Help compare the financial ratios listed for Apple Inc and Alphabet Inc

Running Head: Financial review of Apple Inc. and Alphabet Inc. Corporations 1

Financial review of Apple Inc. and Alphabet Inc. Corporations 9

Financial review of Apple Inc. and Alphabet Inc. Corporations

Shanadra Wilson

ACCT503

Financial Accounting Managerial Use and Analysis

Dr. Timothy Zorek

8/22/2021

Introduction

Financial review can be described as a fundamental aspect in determining the certainty of short-term and long-term operability pentagram. Consequently, critical scrutiny of financial review is also a significant step in any business vender as it aids in planning and determining the going concern concept based on the estimated profitable period. Going concern concept is the ability of any business unit to sustain its operating in the future despite the stiff competition which emerges in the market amongst other systematic and unsystematic risk occurrences. The information provided by (Davidson, 2018), provides further insight on financial review as the process of determining potential credit risk based on financial rationales.

Further, financial review provides decisive information to investors, shareholders, owners, general public and the government as it aids in determining whether the business venture has the financial ability to meet the expected financial obligations on short run and long run basis. However, when the management of any business entity has a plan for expanding its day to daily business activities, several ways must be drafted on how to generate more capital and minimize expenditures based on financial forecasting heightened through ratio analysis.

Financial forecasting can be described as the critical assessment of the financial performance of a business entity in terms of long term operability. In most cases, forecasting is applied to provide a clear prediction of the going concern concept. Application of financial ratios and other significant computations are primary aspect applied to enhance effective financial forecasting. According to the international accounting system, enhanced financial review based on ratio analysis is achieved through presentation of true and fair values in the entities statements of financial position (Guerard, 2013), acknowledges. This paper tends to provide an insight of Apple Inc. and Alphabet Inc. financial review based on profitability ratios, liquidity ratios, debt management ratios and asset management ratios.

Entities overview

Apple Inc.com is amongst the leading multinational business entity based in California which is centrally grounded on e-commerce activities, cloud computing digital streaming, selling end user computer software or personal computers and other respective information technology advancement. It has been classified as one of the best performing business entities in United States and has been listed amongst the top performing corporations across the globe (Investor Updates 2021), despite the competitive pressure encountered from Dell Inc., Samsung Company, Microsoft organization, Google organization and Amazon Corporation. Having been established in the year 1976, this business entity has been depicted to have a certain going concern with operating income of $66.288 billion U.S dollars, revenue returns estimated as $274.515 billion and over 147,000 estimated number of labor force.

Moreover, with a market share of 15.9%, total assets estimated to be $ 323.88 billion; this company has been categorized as the largest footwear designing company in United States having been in the market for over 40 years. As a factor in enhancing the going concern of this company, several competitive mechanisms have been put in place so as to enhance growth. The brands produced by this company focuses on long life-cycles, reliability and serviceability, (Investor Updates 2021). Consequently, the production of unique brands produced by this company are generally focused on the value, performance and expandability, factors have made this company to be one of the best performing. Further, having been established on the streets of California, Apple Inc.com covers business operations worldwide.

Consequently, Alphabet Inc.com can be described as an American multinational entity with its main operational pentagram based in California. Having been formed as a result of streamlining Google in the year 2005, it has been highlighted to have going concern concept as a result of its high revenue returns estimated to be $182.53 billion, operating income estimated to be $ 41.22 billion and total assets amounting to $319.62 billion U.S dollars for the financial year ending on 2020 (Alphabet Investor Relations 2021), acknowledges. Critical comparison of this respective entities position Apple Inc.com in a more positive performance pentagram compared to Alphabet Inc.com.

Graphical representation of apple Inc.com and Alphabet Inc.com

Culmination of the going concern concept of these business entities can further be determined through application of financial ratios which provide an in-depth overview for both short-term and long-term procedures. Financial ratios form a baseline with which decision making and other managerial operations are based on. Profit margin ratio is one of the significant profitable ratios used in determining the capital structure which represents the expected earnings of the business entity from daily activities (Davidson, 2018), acknowledges. These financial ratios are used to provide critical analysis of the expected profits earned form the sales proceeds.

The table below represents different financial ratios for these respective business entities for the financial year ending on 2017.

Financial ratios	Apple Inc.com 2017	Alphabet Inc.com 2017
1. Current ratio	1.2760628	5.1403052
2. Gross profit	0.38	0.59
3. Profit margin	0.2109242	0.1142213
4. Inventory turnover	29.052111	60.858478
5. Days in inventory	12.563631	5.997521
6. Accounts receivable turnover	6.4259804	5.9264902
7. Average collection period	28.400335	30.793943
8. Asset turnover	47.216066	148.00401
9. Debt to asset	1.8754868	0.2270357
10. Time interest earned ratio	6.0395786	3.7856833
11. Dividend yield	116	0.27
12. Free Cash Flow	51,774.00	23,907.00
13. price to earn ratio	17.23913	0.5377778
14. Earnings per share of common stock	1.87	6.93
15. Return on Equity	0.3607018	0.0830284
16. Return on Assets	0.1288264	0.064178

Graphical representation

According to the information presented in the graphical representation of the respective financial ratios, it can be highlighted that apple Inc.com has a greater going concern concept based on revenue aggregation culminated by the price to earn ratio and free cash flow. Contrary to these argumentative speculations, debt to asset ratio and days in inventory position Alphabet Inc.com to have a better positive long-term perspective compared to Apple Inc.com. This can be ascertained by the debt to asset ratio and days in inventory ratio of 1.8754868 and 0.2270357 respectively. Days in inventory can be described as the period in which a business entity takes to meet its financial obligations. Alphabet Inc.com has fewer days of inventory ratio compared to Apple Inc.com Corporation represented by 12.6 and 5.9 respectively. Further, it is clearly evident from the data provided above which has been retrieved company’s annual report that both firm’s current assets exceed the current liabilities a clear indication that the corporations are in a position to meet their current obligations fully (Mayes, 2020). This can be ascertained by a current ratio of greater than 1 for both corporations represented by 1.2760 and 5.140 for the financial year ending on 2017 for Apple Inc.com and Alphabet Inc.com respectively.

Further, the profit margin ratio represents the income earned from the day to daily activities. This basically refers to the kind of financial ratio which is used by the management in assessing the ability of an entity to earn profits on sales, the available assets and equity (Davidson, 2018). Moreover, application of profit margin ratio formulates a significant aspect in determining the level of attractiveness associated with investing in the entities shares hence investors, shareholders and other government agencies use this ratio in determining the credit worthiness of the business represented by 0.21 and 0.11 respectively.

Conclusion

In summary, it is clearly evident that both entities going concern is certain. The ability of any entity to be able to operate well in the near future is determined through presentation of true and fair value of information in the financial statement and accurate computation of financial ratios. The need therefore of ensuring accurate presentation of values in the financial statement and financial ratios do exist so as to enhance a healthy business environment. Constant presentation of credit analysis will hence formulate a significant role in ensuring investors, analyst and other users of financial information evaluates and communicates the strengths and weaknesses of an organization. A profound in-depth scrutiny of analyzing the credit worthiness will help in revealing the significant advantages which are associated with increment in stock value and enhanced potential profitability opportunities (Guerard, 2013). 

Reference list

Alphabet Investor Relations (2021). Alphabet Inc. Financial data Retrieved on 21st August 2021 from https://abc.xyz/investor/previous/#numbers

Davidson, W. N. (2018). Financial forecasting and decision making Place of publication not identified: JOHN WILEY.

Guerard, J. (2013). Introduction to financial forecasting in investment analysis New York, NY: Springer.

Investor Updates (2021). Apple Inc. financial data Retrieved on 21st August 2021 from https://investor.apple.com/investor-relations/default.aspx

Mayes, T. R. (2020). Financial analysis with Microsoft Excel

Samonas, M. (2015). Financial forecasting, analysis, and modelling: A framework for long-term forecasting.

Alphabet Inc.com Market Estimates in'000' billion us dollars Revenue Operating Income Total Assets 182.53 41.22 319.62 Apple Inc.com Market Estimates in '000' us dollars Revenue Operating Income Total Assets 274.51499999999999 66.287999999999997 323.88 Apple Inc. Com 2017 Current ratio Gross profit Profit margin Inventory turnover Days in inventory Accounts receivable turnover Average collection period Asset turnover Debt to asset Time interest earned ratio Dividend yield Free Cash Flow price to earn ratio Earnings per share of common stock Return on Equity Re turn on Assets 1.2760628000000001 0.38 0.21092420000000001 29.052111 12.563631000000001 6.4259804000000003 28.400334999999998 47.216065999999998 1.8754868 6.0395785999999996 116 51774 17.239129999999999 1.87 0.36070180000000002 0.12882640000000001 Alphabet Inc.Com Current ratio Gross profit Profit margin Inventory turnover Days in inventory Accounts receivable turnover Average collection period Asset turnover Debt to asset Time interest earned ratio Dividend yield Free Cash Flow price to earn ratio Earnings per share of common stock Return on Equity Return on Assets 2.4 5.1403052000000002 0.59 0.1142213 60.858477999999998 5.9975209999999999 30.793942999999999 148.00400999999999 0.22703570000000001 3.7856833000000001 0.27 23907 0.53777779999999997 6.93 8.3028400000000002E-2 6.4177999999999999E-2