Final Project/Paper

Financial Ratio Analysis

Erica Essex

The University of Arizona Global Campus

Principles of Finance: BUS 401

Running Head: PRINCIPLES OF FINANCE

PRINCIPLES OF FINANCE

November 7, 2022

PRINCIPLES OF FINANCE

Part one

This part will look into the profitability ratios, liquidity ratios, debt ratios, asset management ratios as well as the per share.

Profitability ratios

Apple’s ROI has been increasing over the years. This implies that the organization has been generating more from its assets. The organization’s ROE has also been increasing across the years. This means that the organization has been experiencing more revenues from the shareholding value. The ROI has also been increasing over the years. This implies that Apple has had increasing profit levels for the three years. The increasing profits has been viable for the investments in the corporation (Welc, 2022). The corporation can state that their investments are bearing fruit.

Debt Ratio

The long-term debt to equity ratio has been increasing over the years. This applies to the total debt to equity ratio. The interest coverage ratio was only in 2022. This implies that the organization has been increasing its debt levels. Debts have accumulated and increased over the years. However, the interest coverage ratio is way high. This implies that the organization is more than capable of paying back its debts over the years (Welc, 2022).

Asset Management Ratio

The total asset turnover has been increasing over the years. This also applies to the receivables turnover ratios. The inventory turnover ratio has been decreasing over the years. The accounts payable turnover increased and later decreased. Based on the information, the organization has utilized its assets in a better way (Welc, 2022). The organization has reduced its inventory levels which reduces the storage costs and increases profits.

Liquidity ratio and Per share

This section will look into the quick ratio, current ratio and the book value per share. The current ratio has been decreasing over the years. This also applies to the quick ratio. This implies that the organization has reduced its solvency levels and cannot pay off its short-term obligations using the current liabilities (Welc, 2022). The book value per share has decreased over the years. This is not favorable to the organization as the values are higher than one.

Part two

Financial Ratios	Strength or Weakness
ROA	Strength
ROE	Strength
ROI	Strength
Quick Ratio	Weakness
Current Ratio	Weakness
Long term debt to Equity Ratio	Weakness
Total debt to equity ratio	Weakness
Total Asset turnover	Strength
Receivables turnover	Strength
Inventory Turnover	Strength
Accounts Payable Turnover	Weakness
Book value per share	Weakness

Based on the information above, the strategies taken by the corporation are to their strength and weakness. The organization is able to repay its obligations. This is a short term projection. The long run analysis of the corporation is highly risky and the business needs to be closed. However, the organization is able to maximize its resources and pay off its debts. There is a likelihood that the corporation will increase its profitability levels across the years.

Apple is also improving in performance. The improvement seems to be affiliated to the investments made in the corporation. The company’s overall ratio is a strong strategy. They have invested in platforms that are generating returns which is good for the organization. If the operations continue for ten years, the organization will reduce much of its obligations which will benefit the shareholders whose liquidity levels have reduced (Welc, 2022). The investments are debt financed as the management wants to maintain its liquidity levels.

Part 3

Financial Ratios	Higher or Lower than industry average
ROA	Higher
ROE	Lower
Gross Margin	Higher
Net profit margin	Higher
Quick Ratio	Lower
Current Ratio	Lower
LT Debt to Equity	higher
Total debt to Equity	Lower
Interest coverage
Total Asset turnover	Higher
Inventory Turnover	Higher

Apple corporation is more invested in its assets and has reduced its debt obligations. Huge debts have resulted in increased debt to equity ratios which are not favorable to the organization. The corporation is in a position to pay off its debts as compared to other companies in the industry. This implies that the corporation has invested in projects that bear fruit to the organization.

Part 4

Apple is better than average in terms of operations. It has been able to invest in a venture that is generating returns. The return level based on the investment is high and is attributed to the increased revenues across the years. Some of the important ratios to look into are the profitability ratios, debt ratios and the asset management ratios. Specifically, the ratios include the return on assets, return on equity, return on investments, long term debt to equity ratio, interest coverage ratio and assets turnover (Welc, 2022). These will reflect the organization’s operations based on the strategy implemented. They will also be useful in making good decisions for the company.

References

Welc, J. (2022). Financial statement analysis. In  Evaluating Corporate Financial Performance (pp. 131-212). Palgrave Macmillan, Cham.