Final Project/Paper

Financial Statement Analysis

Erica Essex

University of Arizona Global Campus

Principles of Finance: BUS 401

Professor Leon Daniel

Running Head: PRINCIPLES OF FINANCE

PRINCIPLES OF FINANCE

October 31, 2022

PRINCIPLES OF FINANCE

Overview of the company

Apple corporation is a multinational technology affiliated corporation that specializes in consumer electronics, software as well as online services. The corporation is known for its iPhone, iPad, Apple Watch, Apple TV among other products (Danko et al., 2019).

Income Statements

Apple corporation has experienced increased revenues across the years. The revenues have grown from $260 million to $365 million in the course of 2019 to 2021. Most of its revenues are generated from its products. The operating income has also increased across the years. 2021 had the highest sales level which recorded the highest operating income. The net income projections also followed suit as the organization experienced increased net income from $55.256 million to $94.680 million.

	2021	2020	2019
Net Sales	$ 365,817	$ 274,515	$ 260,174
Operating Income	$ 108,949	$ 66,288	$ 63,930
Net Income	$ 94,680	$ 57,411	$ 55,256

Common size income statements

	2021	2020	2019
Gross margin	41.78%	38.23%	37.82%
Operating Income Margin	29.78%	24.15%	24.57%
Net Profit Margin	25.88%	20.91%	21.24%

The gross profit margins have been increasing across the years as 2019 reported 37.82% of sales level and 2021 records 41.78% of the sales level. The operating income proportion to sales in 2019 was 24.57% which increased to 29.78% of the sales level. This implies that the organization has maximized on cost of operations to increase revenues. 21.24% of the organization’s sales were part of the profit which increased to 25.88%. This implies that a quarter of the organization’s sales form part of net profit.

Balance Sheet

In Thousands	2021	2020	2019
Total assets	$ 351,002	$ 323,888	$ 338,516
Total current assets	$ 134,836	$ 143,713	$ 162,819
Total current liabilities	$ 125,481	$ 105,392	$ 105,718
Long term debt	$ 162,431	$ 153,157	$ 142,310
Shareholder's equity	$ 63,090	$ 65,339	$ 90,488

Based on the table above, the total assets were high in 2019, decreased in 2020 and later increased in 2021. The current assets levels have been decreasing across the years. This implies that the corporation has invested more in non-current assets. The current liabilities stagnated in 2019 and 2020 then later increased in 2021. Apple has increased its long-term obligations across the years 2019 to 2021 while reducing its shareholder’s equity levels.

Common Size Balance Sheets

In %	2021	2020	2019
Total current assets	38.41%	44.37%	48.10%
Total current liabilities	35.75%	32.54%	31.23%
Long term debt	46.28%	47.29%	42.04%
Shareholder's equity	17.97%	20.17%	26.73%

Based on the table above the proportion of the total current assets to the total assets has been declining over the years. The proportion of the total current liabilities to the total assets has been increasing over the years. This means that the corporation’s quick ratio has been declining over the years. The percentage of long-term debt to the total assets recorded the highest in 2020. This implies that the corporation has had increased debt over 2020 which reduced my small margins. The shareholder’s equity has been declining over the years. This implies that the organization is focusing on debt finance and reducing the liquidity of its shareholders.

Cash Flow

In millions	2021	2020	2019
Cash Flows from Operating activities	$ 104,038	$ 80,674	$ 69,391
Cash flows from investing activities	$ (14,545)	$ (4,289)	$ 45,895
Cash Flows from financing activities	$ (93,353)	$ (86,820)	$ (90,976)
Net increase or decrease in cash	$ (3,860)	$ (10,435)	$ 24,310
Cash at the beginning of the year	$ 39,789	$ 50,224	$ 25,913
Cash at the end of the year	$ 35,929	$ 39,789	$ 50,223

Cash flow from operating activities has been increasing over the years. The organization has reduced its investing revenues. The organization has used more cash in investments over 2020 and 2021. The corporation has had to pay more for its debts with 2021 recording the highest expenditure on debt. This has made the organization to have reducing cash flows across the three years.

Financial analysis Conclusion

Strength	Weakness
Increasing revenues	Increased debt levels
Reduced shareholder liquidity	Huge burden on shareholders (highly risky business)
Increased investments in the future	Increased interest expense.

The corporation can be said to be neutral as it has heavily invested in operations. Much of the investments are based on debt. Debt is risky as the organization has reduced its shareholders levels. This is a long-term strategy of reducing the liquidity of the shareholders as the organization has promised to increase its revenues in the short and long term (Kaufmann, Gadmer & Klett, 2001).

References

AREAS, B. (2018). Financial analysis.  growth,  30, 10.

Baker, H. K., Kumar, S., Goyal, K., & Sharma, A. (2021). International review of financial analysis: A retrospective evaluation between 1992 and 2020.  International Review of Financial Analysis,  78, 101946.

Danko, T. P., Vyazovikova, A. S., Kiselev, V. M., Rauskiene, O., Klimenko, O. I., Semenova, G. N., & Sekerin, V. D. (2019). Impact of intangible assets on competitive positions of the Apple company.  J. Advanced Res. L. & Econ.,  10, 1850.