Mgmt 499 Recommendations / Future Directions / Potential

Running head: FINANCIAL PLAN

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FINANCIAL PLAN

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Olawoyin Ibitoye

Financial Plans MGMT 499

American Intercontinental University

August 2, 2022

Professor Eric Freeman

Apple Financial Plans

Income Projection Statement

Profit potential is shown by revenue projections for the company's future financial year. Apple is prepared to boost its revenue with its services division. The IT behemoth is projected to produce average yearly revenues of $381.81 billion in the following year (Marketscreener, 2022). The EV/R for these earnings is expected to be 7.55x due to the company's capacity to create revenue, suggesting an overvaluation (Marketscreener, 2022). Hence, Apple is predicted to have an enterprise value-to-EBITDA ratio of 23.7x in 2022, indicating its ability to ge3nerate more operational cash flows. Additionally, it is projected that the company will record a first-quarter net income of $30,966 billion and a net sale of $365.82 billion. Furthermore, Apple will earn $ 5,74 per share during the same financial quarter (Apple Inc. (AAPL) analyst ratings, estimates & forecasts, 2022).

The company's status as one of the top smartphone makers worldwide is credited with these expectations. The anticipated arrival of bigger iPhone sizes, including the 6.1-inch iPhone 14, the 6.7-inch iPhone 14 Max, and the 6.1-inch iPhone 14 Pro, is expected to maintain high demand for the iPhone-based gadgets. The company claims that by introducing significant redesigns, improved specs, and new features, it is creating a new benchmark. As a result, it is anticipated that sales of the new models would surpass those of the prior iPhone iterations, whose sales will continue to soar in the upcoming fiscal year. The potential is also predicated on Apple's services section evolving includes  apple pay, apple care, iCloud storage services, apple care warranties and payments towards other services. In addition, an all-time high of $316.166 is projected for quasi revenues (Apple Inc. (AAPL) analyst ratings, estimates & forecasts, 2022). These income flow will come from non-core industries like the wearable tech, home accessories and so on.

Forecasted 12-Month Profit and Loss

Basically, according to the 12-month profit and loss statement, Apple will continue to be profitable in the following fiscal year. In essence, it is anticipated that the corporation will generate significantly more income than it will spend over the upcoming fiscal year. The average working capital expenditure for Apple, for instance, is expected to be $8.5 billion. The cost includes tooling for manufacturing processes, corporate buildings, and infrastructures for data centers and information centers (Document, 2018). Other purchase obligations for the company include non-cancelable commitments to buy capital assets, such as product tooling and manufacturing process equipment, as well as non-cancelable commitments to buy services for licensing, advertising, research, and development 0content creation, internet services, and telecommunications.

The considered repatriation tax imposed by the Act, which was included in the company's other non-current liabilities at the end of the next fiscal year, made up a sizable amount of those obligations (Document, 2018). The Company has decided to pay the supposed repatriation tax due in payments in accordance with the Act. Most of Apple's outstanding non-current liabilities are comprised of things for which the company is unable to reliably forecast the time or payment.

The business anticipates an increase in operational profitability and quarterly sales in the future. Software, accessories, and service and support contracts which have greater gross margins than a few of its non-core products are at the center of these expansions. The company anticipates that iPhone sales will reach $38.87 billion, up 25.6% year over year; services will bring in $18.28 billion; other goods will bring in $8.7 billion; iPad sales will reach $8.25 billion; and Mac sales will reach $9.18 billion (Leswing, 2021). Hence, a gross margin of 42.2 percent is anticipated for these earnings (Leswing, 2021). Holiday demand over the season, new product debuts, cost-cutting measures, internal system upgrades, and collaborations with other high-end manufacturers will all contribute to the possibilities.

4-Year Profit and Loss Projection

The firm is expected to become more profitable during the following four years, although the loss is expected to be kept to a minimum and acceptable level. In the upcoming four fiscal years, the company's gross profit margin ratio should increase. The operating margin ratio is also predicted to increase as a result of the anticipated high net income and low operating profit. Because of the planned rise in sales and net income, the operating income is also likely to increase.

Sales Forecast

In the following four years, it is anticipated that Apple's product and service sales would increase more quickly. The arrival of the iPhone SE with 5G capabilities in CY22, in particular, it is anticipated to increase overall sales per device (Apple Inc. (AAPL) analyst ratings, estimates & forecasts, 2022). According to projections, over the following four years, this increase in sales will result in an average increase of 2% in sales revenue and a rise of 7% in profits (Apple Inc. (AAPL) analyst ratings, estimates & forecasts, 2022). The anticipated high level of sales will result in Apple Company ending the forthcoming financial year with a net sale of $367.2 billion and modified profits per share of $5.63. (Apple Inc. (AAPL) analyst ratings, estimates & forecasts, 2022).

Due to the company's present rapid sales development, its yearly revenues from sales are anticipated to increase by 33 percent, or $366 billion (Leswing, 2021). Apple Inc. is predicted to experience increasing sales from products other than iPhones, including extended warranties, licensing, music and video subscription services, and licensing and advertising. It is anticipated that sales of these services would increase by 26% per year (Leswing, 2021). The business has taken steps to guarantee that it satisfies these requirements. Successful customer-centric marketing techniques are used in some of these ventures. The efficient control of quality and warranty expenses is another crucial tactic. As a result, this package of steps will guarantee that Apple Inc. achieves its net sales projections.

Cash Flow Projection

As a result, analysis of Apple's cash flow statements indicates that the company will effectively manage its cashflow to keep its financial situation stable. At the end of the upcoming economic year, it is projected that income from operational operations will have increased by 28.44 percent. Devaluation and remunerations are predicted to total $12.28 billion; degradation and loss are anticipated to total $ 12.20 billion; and accumulated taxes and tax incentives are anticipated to total an average of $ 4.88 billion in net profit just before goodwill and intangible assets (MarketWatch, 2022). The stated payments are anticipated to come from the business's basic operations. These projections provide an overview of the business' potential operational effectiveness and capacity for a sound fiscal decision-making.

Although over that time, cash flow from investing operations would fall to far less than $11.09 billion, showing that a sizeable sum of money will be put toward ensuring the strategic and long viability. R&D and the purchase of reliable technology solutions will be included in lengthy investments. On the other hand, working capital from financial operations, such as cash payment of dividends, the purchase of common shares, and changes in existing debt, is anticipated to surpass $111.976 billion in the ensuing financial year (MarketWatch, 2022). In order to raise additional capital investment, the business intends to take out more loans and sell more bonds as debt to shareholders, according to Apple Inc. Report.

Additionally, more bonds will be issued as debt to shareholders, more investment capital will be acquired, and more stock will be issued to stockholders. By guaranteeing additional money is coming in, these actions will raise the company's asset ability. Because it will be in a stronger position to grow, dividend payments, and pay down debt, Apple Inc.'s potential to generate future cash flow will increase investor confidence.

Projected Balance Sheet, Income statement for the Next 3 Years

The company's balance sheet is anticipated to be affected by the planned operating initiatives. The company's current assets, which include cash and equivalents, stocks, liquid assets, and supplier nontrade liabilities, are projected to total more than $ 134,836 billion. Conversely, it is anticipated that quasi assets, like equity investments, buildings, and technology, would total $ 216,166 billion in the preceding calendar year (Document, 2018). Within the same level, the company's core obligations over the next year are anticipated to be lower than its asset, primarily when measured with the working capital. In this approach, Apple Inc. anticipates effortlessly paying down its obligations before recording a profit.

It is anticipated that the accounts receivable, which include current liabilities, different income, corporate debt, and term loans, would exceed $ 205,718 billion, while the quasi liabilities will reach $348,028 billion (Document, 2018). The expected value of significant capital, which comprises internal funds and compensated capital, is $ 90,988 billion (Document, 2018). This prediction is the result of the company's cash flows increasing in the future

Payback Calculation

Innovating industries like microprocessor technology and 5G technologies are where Apple Corporation is intending to invest much of its future money. The business has basically invested $450 billion to the project over a 5-year period (Newsroom, 2022).

Innovating industries like A.i. and 5G network are intended to provide employment. After the expenditure reaches a variable cost, the mean annual working capital for investors may be determined as follows, with a  payback period predicted to be five years as well as the cost of financing anticipated to be $450 billion.

Hence here is the payback calculation formula Payback period = 5 years, cost of investment =$450 billion and average annual cash flow = ?. So therefore, 5= $450 billion/ ?. Hence, ? = $450 billion / 5years = $90 billion yearly.

References

AAPL: Apple Inc.. annual cash flow statement. MarketWatch. (n.d.). Retrieved August 2, 2022, from https://www.marketwatch.com/investing/stock/aapl/financials/cash-flow

Apple Inc. (AAPL) Analyst Ratings, Estimates & Forecasts - Yahoo Finance. (n.d.). Apple Inc. (AAPL) Analyst Ratings, Estimates & Forecasts - Yahoo Finance; finance.yahoo.com. Retrieved August 5, 2022, from https://finance.yahoo.com/quote/aapl/analysis/

Apple commits $430 billion in US investments over five years. Apple Newsroom. (2022, June 29). Retrieved August 2, 2022, from https://www.apple.com/newsroom/2021/04/apple-commits-430-billion-in-us-investments-over-five-years/

Document. (n.d.). Retrieved August 2, 2022, from https://www.sec.gov/Archives/edgar/data/320193/000032019319000119/a10-k20199282019.htm

Leswing, K. (2021, October 29). Apple sales miss expectations, Tim Cook says supply issues cost company $6 Billion. CNBC. Retrieved August 2, 2022, from https://www.cnbc.com/2021/10/28/apple-aapl-q4-2021-earnings.html

MarketScreener. (n.d.). Apple Inc. : Financial Data forecasts estimates and expectations: AAPL: US0378331005: Marketscreener. MarketScreener.com | stock exchange quotes| Company News. Retrieved August 2, 2022, from https://www.marketscreener.com/quote/stock/APPLE-INC-4849/financials/