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APPLE INCORPORATION’S FINANCIAL REPORT 10

Hi so im not happy with the report lots of things missing and some formulas are not ok and you are not following the report I sent you ,as I asked you to follow what is in the report I have done before so you know what calculations you have to do but for Apple company. (the report I sent you is a help so you know the step to write this report, so you don’t get confused not to copy paste what is written there but only the steps and the formulas please use it as a guide ).

You are using competitors that I did not even asked for :please follow what I am saying :

· My industry in a Smartphone industry my company is Apple ,

· My group companies are : Samsung, Sony, Huawei

I have already sent you the Ratio for the following companies and added them in the tables: Samsung, Sonny and Huawei I put in the table as my group did already ..

You will be required to calculate My company ratio which is Apple and show me the steps of the calculation in details I have written the formulas below please follow them and add the results in the tables under Apple in the appendix 2.

Follow this formulas in order to get the calculation right. I need to see the steps of the calculation for Apple in appendix 1 ,

Brief :You are required to use tools of financial analysis to assess the corporate performance of your selected company from the perspective of a potential acquirer.

It is expected that your interpretation of your financial analysis will draw upon the macroeconomic country analysis and global industry analysis.

And compere the ratios of my company with the other companies.

Formulas to follow for Apple and Oppo :

1- Profitability Ratios for each year from 2016 to 2020

· Operating Profit Margin = (Operating profit/Sales) x 100%

· Gross Profit Margin =Gross profit/sales

· Net profit Margin= net profit/sales

· Return on Capital Employed (for each year 2016-2020) = {Operating Profit / (Shareholders’ Fund + Non-Current Liabilities)} x 100%

· Cash Return on Capital Employed (CROCE)= cash flow from operating activities /equity+ non-current liabilities

2- Efficiency Ratios :

· Receivable Turnover for each year = (Accounts Receivables/Sales) x 365 days

· Payable Turnover for each year = (Accounts Payable/Cost of Sales) x 365 days

3- Gearing Ratios:

· Gearing Ratio for each year 2016-2020= (Long term debt/long term debt + Equity) x 100%

· Debt to Equity Ratio each year 2016-2020 = (Long Term Debt/Equity) x 100%

· Interest cover = Operating Profit/ Interest

4- Liquidity Ratios:

· Current Ratio for each year 2016-2020 = Current Assets/ Current Liabilities

· Quick ratio each year =(Current assets-inventory)/current liabilities

· Operating Cash Flow to Current Liabilities for each year 2016-2020 = Net cash flow from operating activities/current liabilities

· After you have done all the calculation for Apple you put in Appendix 1 the steps and show me how you did them as I did in my previous assignment if you check

· And after that, you put the results in a table so they are all clear for my company Apple .

· In Appendix 2 you add the tables that I have already created with my company Apple and the competitors and you have to calculate the industry average check the table (I did for you the formula) .

· After all the calculation and tables are done you can start to write and do the graphs, please make sure graphs are clear and presented correctly with the references .

The Report should include : You are expected to compare the corporate performance of your chosen company (Apple) with the competitors ratio (Samsung, Huawei, Sony) .

Introduction

Finance analysis

Profitability ratio

ROCE

Net Profit Margin

Efficiency ratio

Receivable Turnover

Payable Turnover

Gearing/ Financial Risk Ratio

Debt to Equity Ratio

Liquidity Ratio

Current Ratio

Operating Cash Flow to Current Liability

Conclusion

References and Appendix

You have to have good theories to support your writing and you also have to explain what this numbers and data means,, I don’t want descriptive report it should be explained professionally and referring to graphs and appendix and to the numbers found please make sure that the data is right and as I said the calculation need to be right.

Assessment Criteria: Please follow the assessment criteria .

Work will be marked in accordance with the following specific criteria but also with reference to the general criteria within the course handbook.

· Organization, presentation and structure (20%)

· Selection and application of tools of financial analysis (10%)

· Accuracy of ratio calculations (10%)

· Depth and quality of the interpretation (25%).

· Depth and quality of inter-company analysis (25%).

· Use of macroeconomic country analysis and global industry analysis within the interpretation of the financial analysis (10%).

Appendix 2

1- Liquidity

Current Ratio

Year	Apple	Samsung	Huawei	Sony	Industry average (Apple+Samsung+Huawei+Oppo+Sony)/5
2020		2.88	1.76	0.91	(apple+2.88+1.76+0.91)= industry average
2019		2.84	1.58	0.86
2018		2.52	1.48	0.92
2017		2.18	1.41	0.0.83
2016		2.58	1.49	0.86

Quick Ratio (Acid Test)

Year	Apple	Samsung	Huawei	Sony	Industry average (Apple+Samsung+Huawei+Oppo+Sony)/5
2020		2.44	1.33	0.82
2019		2.42	1.20	0.75
2018		2.10	1.21	0.79
2017		1.81	1.16	0.71
2016		2.24	1.18	0.72

Operating Cash flow

Year	Apple	Samsung	Huawei	Sony	Industry average (Apple+Samsung+Huawei+Oppo+Sony)/5
2020		0.18	0.35	0.21
2019		0.82	0.9	0.20
2018		0.97	0.74	0.22
2017		0.92	0.96	0.15
2016		0.86	0.49	0.15

2- Profitability

Gross Profit Margin

Year	Apple	Samsung	Huawei	Sony	Industry average (Apple+Samsung+Huawei+Oppo+Sony)/5
2020		0.37	0.36	0.30
2019		0.37	0.38	0.29
2018		0.45	0.39	0.28
2017		0.46	0.39	0.26
2016		0.40	0.40	0.25

Operating Profit Margin

Year	Apple	Samsung	Huawei	Sony	Industry average (Apple+Samsung+Huawei+Oppo+Sony)/5
2020		0.11%	8.13%	0.12
2019		0.11	9.06%	0.12
2018		0.24	10.16%	0.10
2017		0.22	9.34%	0.045
2016		0.14	9.11%	0.042

Net Profit Margin

Year	Apple	Samsung	Huawei	Sony	Industry average (Apple+Samsung+Huawei+Oppo+Sony)/5
2020		0.11	0.11	0.12
2019		0.15	0.12	0.12
2018		0.18	0.13	0.01
2017		0.15	0.13	0.044
2016		0.12	0.97’	0.042

Return on Capital Employed (ROCE)

Year	Apple	Samsung	Huawei	Sony	Industry average (Apple+Samsung+Huawei+Oppo+Sony)/5
2020		0.02	14.96%	0.05
2019		0.02	18.87%	0.06
2018		0.21	23.91%	0.055
2017		0.22	25.81%	0.023
2016		0.14	23.25	0.025

Cash Return on Capital Employed (CROCE)

Year	Apple	Samsung	Huawei	Sony	Industry average (Apple+Samsung+Huawei+Oppo+Sony)/5
2020		0.04	0.151	0.08	(Apple+0.04+0.151+0.0.8)= Industry average
2019		0.01	0.162	0.085
2018		0.28	0.26	0.093
2017		0.28	0.26	0.065
2016		0.25	0.21	0.063

3- Efficiency

Receivable Turnover

Year	Apple	Samsung	Huawei	Sony	Industry average (Apple+Samsung+Huawei+Oppo+Sony)/5
2020		23.0 days	30.61 days	54.77 days
2019		29.1 days	36.35 days	54.22 days
2018		50.7 days	1.82 days	53.57 days
2017		42.1 days	1.48 days	57.04 days
2016		43.8 days	75.55 days	48.66 days

Payable Turnover

Year	Apple	Samsung	Huawei	Sony	Industry average (Apple+Samsung+Huawei+Oppo+Sony)/5
2020		112.4 days	51.09	29.24 days
2019		97.1 days	96.80 days	34.87 days
2018		23.3 days	79.85 days	32.96 days
2017		25.6 days	72.77 days	41.46 days
2016		0.25 days	83.37 days	38.92 days

4- Gearing (Financial Risk )

Gearing ratio

Year	Apple	Samsung	Huawei	Sony	Industry average (Apple+Samsung+Huawei+Oppo+Sony)/5
2020		0.82%	0.43	0.12
2019		0.82%	0.35	0.11
2018		0.034%	0.28	0.15
2017		0.83%	0.22	0.18
2016		0.64%	0.29	0.2

Debt to Equity

Year	Apple	Samsung	Huawei	Sony	Industry average (Apple+Samsung+Huawei+Oppo+Sony)/5
2020		0.0082	0.43	0.13
2019		0.0083	0.35	0.13
2018		0.000334	0.28%	0.17
2017		0.0084	0.22	0.23
2016		0.0064	0.29	0.18

Interest Cover

Year	Apple	Samsung	Huawei	Sony	Industry average (Apple+Samsung+Huawei+Oppo+Sony)/5
2020		1.84	4.78	76.24
2019		4.51	4.8	71.73
2018		6.84	2.8	54.17
2017		5.97	2.17	19.85
2016		0.27	2.3	11.63

Apple Incorporation’s Financial Report

This financial report analyzes Apple Incorporation’s financial performance between 2016 and 2020. The selected financial ratios are compared visa vie the industry’s performance (see appendix 1). This approach should provide an understanding of the company’s profitability and financial risks over the past 5 years. By comparing the company’s financial performance against the industry’s average performance, this financial report should provide a balanced assessment of the organization’s financial ratios. In addition, this financial report provides investors with vital information as to whether they should invest in Apple Incorporation or not.

Financial Ratio Analysis

Profitability Performance

Profitability ratios indicate how the management of an organization is generating profits. Some of the common profitability measures include net margin, return on assets, and return on equity (Deegan, 2013). This report assesses Apple Incorporation’s net margins and return on equity over the last five years to determine its profitability performance.

Net Margin

This profitability ratio measures how much net profit a company is generating as a percentage of revenue. It helps investors determine if the management of an organization is generating adequate profit from sales and whether or not it contains the company’s operating and overhead costs. Thus, it is a vital indicator of an entity’s overall financial wellbeing (Scott, 2015). An analysis of the Apple Incorporation’s financial statements shows a slight increase in the company’s net margin between 2016 and 2018. In particular, the company’s net margin for the fiscal years 2016, 2017, and 2018 were 21.19%, 21.09%, and 22.41%, respectively. Net margins for 2019 and 2020 were 21.24% and 20.91%, respectively. The increase in net margin between 2016 and 2018 can be attributed to significant increases in net income over the period

Overall, Apple Incorporation performed better than its competitors HP Inc., and IBM. HP Incorporation’s net margins for 2016, 2017, 2018, and 2019 were 5.2%, 4.9%, 9.1%, and 5.4%, respectively. Net margin for 2020 was 5.0%. IBM Incorporations net margin for 2016, 2017, and 2018 were 14.9%, 7.3%, and 11.0%, respectively. The company’s net margin in 2019 and 2020 were 12.2% and 7.6%, respectively (Finbox, 2021b). Figure 1 shows net margin for Apple Inc., IBM Inc., and HP Inc.

Figure 1 Net Income Performances for Apple, IBM, and HP

Return on Equity

Return on equity measures a company’s profitability performance in relation to shareholders’ equity. Investors are interested in a company whose return on equity is equal to or above the industry’s average performance (Deegan, 2013). In 2018, Apple’s return on equity increased to 0.56 compared to 0.36 in 2016 and 2017. Return on equity also increased to 0.61 and 0.88 in 2019 and 2020, respectively. The increase in return in equity can be attributed to significant increase in the company’s common shareholders’ equity. Unlike Apple Inc., IBM Inc. experienced a decline in return on equity ratios over the 5 years. IBM Inc.’s return on equity for 2016, 2017, and 2018 were 73.1%, 32.15, and 50.7%. Its return on equity in 2019 and 2020 were 50.1% and 26.6%, respectively (). HP Inc.’s has had negative return on equity ratios over the 5 year period. Its return to equity in 2016, 2017, and 2018 were -64.18%, -74.1%, and -833.65%. Return on equity ratios in 2019 and 2020 were -264.21% and -127.6%, respectively (Guru Focus, 2021b). Figure 2 shows return on equity ratios for Apple Inc., IBM Inc., and HP Inc., respectively

Figure 2: Return on Equity Ratios for Apple, IBM, and HP

Liquidity Performance

Liquidity ratios help in determining a company’s ability to repay its short term financial obligations by using its current assets. With liquidity ratios, an organization analyzes current liabilities in relation its liquid assets to determine its ability to meet its short term debts in case of an emergency. Some of the commonly used liquidity ratios are current ratio, quick ratio, and cash ratio (Deegan, 2013). This report analyzes Apple Inc.’s current and quick ratios to determine its ability to meet its short term financial obligations by using its current assets.

Current Ratio

This liquidity ratio measures an organization’s ability to repay its short term financial obligations. It tells creditors and analysts how an entity can maximize its current assets to satisfy its creditors and other payables. A current that is higher than or in line with the industry average is acceptable. Any value that is beneath the industry average may imply a higher risk of default (Deegan, 2013). Apple Inc.’s current ratio decreased between 2016 and 2018 before increasing in 2019. In particular, the company’s current ratio for 2016, 2017, 2018, and 2019 were 1.35, 1.28, 1.12, and 1.54, respectively. Its current ratio in 2020 was 1.36. The decrease in current ratio between 2016 and 2018 can be attributed to significant increase in current liabilities.

Overall, the company can meet its short term financial obligations by using its current liabilities. IBM Inc.’s current ratio in 2016, 2017, 2018, and 2019 were 1.21, 1.33, 1.29, and 1.02. Its current ratio in 2020 was 0.98 (Guru Focus, 2021a). HP Inc.’s current ratios in 2016, 2017, 2018, and 2019 were 0.98, 1.00, 0.85, and 0.80. Its current ratio in 2020 was 0.79 (Guru Focus, 2021b). Figure 3 shows the current ratios performances for Apple, IBM, and HP

Figure 3: Current ratios for Apple, IBM, and HP

Quick Ratio

This is another measure of a company’s liquidity performance, but a stringent one. It only considers most liquid assets in determining a company’s liquidity performance (Horngren et al., 2013). Apple Inc.’s quick ratios for fiscal years 2016, 2017, and 2018 were 1.05, 1.09, and 0.99, respectively. Its quick ratios for 2019 and 2020 were 1.38 and 1.22. Thus, the company can meet its short term debts by using its most liquid assets. Unlike Apple Inc., HP Inc. cannot meet its short term debts by using its most liquid assets. Its quick ratios in 2016, 2017, and 2018 were 0.74, 0.74, and 0.61, respectively. The company’s quick ratios in 2019 and 2020 were 0.57 and 0.56, respectively (Guru Focus, 2021b). IBM’s quick ratios in 2016, 2017, and 2018 were 1.17, 1.29, and 1.24, respectively. Its current ratio in 2019 and 2020 were 0.98 and 0.94, respectively (Guru Focus, 2021a). Figure 4 shows quick ratio performances for Apple Inc., IBM Inc., and HP Inc.

Figure 4: Quick ratios for Apple, IBM, and HP

Efficiency Performance

Efficiency ratios analyze how well an organization utilizes its assets and liabilities. They can determine turnover of receivables, use of inventory and assets, and repayment of liabilities. Moreover, efficiency ratios can help in tracking and analyzing performance of financial institutions (Horngren et al., 2013). This financial report analyzes Apple Incorporation’s inventory turnover ratios and total asset turnover ratios.

Inventory Turnover Ratio

Inventory turnover ratio indicates the number of times that an organization has sold and replaced its inventory during a particular period. A slow turnover means excess inventory and poor sales, whereas a faster inventory means either inadequate inventory or strong sales (Horngren et al., 2013). Apple Inc.’s inventory turnover ratio decreased from 14.66 in 2016 to 10.09 in 2017 and 9.29 in 2018. However, it increased to 10.03 in 2019 and 10.38 in 2020. The company can attribute its faster inventory turnover rates to strong sales performances. IBM Inc.’s inventory turnover ratios in 2016, 2017, and 2018 were 26.68, 26.91, and 26.13, respectively. Its inventory turnover ratios in 2019 and 2020 were 24.63 and 22.00, respectively (Guru Focus, 2021a). HP Inc.’s inventory turnover ratios in 2016, 2017, and 2018 were 8.95, 8.27, and 8.07, respectively. Its inventory turnover ratios in 2019 and 2020 were 8.07 and 7.90, respectively (Guru Focus, 2021b).

Figure 5: Inventory Ratios for Apple, IBM, and HP

Total Asset Turnover Ratio

Total asset turnover ratio calculates the value of an entity’s sales relative to the value of its total average assets. It indicates the efficiency with which an organization uses its assets for revenue generation. A higher asset turnover ratio is an indication that an organization is efficiently using its assets for revenue generation. Conversely, a low asset turnover ratio indicates that a firm is not efficiently utilizing its assets for revenue generation (Williams, 2014). Apple Inc. does not efficiently utilize its assets for revenue generation as evidenced by its high asset turnover ratios of 0.18, 0.16, and 0.18 in 2016, 2017, and 2018, respectively. Its asset turnover ratios in 2019 and 2020 were 0.18 and 0.21, respectively. IBM Inc.’s asset turnover in 2016, 2017, and 2018 were 0.70, 0.65, and 0.56, respectively. Its assets turnover ratios in 2019 and 2020 were 0.56 and 0.48, respectively (Guru Focus, 2021a). HP Inc.’s asset turnover ratios in 2016, 2017, and 2018 were 0.71, 1.68, and 1.73, respectively. Its asset turnover ratios in 2019 and 2020 were 1.73 and 1.66, respectively (Guru Focus, 2021b).

Figure 6: Asset turnover ratios for Apple, IBM, and HP

Solvency Ratios

These ratios measure a company’s ability to repay its long term debts and are normally used by business lenders. They indicate whether an organization’s cash flows are adequate to satisfy its long term debts. Hence, solvency ratios are measure of a company’s financial health. An unfavorable ratio is an indication that a company may default on its long term liability obligations (Williams, 2014). This report analyzes Apple Inc.’s debt to equity ratios

Debt to Equity Ratio

This ratio evaluates an organization’s financial leverage. It compares an organization’s long term debts to its shareholders’ equity. A higher leverage ratio indicates an organization with higher risk to stockholders (Schroeder, Clark & Cathey, 2011). Apple Inc has a higher debt to equity ratio, which is highly risky for prospective investors. The company’s debt to equity ratios in 2016, 2017, and 2018 were 0.90, 0.92, and 1.07, respectively. Its debt to equity ratios in 2019 and 2020 were 1.19 and 1.72, respectively. IBM Inc.’s debt to equity ratios in 2016, 2017, and 2018 were 2.31, 2.66, and 2.73, respectively. Its debt to equity ratios in 2019 and 2020 were 3.27 and 3.23, respectively (Guru Focus, 2021a). HP Inc.’s debt to equity ratios in 2016, 2017, and 2018 were -1.75, -2.29, and -9.37, respectively. Its debt to equity ratios in 2019 and 2020 were -4.31 and -3.32, respectively (Guru Focus, 2021b).

Figure 7: Debt to equity ratios for Apple, IBM, and HP

Conclusion

Based on Apple In.’s financial ratio analysis, a prospective investor should buy the company’s shares. There is no doubt that Apple is one of the world’s leading producers of smartphones and personal computers. An analysis of its financial statements indicates that it has had a healthy revenue base between 2016 and 2020. It is highly profitable than its competitors IBM Inc. and HP Inc. Moreover, it is in a better position to meet its short term debts by using its current assets. However, its high debt to equity ratios between 2016 and 2020 imply that it is a risky investment.

References

Deegan, C. (2013). Financial accounting theory. Sydney, Australia: McGraw-Hill Education Australia.

Finbox.com. (2021b). Net income to stockholders margin for International Business Machines Corporation. Retrieved from https://finbox.com/NYSE:IBM/explorer/ni_margin

Guru Focus. com. (2021a). HP. Retrieved from https://www.gurufocus.com/term/InventoryTurnover/HPQ/Inventory%252BTurnover/HP %2BInc

Guru Focus.com. (2021b). International Business Machines. Retrieved from https://www.gurufocus.com/term/InventoryTurnover/IBM/Inventory%252BTurnover/Int ernational%2BBusiness%2BMachines%2BCorp

Horngren, C., Harrison, W., Oliver, S., Best, P., Fraser, D., Tan, R., & Willet, R. (2013). Financial accounting. Sydney, Australia: Pearson Higher Education AU.

Scott, W. R. (2015). Financial accounting theory. Upper Saddle River, NJ: Prentice Hall.

Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2011). Financial accounting theory and analysis: text and cases. Hoboken, NJ: John Wiley and Sons.

Williams, J. (2014). Financial accounting. New York, NY: McGraw-Hill Higher Education.

Appendix A

Profitability Ratios (Amount in $ million)	2020	2019	2018	2017	2016
Net margin =Net income/Sales *100%	20.91%	21.24%	22.41%	21.09%	21.19%
Return on equity = net income/ shareholders equity	0.88	0.61	0.56	0.36	0.36

Liquidity Ratios ( Amount in $ million)	2020	2019	2018	2017	2016
Current ratio = Current assets/ current liabilities	1.36	1.54	1.12	1.28	1.35
Quick ratio =(Cash + Cash Equivalents + Marketable Securities + Accounts Receivable) / Current Liabilities	1.22	1.38	0.99	1.09	1.05

Efficiency Ratios ( Amount in $ million)	2020	2019	2018	2017	2016
Inventory turnover= cost of sales/average inventory	10.38	10.03	9.29	10.09	14.66
Total asset turnover = total revenue/average total assets	0.21	0.18	0.18	0.16	0.18
Note: average inventory = (opening inventory + closing inventory)/2
Average total assets = (beginning assets + closing assets)/2

Solvency Ratios (Amount in $ millions)	2020	2019	2018	2017	2016
Debt to equity ratio = long term debt/ equity	1.72	1.19	1.07	0.92	0.90

Apple 2016 2017 2018 2019 2020 1.35 1.28 1.1200000000000001 1.54 1.36 IBM 2016 2017 2018 2019 2020 1.21 1.33 1.29 1.02 0.98 HP 2016 2017 2018 2019 2020 0.98 1 0.85000000000000009 0.8 0.79 Apple 2016 2017 2018 2019 2020 1.05 1.0900000000000001 0.99 1.3800000000000001 1.22 IBM 2016 2017 2018 2019 2020 1.1700000000000002 1.29 1.24 0.98 0.94000000000000006 HP 2016 2017 2018 2019 2020 0.7400000000000001 0.7400000000000001 0.6100000000000001 0.56999999999999995 0.56000000000000005 Apple 2016 2017 2018 2019 2020 14.66 10.09 9.2899999999999991 10.029999999999999 10.38 IBM 2016 2017 2018 2019 2020 26.68 26.91 26.13 24.63 22 HP 2016 2017 2018 2019 2020 8.9499999999999993 8.27 8.07 8.07 7.9 Apple 2016 2017 2018 2019 2020 0.18 0.16 0.18 0.18 0.21 IBM 2016 2017 2018 2019 2020 0.7 0.65 0.56000000000000005 0.56000000000000005 0.48 HP 2016 2017 2018 2019 2020 0.71 1.68 1.73 1.73 1.66 Apple 2016 2017 2018 2019 2020 0.9 0.92 1.07 1.19 1.72 IBM 2016 2017 2018 2019 2020 2.31 2.66 2.73 3.27 3.23 HP 2016 2017 2018 2019 2020 -1.75 -2.29 -9.3699999999999992 -4.3099999999999996 -3.32 Apple 2016 2017 2018 2019 2020 0.21190000000000006 0.21090000000000006 0.22410000000000005 0.21240000000000006 0.20910000000000001 IBM 2016 2017 2018 2019 2020 0.14900000000000005 7.3000000000000023E-2 0.11000000000000003 0.12200000000000003 7.6000000000000026E-2 HP 2016 2017 2018 2019 2020 5.2000000000000018E-2 4.900000000000003E-2 9.1000000000000025E-2 5.400000000000002E-2 5.0000000000000017E-2 Apple 2016 2017 2018 2019 2020 0.3600000000000001 0.3600000000000001 0.56000000000000005 0.61000000000000021 0.88 IBM 2016 2017 2018 2019 2020 0.73100000000000021 0.32150000000000012 0.50700000000000001 0.501 0.26600000000000001 HP 2016 2017 2018 2019 2020 -0.64180000000000026 -0.74100000000000021 -8.3365000000000027 -2.6421000000000001 -1.276