Financial Plan Apple

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SHAREHOLDER’S ANALYSIS

Apple, Inc. Shareholder’s Analysis

Mychelle Dockery

May 3, 2021

FIN/571

Professor Mahone

University of Phoenix

Apple, Inc. Shareholder’s Analysis

Apple, Inc. has strived to develop the most updated and exceptional technological devices, software, and communications. Apple launches its products in ways that are undisputable the most desirable on the market prior to being marketed for sale. Apple, Inc. was incorporated in California in 1977 and has now spread to locations world-wide. It continues to be a successful business. Innovation nis what makes Apple superior by enhancing its dominance in the market and using power of influence effectively. It believes that continual investment in research and development is critical to the development and enhancement of products and technologies.

The developing countries have been the most crucial part of Apple's success story. Economic conditions related to the developing countries impact on Apple, Inc includes the stability of their economic environment, growth prospects of the economy, and the level of disposable income of the people. Government favoring tax laws, environmental policies, and currency environment for importers also have and impact.

During the year 2017, federal reserve increased interest rates three times in total. This increase in rates reduce the availability of low-cost finances to fund the operations of the company. Apple, Inc. is well leveraged and is having a significant portion of the debt component in its balance sheet. Such an increased interest rate pushes the interest rate expenses upwards for the company, which is not desirable. The inflation for the year also favored the company in its home market which enables the product prices under the tab. A good employment rate increases disposable income for the people and enhances the economic conditions in the country.

Current ratio measures a company’s ability to pay short-term debts and other current liabilities by comparing current assets to current liabilities. It shows a company’s financial stability and sustainability (Apple, Inc, 2021). According to Apple, Inc.’s 10-K report, in December 2017, the current ratio for Apple is 1.24% compared to the slightly higher ratio of 1.35% in 2016 (2017). This generally indicates good short-term financial strength. Apple should continue to use its financial resources and make profits efficiently and continue with its short-term financial strength.

The price-to-earnings ratio is the ratio for valuing a company that measures its current share price relative to its per-share earnings (Fernando, 2021). Apple trailing PE ratio for 2016 is 12.175 and 16.415 in 2017, which indicates an increase in PE ratio by 35% approximately. The increase signifies the rising valuation for the company followed by a favorable forecast. For 2016, forward PE for Apple is Around 8 whereas, for the year 2017, it is around 10 which is a significant increase of 25%. The increase indicates positive prospects for the company in the near future (Form 10K, 2017).

Inventory turnover is a ratio showing how many times a company’s inventory is sold and replaced over a period of time. The days in inventory can be calculated by the inventory turnover formula to calculate the days it takes to sell the inventory on hand. Apple has a current inventory turnover rate of 58.6%, finished 2016 at 60.91%, and 2017 at 59.89% (Apple, Inc, 2021).

The gross profit margin is a measure of profitability as a percentage. Total revenue must be subtracted from the cost of goods sold, then the gross profit should be divided by the total revenue to calculate this (Bloomenthal, 2021). Apple, Inc.’s gross profit margin in 2017 was 39% and 40% in 2017. From the calculations, Apple was more profitable in 2017 (Form 10K, 2017).

The return on assets shows how profitable a company is in relation to its total assets. The ROA shows the effectiveness of management in using assets to generate earnings. To calculate this, the annual earnings should be divided by its total assets and should be shown as a percentage (Hargrave, 2021). For 2016, Apple’s return on assets was 14.2% and 12.9% in 2017. Apple had a slightly higher return in 2016 (Apple, Inc, 2021). The fall in ROA implies pressure on the profitability of the company due to competition.

The return on equity is a measure of profitability that calculates how many dollars of profit a company generates with each dollar of shareholders’ equity (Fernando, 2021). Apple, Inc. reported an ROE of 35.62 in 2016 and 36.07% in 2017 (Apple, Inc, 2021). This has risen in recent years due to higher financial leverage. It is the highest value achieves for any full year in the past decade if the company. The increase of 1.4% means there is a slight increase in the profitability of equity holders.

Apple, Inc. makes projections relating to its earnings and has a responsibility to its stakeholders to meet those projections. A loss of confidence in the financial stability of the company could cause shareholders to stop investing or reduce the value of stock. This could lead to short-term liquidity issues and potentially solvency issues. Apple’s management must prepare and follow strategic and financial plans that allow the company to be profitable each year. Because of its excellent balance of risks, innovation, and improvement, Apple, Inc. continues to be a model company in the technological industry.

References

Form 10-K. (2017). Retrieved from https://www.sec.gov/Archives/edgar/data/320193/000032019317000070/a10-k20179302017.htm

Apple Inc. (2017). Retrieved from

https://www.sec.gov/Archives/edgar/data/320193/000032019317000070/a10-k20179302017.htm

Apple, Inc. (2021). https://www.stock-analysis-on.net/NASDAQ/Company/Apple-\n

Inc/Ratios/Liquidity

Bloomenthal, A, (2021). Investopedia. Retrieved from

http://www.investopedia.com/terms/g/gross_profit_margin.asp

Fernando, J., (2021). Investopedia. Retrieved from http://www.investopedia.com /terms/r./return

on equity .asp

Hargrave, M., (2021) Investopedia. Retrieved from

http://www.investopedia.com/terms/r/returnonassets.asp

Fernando, J., (2021). Investopedia. Retrieved from

https://www.investopedia.com/terms/p/price-earningsratio.asp