Use the research and analysis, along with an explanation of accounting concepts, to tell a story about your corporation's financial performance and position.
Running head: APPLE INC. 1
APPLE INC. 5
Apple Inc.
Name
Institutional Affiliation
Date
Apple Inc.
Introduction
Apple is an established, global brand. It is found in the technology sector and the consumer electronics industry. It is estimated to have about 137000 employees on its payroll. The annual report contains information that sheds light on the performance of any business. The analytical review gives information that benefits any investor in the long run. One may evaluate the liquidity, profitability, solvency, and leverage ratio. There is a need to assess the non- financial data due to its influence on performance. The annual report contains both financial and non-financial data that have to be analyzed.
Turnover ratios
Turnover ratios gauge the manner a business uses its assets in the generation of revenues. The inventory and the accounts receivable turnover fall in this category (Financial Ratio Analysis, 2018). One notes that Apple Inc. had an inventory turnover of 41.39 in 2018 and 39.40 in 2019. A reduction of this rate indicates that the business is doing a great job of selling off its inventory. Besides, the company has days of inventory of nine days in both years. A reduction in the number of days implies a decrease in storage and holding costs.
|
Inventory Turnover |
2019 |
2018 |
|
COGS |
161,782 |
163,756 |
|
Inventory |
4,106 |
3,956 |
|
Inventory Turnover |
39.40 |
41.39 |
|
Days of inventory |
|
|
|
Days |
360 |
360 |
|
Inventory turnover |
39.40136 |
41.39434 |
|
Days of inventory |
9 |
9 |
The accounts receivable is the quotient of the sales and the average debtors. Apple Inc. had a turnover of 11.45 in 2018 and 11.35 in 2019. A reduction in the rate shows that the business is taking longer to collect its receivables. It had days of receivable of 31 and 32 in the same period. Increasing the number of days shows that the business needs to offer better rates to its debtors. They may consider offering better quantity and price discounts.
|
Accounts receivable Turnover |
2019 |
2018 |
|
Sales |
260,174 |
265,595 |
|
Account receivable |
22,926 |
23,186 |
|
Turnover |
11.35 |
11.45 |
|
Days of inventory |
|
|
|
Days |
360 |
360 |
|
Inventory turnover |
11.35 |
11.45 |
|
Days of inventory |
32 |
31 |
Leverage ratios
Leverage ratios evaluate the level of borrowings by a business. An investor may determine the debt to equity and the debt to assets ratio (Financial Ratio Analysis, 2018). It is noted that Apple Inc. had a debt to equity ratio of 0.96 in 2018 and 1.13 in 2019. Besides, it had a debt to assets ratio of 0.28 in 2018 and .30 in 2019. Such rates show that the business is quite leveraged. It also indicates that the company has taken up more debt. There is a need for the management to make sure the borrowings are kept within a sustainable level.
|
Debt to equity |
2019 |
2018 |
|
Debt |
102,067 |
102,519 |
|
Equity |
90,488 |
107,147 |
|
Debt to equity ratio |
1.13 |
0.96 |
|
Debt to total assets |
|
|
|
Debt |
102067 |
102519 |
|
Total assets |
338,516 |
365,725 |
|
Ratio |
0.30 |
0.28 |
Profitability ratios
Profitability ratios evaluate the returns generated by a business. This category entails both the net profit margin and the return on equity (ROE). Besides, Apple Inc. had a net profit margin of 0.22 in 2018 and 0.21 in 2019. It also had an ROE of 0.56 in 2018 and 0.61 in 2019. One notes that the business has been consistently profitable. However, there is a need for management to undertake cost control and to maximize profits.
|
Return on equity |
2019 |
2018 |
|
Net income |
55,256 |
59,531 |
|
Equity |
90,488 |
107,147 |
|
ROE |
0.61 |
0.56 |
|
Net profit margin |
|
|
|
Net profit |
55256 |
59531 |
|
Sales |
260,174 |
265,595 |
|
Ratio |
0.21 |
0.22 |
Liquidity ratio
|
Current ratio |
2019 |
2018 |
|
Current assets |
162,819 |
131,339 |
|
Current liability |
105,718 |
115,929 |
|
Ratio |
1.54 |
1.13 |
|
Quick ratio |
|
|
|
Current assets |
158,713 |
127,383 |
|
Current liability |
105,718 |
115,929 |
|
Ratio |
1.50 |
1.10 |
History and non-financial information
Competition
Apple Inc. was incorporated in the year 1977 and had its headquarters in Cupertino, California. It faces stiff competition from other established brands such as Samsung Electronics and Hewlett Packard, amongst others. The industry players engage in aggressive marketing and competition for market share. One note that the businesses are keen on undertaking aggressive pricing and putting in place low-cost structures. The customers evaluate multiple issues before settling on the product to purchase. These features include the product features, its price, innovativeness of the manufacturer, the company reputation, its supply chain, quality, and performance of the product, and the software of the products.
Rival companies pose a threat due to their vast resources. Apple has been a market leader in creativity and innovativeness. However, some of its competitors have imitated its products and offered low priced electronics. They also have a large customer base that may make it hard for firms such as Apple Inc. to establish itself in countries such as China. The company has made itself a market leader; hence the other players are keen on offering profits at minimal margins. They aim at reducing Apple Inc.'s market share. The business is also keen on expanding into new markets in regions across the globe.
Intellectual property
Apple Inc. holds intellectual property rights in software and services, accessories, and hardware devices. They include the service marks, copyrights, patents, trade dress, amongst others. It holds property rights both in the US and foreign countries. However, it depends on technical competence, innovative skills, and marketing to spur its growth. The company protects its innovations, research, design, and development using this legal means. It also holds copyrights that relate to certain aspects of the services and products offered by the firm. Apple Inc. files the patent applications regularly. This move makes sure that no one interferes with business services, processes, and products.
Supply of components
The company generates revenues from various sources and obtains its components from many suppliers. However, the industry may source similar components from the manufacturers (SEC Filings Details, 2019). This situation creates competition for products. It may also lead to a shortage of products hence affecting their prices. However, Apple Inc. customizes its components, making them different from the ones demanded by its rivals. As a result, the business has to pay a relatively higher price to make the manufacturers concentrate on the production of the company components. Apple Inc. has also created contractual terms with the manufacturers to make them focus on supplying the components. The majority of the company suppliers are found on the Asian continent.
Conclusion
Financial ratios show a positive performance. The business is quite liquid and has very minimal leverage. However, there is a need to manage the assets of a business in the right manner. One notes that the company takes longer to collect credit sales. It also holds inventory for long periods. Correcting this pattern reduces both storage and bad debt expenses. Besides, non-financial factors have a direct impact on the success of the business. The paper has considered the supply chain, the level of competition, and intellectual property. Proper management of both the financial and non-financial matters affects the success of any business.
References
Apple - SEC Filings - SEC Filings Details. (2019). Retrieved from Apple.com website: https://investor.apple.com/sec-filings/sec-filings-details/default.aspx?FilingId=13709514
Financial Ratio Analysis - List of Financial Ratios. (2018). Retrieved from accountingverse.com website: https://www.accountingverse.com/managerial-accounting/fs-analysis/financial-ratios.html