finance week 5 proj

Name

Course

Institution Affiliation

Publicly Traded Companies

Publicly traded companies refer to organizations that have their listed share on any stock exchanges thus allowing the common public to trade their share. In these cases, individuals can purchase and sell these companies' shares in the open market. The process through which the company makes its share public is referred to as initial public offering where the country securities and exchange regulators approve the process. This discussion will be based on Apple Inc. where I will analyze the company operation and the market it operates, evaluate EVA and frees cash flow of the organization and also analyze the ROA and ROE.

Apple Inc. is a multinational organization in the technology industry with its headquarters in Cupertino California. It was founded in April 1976 by Steve Jobs, Ronald Wayne, and Steve Wozniak where their first product was Wozniak's Apple 1 personal computer. The company has grown tremendously to become one of the most popular and international companies and a leader in innovative technology. As of today, the organization specializes in designing, manufacturing, and sales of smartphones, tablets, personal computers, wearables and accessories, and also other technology-related services. It operates in geographical segments which include the Americas, Great China, Europe, Japan, and Asia. In terms of its products and services, it comprises iPhone, AirPods, Mac, iPad, Apple Watch, Apple TV, Apple Care, Beats products, iCloud, streaming, digital content stores, and licensing services. The organization operations involve empowering workers, enforcing labor and human rights, accountability, and also a clean environment. Being one of the top technology industries, the management has maintained the organization has high work standards with a certain code of conduct which has enabled them to maintain competitive advantages. The organization also incorporates diversity and focuses on job training to ensure employees stay informed and productive as the technology field is very competitive.

Apple Inc. EVA, and free cash flow

Economic Value Added (EVA), can be referred to as the organization's measure of its financial performance based on residual wealth determined through deducting the cost of capital form the operating profit, regulated for taxes on a cash basis. Because it tries to capture the organization's true economic profit, it thus also referred to as the economic profit (Chen, 2020).

Apple Inc EVA can be calculated as follows for the year that ended on September 28, 2019

To get the answers in the table, EVA is calculated as the following

EVA = NOPAT- Capital cost x Capital invested = 53, 325-13.67% x 45,225 = 45,913 as per September 2019. These results indicate that EVA for the organization had increaser from the year 2018 to 2019 as compared to the previous result where it had decreased from the year 2017 to 2018.

The free cash flow (FCF), can be referred to as the measure of cash flow inside an organization that it can use freely. It indicates how an organization spent or raised cash during one fiscal year. It mainly consists of business cash flow, financial cash flow, and investment cash flow. FCF the organization's competitiveness and is calculated by subtracting Investment Cash Flow from Business Cash Flow

Apple Inc. FCF

Data indicates that the organization FCF increased from 2017 to 2018 and also decreased from 2018 to 2019(Dybek, 2019).

ROA and ROE

For Apple Inc. ROA can be referred to as the profitability ratio determined form net income divisible by total assets while ROE is referred to as profitability ration determined by net income divisible by the equity of the shareholder’s. These profitability ratios are mainly determined by Gross profit margin, operating profit margin, and net profit margin.

Data shows there was an improvement of ROA for the company from 2017 to 2018 and 2019. Also the same case with ROE where the company improved from 2017 to 2018 and from 2018 to 2019(Dybek, 2019).

The main difference between these two "ROA and ROE" measure is the way debts of an organization is taken into account. The organization's total assets will be equal to shareholders' equity and thus ROA and ROE would be equal. In case the organization adapts financial leverage ROA would fall below ROE. In essence, an organization increases assets but taking debts since it means there is cash that has been brought in. More so, the company decreases its equity by increasing debt since shareholders' equity is calculated by minus of total debt form assets.

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