Apple: Operating Budget
Assumptions of Financial Projections for the Next Quarter
Apple’s next sales are expected to grow by approximately 2% in the next quarter. The company’s cost of
sales is expected to grow proportionally with sales. Its operating expenses are also expected to grow due
to labor costs and other expenses. The following table shows the predicted revenues and costs for Apple
in the next quarter.
Operating Budget
STATEMENTS OF OPERATIONS - USD ($) $ in
Millions
Prior
Quarter
Budgeted
Projection Next
Q
Var +/- Var %
Net sales $81,434 $82,959 $1,525 1.87%
Cost of sales 46,179 47,074 $895 1.94%
Gross margin 35,255 35,885 $630 1.79%
Operating expenses:
Research and development 5,717 6,797 $1,080 18.89%
Selling, general and administrative 5,412 6,012 $600 11.09%
Total operating expenses 11,129 12,809 $1,680 15.10%
Operating income 24,126 23,076 ($1,05
0)
-4.35%
Other income/(expense), net 243 -10 ($253) -104.12%
Income before provision for income taxes 24,369 23,066 ($1,30
3)
-5.35%
Provision for income taxes 2,625 3,624 $999 38.06%
Net income $21,744 $19,442 ($2,30
2)
-10.59%
Ratio Analysis
Net Margin 26.70% 23.44% -3.27% -12.2%
Current Ratio 1.07 0.86 -
21.00%
-19.6%
Debt Ratio 82.03% 82.72% 0.69% 0.8%
Due to expected increase in operating expenses, Apple’s operating income is expected to lower in the
next quarter. Similarly, high operating expenses next month will reduce the company’s net margin next
quarter. Despite projected growth in net sales and gross margin in the next quarter by approximately 2%,
the company is expected to experience a significant decrease in net income, by approximately 10.59%, in
the next quarter. Moreover, with the expected increase in current liabilities, the company will experience
a decline in the current ratio, which reduces its liquidity. Its debt ratio is expected to remain at 82%.
