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Access the most recent year's income statement and balance sheet for two prominent companies in the same industry (e.g., Dell and Apple). Compare their returns on equity, and analyze the differences in detail, using DuPont analysis. Suggest clear strategies for improvement wherever necessary.

Apple and Microsoft

2 pages

Paper Topic - Access the most recent year's income statement and balance sheet for two prominent companies in the same industry (e.g., Dell and Apple). Compare their returns on equity, and analyze the differences in detail, using DuPont analysis. Suggest clear strategies for improvement wherever necessary. 

 

Company’s – Apple and Microsoft 

Abstract –  

Introduction / Business Overview –  

· Brief Company introduction - Begin with a description of the business so that it can assist investors understand the company, its industry, its motivation and any advantage it has over its competitors.  

Financial Executive Summary – Microsoft and Apple 

· An executive summary section comprises the most significant results from the financial analysis in a concise and easy-to-read format. This section encapsulates the data presented in the rest of the report, comprising the implications those statistics have in the industry in a general and the company at large. The summary section can comprise brief summaries of the firm’s mission, history, current performance, and expected outlook. Additionally, the section will include a summary if the firm’s industry, market situation and competition. 

Financial Statements –  

· Bear in mind that the core of a good financial analysis paper is the collection of the firm’s financial statements. The statements include the balance sheet, equity statement, income statement and cash flow statement. The balance sheet will display the firm’s allocation of assets, liabilities and shareholder’ equity. On the other hand, the income statement will display the firm’s income, expenditure, losses and profits. The equity statement is used to show the changes in the amount of shareholder’s equity while the cash flow will stipulate where the firm obtained its cash and how it was spent. 

Industry Analysis –  

· It is evident that no business exists in a vacuum and for this reason, a financial analysis should have an examination of the firm’s industry. The report will consist of a clear comparison between the firm’s financial health and that of its competitors. Additionally, it will report the firm’s market share and prominence in the industry. All these factors assist the investors to determine if the form is competing well in its industry and could make a lucrative investment. 

Dupont Analysis  -  

· The DuPont analysis is a framework for analyzing fundamental performance popularized by the DuPont Corporation. DuPont analysis is a useful technique used to decompose the different drivers of return on equity (ROE). The decomposition of ROE allows investors to focus on the key metrics of financial performance individually to identify strengths and weaknesses. 

· There are three major financial metrics that drive return on equity (ROE): operating efficiency, asset use efficiency and financial leverage. Operating efficiency is represented by net profit margin or net income divided by total sales or revenue. Asset use efficiency is measured by the asset turnover ratio. Leverage is measured by the equity multiplier, which is equal to average assets divided by average equity. 

Key Risks and Other Considerations -  

· The part can be either the bull or bear story in the investment thesis, but it helps to detail the key aspects that might disrupt either an optimistic or bearish stance. The above mentions sections can prove sufficient but based on the things that are covered during a financial analysis, other new parts may be included in the paper. Parts that are meant to cover corporate governance, political environment or near-term news flow can be worthy of a comprehensive financial analysis paper. Bear in mind that anything significant that can affect the future value of a stock must be included in the paper.