1
Decoding Apple's Financial Prowess: A Ratio-Based Approach
Student’s Name
Institution
Course
Instructor
Date
2
Decoding Apple's Financial Prowess: A Ratio-Based Approach
In the present era, technology firms have become an integral part of society's lifestyle and
economic productivity, and hence, they need to focus on continuous operations and sustainable
development. Starting as a mere project in 1976, situated within a Silicon Valley garage, Apple
Inc. has always been at odds with the rest of its industries by continuously concentrating on
innovation (Library of Congress, n.d.). They had set out to make personal computing better
through their risky investment. Henceforth, Steve Jobs and Steve Wozniak are now associated
with Apple Inc., which is a global technological giant that fuses modern hardware, software and
services so well that it is adored across the globe (Apple Inc., 2024). From Apple I and II
computers to iPhone, iPad, and MacBook lines, among other inventions like those of no other
leading manufacturer before them, they have kept on setting new standards for others to follow
(Kocienda, 2018). The secret behind Apple's success lies in its financial performance, which has
remained higher than industry benchmarks throughout its meteoric growth. Whether through
making calculated investments, operating more efficiently or consistently delivering superior
user experiences, this company always shows how much profit it earns annually and how
plentifully liquid assets it possesses (Lu, 2024). Their financial ability has enabled the company
to maintain a competitive position while attracting various investors as well as researchers who
analyze stock prices for different firms in the market today. The paper uses Apple Inc. as a case
study to provide a financial statement analysis focusing on liquidity ratios, solvency analysis,
and profitability analysis from 2021 to 2023.
Findings and Discussion
Liquidity Ratio Analysis
3
Liquidity analysis is an assessment of the ability of a company to meet its
immediate financial obligations as they arise. It entails evaluating whether a business can convert
its current assets into cash or cash equivalents to clear the current debts. The main aim of this
form of analysis is to help establish whether or not a firm has enough liquid resources to keep it
running and avoid becoming distressed financially. Table 1 reflects a company's ability to cover
liabilities due within one year. The current ratio is acquired by dividing the current assets by the
current liabilities of the company.
Liquidity Ratios
Sep 30, 2023 Sep 24, 2022 Sep 25, 2021
Current ratio 0.99 0.88 1.07
Quick ratio 0.84 0.71 0.91
Cash ratio 0.42 0.31 0.50
Table 1: Source: Stock Analysis On Net. (n.d.).
Sep 30, 2023 Sep 24, 2022 Sep 25, 2021
—
0.20
0.40
0.60
0.80
1.00
1.20
Current Ratio
Figure 1: Source: Stock Analysis On Net. (n.d.).
4
The diagram in Figure 1 indicates Apple's current ratio from September 2021 to
September 2023. As such, Apple's current assets could not pay off its current liabilities in the
period covered in 2022, as the ratio was less than 1.1. However, the situation changed after
September 2023, when the ratio became greater than one. The case can be attributed to an
increase in current assets compared to current assets, which the company has sustained since
then.
The quick ratio is another liquidity ratio that measures the ability of a company to pay off
its short-term obligations using its most liquid assets, excluding inventories. When the quick
ratio is below 1.0, it could be a sign of possible liquidity problems, whereas a higher ratio shows
a stronger position of liquidity for a company. Referring to Figure 2, Apple's quick ratio also
followed the same pattern as the current ratio in that it declined from 0.91 in 2021 to 0.71 in
2022 before rising to 0.84 in 2023. While the quick ratio was less than ideal at 1.0, it suggested
that Apple had enough liquid assets other than inventories so that they could stand on their own
regarding their obligations.
Sep 30, 2023 Sep 24, 2022 Sep 25, 2021
—
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
Quick ratio
Quick ratio
5
Figure 2: Source: Stock Analysis On Net. (n.d.).
The cash ratio is considered the strictest liquidity measure as it only regards cash and
cash equivalents as liquid assets. Based on Figure 3, the cash buffer to cover current liabilities by
Apple fell from 0.50 in 2021 to 0.31 in 2022, meaning lower cash reserves for this purpose.
However, it increased to 0.42 in FY2023, indicating a stronger cash position.
Sep 30, 2023 Sep 24, 2022 Sep 25, 2021
—
0.10
0.20
0.30
0.40
0.50
0.60
Cash ratio
Cash ratio
Figure 3: Source: Stock Analysis On Net. (n.d.).
All in all, while there was a decline in Apple's liquidity ratios during one year, they began
showing improvement signs during another year; nevertheless, not at an optimal level but still
manageable. Hence, Apple has enough liquid resources to fulfill short-term commitments even
though it showed some tightness regarding its liquidity position.
Solvency Ratios Analysis
The solvency ratios of a company will help the firm understand its long-term financial
obligation and debt management capacity level. The figures give an idea of the company's capital
structure, leverage and overall financial risk. The ratio of a corporation’s debt-to-equity is a vital
6
measure in finding out how much it owes compared to what shareholders have invested (Liu,
2024). Based on Table 2, Apple's debt-to-equity ratio rose from 1.99 in 2021 to 2.39 in 2022,
showing greater amounts of debt in comparison to equity. However, it declined to 1.80 in 2023,
indicating a slight recovery of these capital structures for this organization. It could be a strong
indication that the company debt was being managed well through policies implemented by the
management and executives.
Sep 30, 2023 Sep 24, 2022 Sep 25, 2021
Debt to equity 1.80 2.39 1.99
Debt to assets 0.32 0.34 0.36
Debt to capital 0.64 0.70 0.67
Table 2: Source: Yahoo Finance. (2024).
The debt-to-asset ratio looks at how much of the company's assets are financed using
funds borrowed. A high debt-to-asset ratio would indicate that the company is exposed to the risk
of missing debt repayment due to the high amounts borrowed to acquire assets (Shahfira &
Hasanuh, 2021). In reference to Table 2, Apple's debt-to-asset ratio has been on the decline over
the period in question. It began at 0.36 in 2021, then declined to 0.34 in 2022 and finally to 0.32
in 2023. The trend is owed to the fact that the amount of debt reduced during the period as the
value of assets increased. It is a strong indication that the debt is being managed and the assets
are sufficient to support its operations.
Debt capital ratio measures the extent to which a firm's capitalization consists of
borrowed funds (Sukma et al., 2022). Apple's debt-to-capital ratio followed a similar trend,
increasing from 0.67 in 2021 to reach a peak of 0.70 during the year 2022, then down again to
7
0.64 as indicated towards the year 2023, as shown in Table 1. The trend indicates that Apple
relies heavily on borrowing and financing its operations and growth plans.
In general terms, this implies that solvency ratios indicate that Apple has a highly
leveraged capital structure with an extensive dependency on debt for funding growth initiatives
and operations. However, having a solid net profitability position and sizable operating income
has enabled Apple Inc. to maintain a solid capacity for dealing with liabilities arising from
borrowed funds, servicing them, and paying other costs associated with fixed commitments.
Profitability Ratios Analysis
Profitability ratios offer insights into a firm's capability to create profits from its business
undertakings and investments. These are essential in appraising corporate financial performance
as well as the extent of dividends that can be distributed to shareholders (Kanna et al., 2023). Net
profit margin (NPM) shows how much of every dollar earned by Apple is converted to actual
profit after all expenses have been met. For this period, Apple's net profit margins remained
consistently high at 25.31% in 2023 and 2022 and then increased. However, it was a slight
decrease from 25.88% in 2021, hence reflecting the remarkable ability of the company to
produce sizable earnings from its operations.
Sep 30, 2023 Sep 24, 2022 Sep 25, 2021
Net profit margin 25.31% 25.31% 25.88%
Return on equity (ROE) 156.08% 196.96% 150.07%
Return on assets (ROA) 27.51% 28.29% 26.97%
Table 3: Source: Stock Analysis On Net. (n.d.).
Return on investment (ROI) is a profitability ratio measuring the effectiveness of
investment activities undertaken by an organization. Whereas there were no specific figures
8
given for ROI, it is important to use this measure to assess the effects of Apple’s investment
decisions on profitability. The ratio compares the income generated from the reserves held and
the operating profit in relation to the shareholders’ equity or assets. Table 3 depicts a positive
picture of Apple's rates of return on its equation of equities varying between 150. 07 % in 2021
and hitting 196. 96%. At the same time, it dropped to 156.08% by 2023, potentially due to poor
management control.
Conclusion
The financial performance of Apple is in excellent condition, as denoted by its impressive
ratios and financial position within three years. While the company endured temporary liquidity
issues, it improved its liquidity ratios to meet its short-term obligations. Solvability analysis
indicates that Apple embraces an aggressive capital structure dependent on debt financing.
However, the company has mitigated its debts due to huge operating profits. Regarding
profitability ratios, Apple has high net profit margins and return on equity and assets. These
figures correspond to high operating income by the firm, efficient asset management, and
feasible use of shareholders’ equity.
9
References
Apple Inc. (2024). Investor relations. Retrieved from Apple.com:
https://investor.apple.com/investor-relations/default.aspx
Kanna, H. R., Ruma, Z., & Sahabuddin, R. (2023). Profitability ratio analysis to measure
financial performance at PT. Bank Sulselbar Makassar main branch.IInternational
Journal of Social Science, Education, Communication and Economics (SINOMICS
JOURNAL),I2(3), 463-472.
Kocienda, K. (2018).ICreative selection: Inside Apple's design process during the golden age of
Steve Jobs. Pan Macmillan.
Library of Congress. (n.d.). The founding of Apple Computer, Inc. Retrieved from Library of
Congress: https://guides.loc.gov/this-month-in-business-history/april/apple-computer-
founded#:~:text=and%20Photographs%20Division.-,Apple%20Computer%2C%20Inc.,in
%20their%20homes%20or%20offices.
Liu, Z. (2024). A financial analysis of Apple based on its external and internal
environment.IJournal of Education, Humanities and Social Sciences,I30, 97-104.
Lu, Y. (2024). Financial statement analysis and revenue forecast for Apple Inc. InISHS Web of
ConferencesI(Vol. 181, p. 02020). EDP Sciences.
Shahfira, D., & Hasanuh, N. (2021). The influence of company size and debt to asset ratio on
return on assets.IJurnal Khatulistiwa Informatika,I8(1), 9-13.
Stock Analysis On Net. (n.d.). Apple Inc: Analysis of liquidity ratios. Retrieved from Stock
Analysis On Net:
https://www.stock-analysis-on.net/NASDAQ/Company/Apple-Inc/Ratios/
Liquidity#Ratios-Summary
10
Sukma, R. P., Nurtina, A. R., & Nainggolan, B. M. (2022). Effect of debt ratio, long-term debt to
equity, and firm size on profitability.IJournal of Management and Leadership,I5(1), 27-
37.
Yahoo Finance. (2024). Apple valuation measures. Retrieved from Yahoo Finance:
https://finance.yahoo.com/quote/AAPL/key-statistics/
