decade. The equity multiplier was only 2.08 in fiscal The company's book value growth rate has not matched that of its asset base, with long-term debt rising to $53.5 billion in A higher equity multiplier indicates more financial leverage, with less of the business being financed by equity. Apple's equity multiplier falls near the middle of the peer group range 9 P a g e

12 References: AAPL Balance Sheet. (n.d.). Retrieved October 11, 2017, fromhttp:// AAPL Income Statement. (n.d.). Retrieved October 11, 2017, fromhttp:// T. (2017, July 12). How to Analyze and Improve Asset Turnover Ratio? Retrieved October 11, 2017, from Thomas, C. F. (1998). Emory University Virtual Library9829Selden Deemer Site maintained by, Betsey Patterson Site maintained by. Emory University Virtual Library. Emory University Libraries, URL: edu/vl/vlhome.html Free Free via the World Wide Web; some directories available only to Emory University community. Electronic Resources Review, 2(3), doi: /err http://bus.emory.edu/scrosso/summer%202013/ar%20final%20projects/ar%20final%20projects/ Nunez.pdf Apple Inc. Financial Analysing (Ratios). (2012, April 19). Retrieved October 11, 2017, fromhttps://hussamkhalafallah.wordpress.com/2012/04/19/apple-inc-financial-analysing-ratios/ (n.d.). Retrieved October 11, 2017, from 10 P a g e