Week 2 Journal

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.