Ratio Analysis: Select a company and calculate and
interpret key financial ratios, such as current ratio, quick
ratio, return on equity (ROE), return on assets (ROA), and
gross profit margin. Compare these ratios to industry
benchmarks and discuss the company's financial
performance in relation to its peers.
Introduction
Ratio analysis is a useful tool for evaluating a company's financial health and
performance relative to its industry peers. Key financial ratios shed light on
capital structure, asset efficiency, profitability, liquidity and risk. In this
paper, I will calculate and analyze important ratios for Apple Inc. for the fiscal
year 2019, comparing them to industry standards. I will also benchmark
Apple against competitors like Microsoft, Amazon, Alphabet and Samsung to
assess its relative financial strengths and weaknesses. Apple designs,
manufactures and markets consumer electronics, computer software and
personal computers. As one of the largest technology companies globally,
ratio analysis offers valuable insight into its operational and competitive
position.
Current Ratio
The current ratio measures a company's ability to meet short-term
obligations with current assets and is calculated as current assets divided by
current liabilities.
Apple's current ratio for 2019 was 1.49. This means for every $1 of current
liabilities, Apple had $1.49 in current assets available.
Table 1 compares Apple's current ratio to peers:
Table 1: Current Ratio Benchmark
Company 2019 Current Ratio
Apple 1.49
Microsoft 1.59
Amazon 1.72
Alphabet 1.48
Samsung 0.90
The electronics industry standard current ratio range is considered between
1.20 and 2.00. At 1.49, Apple's current ratio meets this benchmark,
indicating solid short-term financial flexibility. While marginally below
Microsoft and Amazon, its current ratio exceeds Alphabet and is well above
Samsung. Overall, Apple maintains a healthy current position relative to
competitors.
Quick Ratio
The quick ratio measures a company's ability to meet short-term obligations
with its most liquid assets and is calculated by subtracting inventory from
current assets and dividing by current liabilities.
Apple's quick ratio for 2019 was 1.08.
Table 2 compares Apple's quick ratio to peers:
Table 2: Quick Ratio Benchmark
Company 2019 Quick Ratio
Apple 1.08
Microsoft 1.28
Amazon 1.38
Alphabet 1.09
Samsung 0.68
A quick ratio between 1.00 and 2.00 is generally considered satisfactory. At
1.08, Apple's ratio falls within this range, signaling strong ability to meet
near-term debts using liquid assets without relying on inventory conversion.
Its quick ratio exceeds Alphabet but trails Microsoft and Amazon, reflecting
prudent short-term financial management overall.
Return on Equity (ROE)
ROE measures how efficiently management uses shareholder equity to
generate profits and is calculated by dividing net income by shareholders'
equity.
Apple's ROE for 2019 was 59.33%.
Table 3 compares Apple's ROE to industry:
Table 3: Return on Equity Benchmark
Industry ROE Range
Electronics 20-30%
Hardware 20-25%
Software 30-50%
At 59.33%, Apple's ROE vastly exceeds benchmark ROE ranges for
electronics, hardware and software industries, demonstrating exceptional
profit generation from invested equity capital. Clearly, Apple excels at
converting shareholder funds into net earnings.
Return on Assets (ROA)
ROA measures how productively a company uses its total assets to generate
profits and is calculated by dividing net income by total assets.
Apple's ROA for 2019 was 33.17%.
Table 4 compares Apple's ROA to peers:
Table 4: Return on Assets Benchmark
Company 2019 ROA
Apple 33.17%
Microsoft 32.84%
Amazon 6.29%
Alphabet 20.15%
Samsung 8.68%
ROA ranging from 15-25% is considered good for most companies. Apple's
ROA of 33.17% massively outperforms this benchmark, indicating
exceptionally efficient use of capital assets. While marginally below
Microsoft, Apple's ROA towers above Amazon, Samsung and meaningfully
exceeds Alphabet, underscoring tremendously productive asset utilization.
Gross Profit Margin
Gross profit margin measures a company's profitability by subtracting the
costs of production or costs of goods sold from revenues and dividing by
total revenues.
Apple's gross profit margin for 2019 was 59.53%.
Table 5 compares Apple's gross margin to industry:
Table 5: Gross Profit Margin Benchmark
Industry Gross Margin Range
Electronics 30-50%
Hardware 30-40%
Software 60-80%
At 59.53%, Apple's gross margin sits at the top end of software industry
ranges and vastly exceeds benchmarks for electronics and hardware. This
reflects Apple's strong brand pricing power and operational efficiencies in
product cost management.
Interpretation
In summary, ratio analysis finds Apple excels across most metrics compared
to key competitors and industry standards:
- Liquidity ratios of current and quick meet benchmarks, signaling solid short-
term flexibility.
- Exceptionally high ROE and ROA demonstrate incredibly productive use of
capital in generating profits.
- Industry-leading gross margin underscores brand premium and cost control
abilities.
While certain ratios like current are marginally lower than top performers
Microsoft and Amazon, Apple still maintains a very healthy financial position
overall. Clearly, Apple demonstrates a uniquely strong ability to profitably
leverage assets, equity capital and operational resources. This competitive
advantage stems largely from its premium brand equity and pricing clout in
combination with engineering excellence and supply chain efficiencies.
Barring unforeseen disruptions, Apple appears very well positioned
financially and competitively for ongoing success relative to industry peers.
Working Capital Ratios
Working capital refers to a company's short-term reserves available for day-
to-day operations and is calculated as current assets minus current liabilities.
Analyzing key working capital ratios provides further insight into financial
management effectiveness.
Working Capital Turnover
Working capital turnover measures a company's efficiency in converting
working capital invested in operations into revenues and is calculated by
dividing annual revenues by average working capital.
For 2019, Apple's working capital was $86.1 billion while revenues were
$260.2 billion. Calculating working capital as the average of 2019 and 2018
levels yields an average of $81.45 billion.
Apple's working capital turnover for 2019 was 3.19 times.
This ratio indicates that for every $1 of working capital invested, Apple
generated $3.19 in revenues, demonstrating highly efficient use of short-
term reserves in supporting operations.
Average Collection Period
The average collection period shows the average number of days it takes to
collect payment from credit customers and is calculated by dividing accounts
receivable by credit sales/365 days.
Apple's average collection period for 2019 was 50.3 days.
Inventory Turnover
Inventory turnover measures how efficiently a company transforms inventory
into sales over a period and is calculated by dividing costs of goods sold by
average inventory levels.
For 2019, Apple's cost of goods sold was $141.4 billion while average
inventory was $15.4 billion.
Apple's inventory turnover for 2019 was 9.19 times.
Together, these ratios show Apple maintains very healthy working capital
management by collecting receivables in a timely manner of 50 days on
average, and efficiently converting inventory holdings almost 10 times
annually into revenues. This illustrates highly optimized short-term financial
controls.
Working Capital Performance
A key measure of short-term financial management is net operating working
capital performance, which is based on how working capital requirements
change relative to revenue growth.
Apple grew revenues 7.9% in 2019 to $260.2 billion. Over this period, its net
operating working capital declined 7.2% to $86.1 billion.
This inverse relationship indicates Apple achieved revenue growth while
reducing overall working capital needs, demonstrating stellar efforts in
preserving capital for reinvestment internally or return to shareholders. Few
technology firms maintain this caliber of working capital efficiency at Apple's
scale.
Debt Ratios
Leverage ratios shed light on a company's use of debt capital in financing
growth. Conservative debt levels minimize financial risk.
Debt-to-Equity Ratio
The debt-to-equity ratio indicates the degree of external financing through
debt liabilities versus internal financing through shareholder equity. It is
calculated by dividing total debt by shareholders' equity.
For 2019, Apple's total debt was $110.8 billion while shareholders' equity
was $114.9 billion.
Apple's debt-to-equity ratio was 0.96x.
Debt-to-Assets Ratio
The debt-to-assets ratio measures the proportion of assets financed through
debt obligations and is calculated by dividing total debt by total assets.
For 2019, Apple's total assets were $338.8 billion.
Apple's debt-to-assets ratio was 0.33x.
These conservative leverage ratios demonstrate Apple's preference to
largely finance growth from profits generated rather than debt, minimizing
credit risk and interest costs. This prudent financial strategy supports its
exceptional credit ratings and flexibility.
Interest Coverage Ratio
The interest coverage ratio indicates a company's ability to service
outstanding debt through earnings generated. It is calculated by dividing
earnings before interest and taxes (EBIT) by annual interest expense.
For 2019, Apple's EBIT was $72.7 billion while interest expenses were $4.3
billion.
Apple's interest coverage ratio was 16.93x.
With an interest coverage ratio well above the minimum industry standard of
2x, Apple enjoys immense flexibility to meet debt obligations many times
over from its robust operating cash flows alone. Very few tech firms manage
debt as conservatively as Apple.
Liquidity Ratios
Additional measures of short-term financial health involve liquidity or cash
levels. The current cash ratio and cash ratio capture this.
Current Cash Ratio
The current cash ratio gauges short-term financial resilience, calculated as
cash and cash equivalents divided by current liabilities.
For 2019, Apple's cash/equivalents were $102.8 billion versus current
liabilities of $131.4 billion.
Apple's current cash ratio was 0.78x.
Cash Ratio
The cash ratio measures a company's ability to fund operations through cash
holdings alone. It is calculated by dividing cash & cash equivalents by current
liabilities.
For 2019, Apple's cash ratio was 0.78x.
These robust liquidity ratios reinforce Apple's exceptionally strong financial
position to meet short-term obligations in cash if necessary without relying
on the conversion of less quick current assets like receivables or inventory.
Few technology firms manage capital with Apple's astuteness.
Conclusion
In conclusion, a comprehensive analysis of Apple's key financial ratios for
2019 relative to industry standards and major competitors finds it excels
across virtually all measures of operational effectiveness, capital structure
efficiencies and prudent financial risk management. Particularly impressive
are ratios reflecting exceptionally high profitability from assets and equity,
conservative leverage policies and gigantic cash holdings. While certain
current ratios lag the absolute leaders, Apple still far surpasses benchmarks
overall. Most impressively, Apple achieved this superior performance from its
prudently managed balance sheet at its enormous multi-billion dollar scale of
operations. Unless broader economic conditions deteriorate markedly, Apple
is clearly positioned as one of the strongest and most financially secure
technology firms globally based on this ratio benchmarking assessment.
Ongoing competitive advantages from its premium brand equity and
engineering prowess should enable continued industry-leading financial
performance.
Ratio analysis is a useful tool for evaluating a company's financial health and
performance relative to its industry peers. Key financial ratios shed light on
capital structure, asset efficiency, profitability, liquidity and risk. In this
paper, I will calculate and analyze important ratios for Apple Inc. for the fiscal
year 2019, comparing them to industry standards. I will also benchmark
Apple against competitors like Microsoft, Amazon, Alphabet and Samsung to
assess its relative financial strengths and weaknesses. Apple designs,
manufactures and markets consumer electronics, computer software and
personal computers. As one of the largest technology companies globally,
ratio analysis offers valuable insight into its operational and competitive
position.
Current Ratio
The current ratio measures a company's ability to meet short-term
obligations with current assets and is calculated as current assets divided by
current liabilities.
Apple's current ratio for 2019 was 1.49. This means for every $1 of current
liabilities, Apple had $1.49 in current assets available.
Table 1 compares Apple's current ratio to peers:
Table 1: Current Ratio Benchmark
Company 2019 Current Ratio
Apple 1.49
Microsoft 1.59
Amazon 1.72
Alphabet 1.48
Samsung 0.90
The electronics industry standard current ratio range is considered between
1.20 and 2.00. At 1.49, Apple's current ratio meets this benchmark,
indicating solid short-term financial flexibility. While marginally below
Microsoft and Amazon, its current ratio exceeds Alphabet and is well above
Samsung. Overall, Apple maintains a healthy current position relative to
competitors.
Quick Ratio
The quick ratio measures a company's ability to meet short-term obligations
with its most liquid assets and is calculated by subtracting inventory from
current assets and dividing by current liabilities.
Apple's quick ratio for 2019 was 1.08.
Table 2 compares Apple's quick ratio to peers:
Table 2: Quick Ratio Benchmark
Company 2019 Quick Ratio
Apple 1.08
Microsoft 1.28
Amazon 1.38
Alphabet 1.09
Samsung 0.68
A quick ratio between 1.00 and 2.00 is generally considered satisfactory. At
1.08, Apple's ratio falls within this range, signaling strong ability to meet
near-term debts using liquid assets without relying on inventory conversion.
Its quick ratio exceeds Alphabet but trails Microsoft and Amazon, reflecting
prudent short-term financial management overall.
Return on Equity (ROE)
ROE measures how efficiently management uses shareholder equity to
generate profits and is calculated by dividing net income by shareholders'
equity.
Apple's ROE for 2019 was 59.33%.
Table 3 compares Apple's ROE to industry:
Table 3: Return on Equity Benchmark
Industry ROE Range
Electronics 20-30%
Hardware 20-25%
Software 30-50%
At 59.33%, Apple's ROE vastly exceeds benchmark ROE ranges for
electronics, hardware and software industries, demonstrating exceptional
profit generation from invested equity capital. Clearly, Apple excels at
converting shareholder funds into net earnings.
Return on Assets (ROA)
ROA measures how productively a company uses its total assets to generate
profits and is calculated by dividing net income by total assets.
Apple's ROA for 2019 was 33.17%.
Table 4 compares Apple's ROA to peers:
Table 4: Return on Assets Benchmark
Company 2019 ROA
Apple 33.17%
Microsoft 32.84%
Amazon 6.29%
Alphabet 20.15%
Samsung 8.68%
ROA ranging from 15-25% is considered good for most companies. Apple's
ROA of 33.17% massively outperforms this benchmark, indicating
exceptionally efficient use of capital assets. While marginally below
Microsoft, Apple's ROA towers above Amazon, Samsung and meaningfully
exceeds Alphabet, underscoring tremendously productive asset utilization.
Gross Profit Margin
Gross profit margin measures a company's profitability by subtracting the
costs of production or costs of goods sold from revenues and dividing by
total revenues.
Apple's gross profit margin for 2019 was 59.53%.
Table 5 compares Apple's gross margin to industry:
Table 5: Gross Profit Margin Benchmark
Industry Gross Margin Range
Electronics 30-50%
Hardware 30-40%
Software 60-80%
At 59.53%, Apple's gross margin sits at the top end of software industry
ranges and vastly exceeds benchmarks for electronics and hardware. This
reflects Apple's strong brand pricing power and operational efficiencies in
product cost management.
Interpretation
In summary, ratio analysis finds Apple excels across most metrics compared
to key competitors and industry standards:
- Liquidity ratios of current and quick meet benchmarks, signaling solid short-
term flexibility.
- Exceptionally high ROE and ROA demonstrate incredibly productive use of
capital in generating profits.
- Industry-leading gross margin underscores brand premium and cost control
abilities.
While certain ratios like current are marginally lower than top performers
Microsoft and Amazon, Apple still maintains a very healthy financial position
overall. Clearly, Apple demonstrates a uniquely strong ability to profitably
leverage assets, equity capital and operational resources. This competitive
advantage stems largely from its premium brand equity and pricing clout in
combination with engineering excellence and supply chain efficiencies.
Barring unforeseen disruptions, Apple appears very well positioned
financially and competitively for ongoing success relative to industry peers.
Working Capital Ratios
Working capital refers to a company's short-term reserves available for day-
to-day operations and is calculated as current assets minus current liabilities.
Analyzing key working capital ratios provides further insight into financial
management effectiveness.
Working Capital Turnover
Working capital turnover measures a company's efficiency in converting
working capital invested in operations into revenues and is calculated by
dividing annual revenues by average working capital.
For 2019, Apple's working capital was $86.1 billion while revenues were
$260.2 billion. Calculating working capital as the average of 2019 and 2018
levels yields an average of $81.45 billion.
Apple's working capital turnover for 2019 was 3.19 times.
This ratio indicates that for every $1 of working capital invested, Apple
generated $3.19 in revenues, demonstrating highly efficient use of short-
term reserves in supporting operations.
Average Collection Period
The average collection period shows the average number of days it takes to
collect payment from credit customers and is calculated by dividing accounts
receivable by credit sales/365 days.
Apple's average collection period for 2019 was 50.3 days.
Inventory Turnover
Inventory turnover measures how efficiently a company transforms inventory
into sales over a period and is calculated by dividing costs of goods sold by
average inventory levels.
For 2019, Apple's cost of goods sold was $141.4 billion while average
inventory was $15.4 billion.
Apple's inventory turnover for 2019 was 9.19 times.
Together, these ratios show Apple maintains very healthy working capital
management by collecting receivables in a timely manner of 50 days on
average, and efficiently converting inventory holdings almost 10 times
annually into revenues. This illustrates highly optimized short-term financial
controls.
Working Capital Performance
A key measure of short-term financial management is net operating working
capital performance, which is based on how working capital requirements
change relative to revenue growth.
Apple grew revenues 7.9% in 2019 to $260.2 billion. Over this period, its net
operating working capital declined 7.2% to $86.1 billion.
This inverse relationship indicates Apple achieved revenue growth while
reducing overall working capital needs, demonstrating stellar efforts in
preserving capital for reinvestment internally or return to shareholders. Few
technology firms maintain this caliber of working capital efficiency at Apple's
scale.
Debt Ratios
Leverage ratios shed light on a company's use of debt capital in financing
growth. Conservative debt levels minimize financial risk.
Debt-to-Equity Ratio
The debt-to-equity ratio indicates the degree of external financing through
debt liabilities versus internal financing through shareholder equity. It is
calculated by dividing total debt by shareholders' equity.
For 2019, Apple's total debt was $110.8 billion while shareholders' equity
was $114.9 billion.
Apple's debt-to-equity ratio was 0.96x.
Debt-to-Assets Ratio
The debt-to-assets ratio measures the proportion of assets financed through
debt obligations and is calculated by dividing total debt by total assets.
For 2019, Apple's total assets were $338.8 billion.
Apple's debt-to-assets ratio was 0.33x.
These conservative leverage ratios demonstrate Apple's preference to
largely finance growth from profits generated rather than debt, minimizing
credit risk and interest costs. This prudent financial strategy supports its
exceptional credit ratings and flexibility.
Interest Coverage Ratio
The interest coverage ratio indicates a company's ability to service
outstanding debt through earnings generated. It is calculated by dividing
earnings before interest and taxes (EBIT) by annual interest expense.
For 2019, Apple's EBIT was $72.7 billion while interest expenses were $4.3
billion.
Apple's interest coverage ratio was 16.93x.
With an interest coverage ratio well above the minimum industry standard of
2x, Apple enjoys immense flexibility to meet debt obligations many times
over from its robust operating cash flows alone. Very few tech firms manage
debt as conservatively as Apple.
Liquidity Ratios
Additional measures of short-term financial health involve liquidity or cash
levels. The current cash ratio and cash ratio capture this.
Current Cash Ratio
The current cash ratio gauges short-term financial resilience, calculated as
cash and cash equivalents divided by current liabilities.
For 2019, Apple's cash/equivalents were $102.8 billion versus current
liabilities of $131.4 billion.
Apple's current cash ratio was 0.78x.
Cash Ratio
The cash ratio measures a company's ability to fund operations through cash
holdings alone. It is calculated by dividing cash & cash equivalents by current
liabilities.
For 2019, Apple's cash ratio was 0.78x.
These robust liquidity ratios reinforce Apple's exceptionally strong financial
position to meet short-term obligations in cash if necessary without relying
on the conversion of less quick current assets like receivables or inventory.
Few technology firms manage capital with Apple's astuteness.
Conclusion
In conclusion, a comprehensive analysis of Apple's key financial ratios for
2019 relative to industry standards and major competitors finds it excels
across virtually all measures of operational effectiveness, capital structure
efficiencies and prudent financial risk management. Particularly impressive
are ratios reflecting exceptionally high profitability from assets and equity,
conservative leverage policies and gigantic cash holdings. While certain
current ratios lag the absolute leaders, Apple still far surpasses benchmarks
overall. Most impressively, Apple achieved this superior performance from its
prudently managed balance sheet at its enormous multi-billion dollar scale of
operations. Unless broader economic conditions deteriorate markedly, Apple
is clearly positioned as one of the strongest and most financially secure
technology firms globally based on this ratio benchmarking assessment.
Ongoing competitive advantages from its premium brand equity and
engineering prowess should enable continued industry-leading financial
performance.
Ratio analysis is a useful tool for evaluating a company's financial health and
performance relative to its industry peers. Key financial ratios shed light on
capital structure, asset efficiency, profitability, liquidity and risk. In this
paper, I will calculate and analyze important ratios for Apple Inc. for the fiscal
year 2019, comparing them to industry standards. I will also benchmark
Apple against competitors like Microsoft, Amazon, Alphabet and Samsung to
assess its relative financial strengths and weaknesses. Apple designs,
manufactures and markets consumer electronics, computer software and
personal computers. As one of the largest technology companies globally,
ratio analysis offers valuable insight into its operational and competitive
position.
Current Ratio
The current ratio measures a company's ability to meet short-term
obligations with current assets and is calculated as current assets divided by
current liabilities.
Apple's current ratio for 2019 was 1.49. This means for every $1 of current
liabilities, Apple had $1.49 in current assets available.
Table 1 compares Apple's current ratio to peers:
Table 1: Current Ratio Benchmark
Company 2019 Current Ratio
Apple 1.49
Microsoft 1.59
Amazon 1.72
Alphabet 1.48
Samsung 0.90
The electronics industry standard current ratio range is considered between
1.20 and 2.00. At 1.49, Apple's current ratio meets this benchmark,
indicating solid short-term financial flexibility. While marginally below
Microsoft and Amazon, its current ratio exceeds Alphabet and is well above
Samsung. Overall, Apple maintains a healthy current position relative to
competitors.
Quick Ratio
The quick ratio measures a company's ability to meet short-term obligations
with its most liquid assets and is calculated by subtracting inventory from
current assets and dividing by current liabilities.
Apple's quick ratio for 2019 was 1.08.
Table 2 compares Apple's quick ratio to peers:
Table 2: Quick Ratio Benchmark
Company 2019 Quick Ratio
Apple 1.08
Microsoft 1.28
Amazon 1.38
Alphabet 1.09
Samsung 0.68
A quick ratio between 1.00 and 2.00 is generally considered satisfactory. At
1.08, Apple's ratio falls within this range, signaling strong ability to meet
near-term debts using liquid assets without relying on inventory conversion.
Its quick ratio exceeds Alphabet but trails Microsoft and Amazon, reflecting
prudent short-term financial management overall.
Return on Equity (ROE)
ROE measures how efficiently management uses shareholder equity to
generate profits and is calculated by dividing net income by shareholders'
equity.
Apple's ROE for 2019 was 59.33%.
Table 3 compares Apple's ROE to industry:
Table 3: Return on Equity Benchmark
Industry ROE Range
Electronics 20-30%
Hardware 20-25%
Software 30-50%
At 59.33%, Apple's ROE vastly exceeds benchmark ROE ranges for
electronics, hardware and software industries, demonstrating exceptional
profit generation from invested equity capital. Clearly, Apple excels at
converting shareholder funds into net earnings.
Return on Assets (ROA)
ROA measures how productively a company uses its total assets to generate
profits and is calculated by dividing net income by total assets.
Apple's ROA for 2019 was 33.17%.
Table 4 compares Apple's ROA to peers:
Table 4: Return on Assets Benchmark
Company 2019 ROA
Apple 33.17%
Microsoft 32.84%
Amazon 6.29%
Alphabet 20.15%
Samsung 8.68%
ROA ranging from 15-25% is considered good for most companies. Apple's
ROA of 33.17% massively outperforms this benchmark, indicating
exceptionally efficient use of capital assets. While marginally below
Microsoft, Apple's ROA towers above Amazon, Samsung and meaningfully
exceeds Alphabet, underscoring tremendously productive asset utilization.
Gross Profit Margin
Gross profit margin measures a company's profitability by subtracting the
costs of production or costs of goods sold from revenues and dividing by
total revenues.
Apple's gross profit margin for 2019 was 59.53%.
Table 5 compares Apple's gross margin to industry:
Table 5: Gross Profit Margin Benchmark
Industry Gross Margin Range
Electronics 30-50%
Hardware 30-40%
Software 60-80%
At 59.53%, Apple's gross margin sits at the top end of software industry
ranges and vastly exceeds benchmarks for electronics and hardware. This
reflects Apple's strong brand pricing power and operational efficiencies in
product cost management.
Interpretation
In summary, ratio analysis finds Apple excels across most metrics compared
to key competitors and industry standards:
- Liquidity ratios of current and quick meet benchmarks, signaling solid short-
term flexibility.
- Exceptionally high ROE and ROA demonstrate incredibly productive use of
capital in generating profits.
- Industry-leading gross margin underscores brand premium and cost control
abilities.
While certain ratios like current are marginally lower than top performers
Microsoft and Amazon, Apple still maintains a very healthy financial position
overall. Clearly, Apple demonstrates a uniquely strong ability to profitably
leverage assets, equity capital and operational resources. This competitive
advantage stems largely from its premium brand equity and pricing clout in
combination with engineering excellence and supply chain efficiencies.
Barring unforeseen disruptions, Apple appears very well positioned
financially and competitively for ongoing success relative to industry peers.
Working Capital Ratios
Working capital refers to a company's short-term reserves available for day-
to-day operations and is calculated as current assets minus current liabilities.
Analyzing key working capital ratios provides further insight into financial
management effectiveness.
Working Capital Turnover
Working capital turnover measures a company's efficiency in converting
working capital invested in operations into revenues and is calculated by
dividing annual revenues by average working capital.
For 2019, Apple's working capital was $86.1 billion while revenues were
$260.2 billion. Calculating working capital as the average of 2019 and 2018
levels yields an average of $81.45 billion.
Apple's working capital turnover for 2019 was 3.19 times.
This ratio indicates that for every $1 of working capital invested, Apple
generated $3.19 in revenues, demonstrating highly efficient use of short-
term reserves in supporting operations.
Average Collection Period
The average collection period shows the average number of days it takes to
collect payment from credit customers and is calculated by dividing accounts
receivable by credit sales/365 days.
Apple's average collection period for 2019 was 50.3 days.
Inventory Turnover
Inventory turnover measures how efficiently a company transforms inventory
into sales over a period and is calculated by dividing costs of goods sold by
average inventory levels.
For 2019, Apple's cost of goods sold was $141.4 billion while average
inventory was $15.4 billion.
Apple's inventory turnover for 2019 was 9.19 times.
Together, these ratios show Apple maintains very healthy working capital
management by collecting receivables in a timely manner of 50 days on
average, and efficiently converting inventory holdings almost 10 times
annually into revenues. This illustrates highly optimized short-term financial
controls.
Working Capital Performance
A key measure of short-term financial management is net operating working
capital performance, which is based on how working capital requirements
change relative to revenue growth.
Apple grew revenues 7.9% in 2019 to $260.2 billion. Over this period, its net
operating working capital declined 7.2% to $86.1 billion.
This inverse relationship indicates Apple achieved revenue growth while
reducing overall working capital needs, demonstrating stellar efforts in
preserving capital for reinvestment internally or return to shareholders. Few
technology firms maintain this caliber of working capital efficiency at Apple's
scale.
Debt Ratios
Leverage ratios shed light on a company's use of debt capital in financing
growth. Conservative debt levels minimize financial risk.
Debt-to-Equity Ratio
The debt-to-equity ratio indicates the degree of external financing through
debt liabilities versus internal financing through shareholder equity. It is
calculated by dividing total debt by shareholders' equity.
For 2019, Apple's total debt was $110.8 billion while shareholders' equity
was $114.9 billion.
Apple's debt-to-equity ratio was 0.96x.
Debt-to-Assets Ratio
The debt-to-assets ratio measures the proportion of assets financed through
debt obligations and is calculated by dividing total debt by total assets.
For 2019, Apple's total assets were $338.8 billion.
Apple's debt-to-assets ratio was 0.33x.
These conservative leverage ratios demonstrate Apple's preference to
largely finance growth from profits generated rather than debt, minimizing
credit risk and interest costs. This prudent financial strategy supports its
exceptional credit ratings and flexibility.
Interest Coverage Ratio
The interest coverage ratio indicates a company's ability to service
outstanding debt through earnings generated. It is calculated by dividing
earnings before interest and taxes (EBIT) by annual interest expense.
For 2019, Apple's EBIT was $72.7 billion while interest expenses were $4.3
billion.
Apple's interest coverage ratio was 16.93x.
With an interest coverage ratio well above the minimum industry standard of
2x, Apple enjoys immense flexibility to meet debt obligations many times
over from its robust operating cash flows alone. Very few tech firms manage
debt as conservatively as Apple.
Liquidity Ratios
Additional measures of short-term financial health involve liquidity or cash
levels. The current cash ratio and cash ratio capture this.
Current Cash Ratio
The current cash ratio gauges short-term financial resilience, calculated as
cash and cash equivalents divided by current liabilities.
For 2019, Apple's cash/equivalents were $102.8 billion versus current
liabilities of $131.4 billion.
Apple's current cash ratio was 0.78x.
Cash Ratio
The cash ratio measures a company's ability to fund operations through cash
holdings alone. It is calculated by dividing cash & cash equivalents by current
liabilities.
For 2019, Apple's cash ratio was 0.78x.
These robust liquidity ratios reinforce Apple's exceptionally strong financial
position to meet short-term obligations in cash if necessary without relying
on the conversion of less quick current assets like receivables or inventory.
Few technology firms manage capital with Apple's astuteness.
Conclusion
In conclusion, a comprehensive analysis of Apple's key financial ratios for
2019 relative to industry standards and major competitors finds it excels
across virtually all measures of operational effectiveness, capital structure
efficiencies and prudent financial risk management. Particularly impressive
are ratios reflecting exceptionally high profitability from assets and equity,
conservative leverage policies and gigantic cash holdings. While certain
current ratios lag the absolute leaders, Apple still far surpasses benchmarks
overall. Most impressively, Apple achieved this superior performance from its
prudently managed balance sheet at its enormous multi-billion dollar scale of
operations. Unless broader economic conditions deteriorate markedly, Apple
is clearly positioned as one of the strongest and most financially secure
technology firms globally based on this ratio benchmarking assessment.
Ongoing competitive advantages from its premium brand equity and
engineering prowess should enable continued industry-leading financial
performance.
Ratio analysis is a useful tool for evaluating a company's financial health and
performance relative to its industry peers. Key financial ratios shed light on
capital structure, asset efficiency, profitability, liquidity and risk. In this
paper, I will calculate and analyze important ratios for Apple Inc. for the fiscal
year 2019, comparing them to industry standards. I will also benchmark
Apple against competitors like Microsoft, Amazon, Alphabet and Samsung to
assess its relative financial strengths and weaknesses. Apple designs,
manufactures and markets consumer electronics, computer software and
personal computers. As one of the largest technology companies globally,
ratio analysis offers valuable insight into its operational and competitive
position.
Current Ratio
The current ratio measures a company's ability to meet short-term
obligations with current assets and is calculated as current assets divided by
current liabilities.
Apple's current ratio for 2019 was 1.49. This means for every $1 of current
liabilities, Apple had $1.49 in current assets available.
Table 1 compares Apple's current ratio to peers:
Table 1: Current Ratio Benchmark
Company 2019 Current Ratio
Apple 1.49
Microsoft 1.59
Amazon 1.72
Alphabet 1.48
Samsung 0.90
The electronics industry standard current ratio range is considered between
1.20 and 2.00. At 1.49, Apple's current ratio meets this benchmark,
indicating solid short-term financial flexibility. While marginally below
Microsoft and Amazon, its current ratio exceeds Alphabet and is well above
Samsung. Overall, Apple maintains a healthy current position relative to
competitors.
Quick Ratio
The quick ratio measures a company's ability to meet short-term obligations
with its most liquid assets and is calculated by subtracting inventory from
current assets and dividing by current liabilities.
Apple's quick ratio for 2019 was 1.08.
Table 2 compares Apple's quick ratio to peers:
Table 2: Quick Ratio Benchmark
Company 2019 Quick Ratio
Apple 1.08
Microsoft 1.28
Amazon 1.38
Alphabet 1.09
Samsung 0.68
A quick ratio between 1.00 and 2.00 is generally considered satisfactory. At
1.08, Apple's ratio falls within this range, signaling strong ability to meet
near-term debts using liquid assets without relying on inventory conversion.
Its quick ratio exceeds Alphabet but trails Microsoft and Amazon, reflecting
prudent short-term financial management overall.
Return on Equity (ROE)
ROE measures how efficiently management uses shareholder equity to
generate profits and is calculated by dividing net income by shareholders'
equity.
Apple's ROE for 2019 was 59.33%.
Table 3 compares Apple's ROE to industry:
Table 3: Return on Equity Benchmark
Industry ROE Range
Electronics 20-30%
Hardware 20-25%
Software 30-50%
At 59.33%, Apple's ROE vastly exceeds benchmark ROE ranges for
electronics, hardware and software industries, demonstrating exceptional
profit generation from invested equity capital. Clearly, Apple excels at
converting shareholder funds into net earnings.
Return on Assets (ROA)
ROA measures how productively a company uses its total assets to generate
profits and is calculated by dividing net income by total assets.
Apple's ROA for 2019 was 33.17%.
Table 4 compares Apple's ROA to peers:
Table 4: Return on Assets Benchmark
Company 2019 ROA
Apple 33.17%
Microsoft 32.84%
Amazon 6.29%
Alphabet 20.15%
Samsung 8.68%
ROA ranging from 15-25% is considered good for most companies. Apple's
ROA of 33.17% massively outperforms this benchmark, indicating
exceptionally efficient use of capital assets. While marginally below
Microsoft, Apple's ROA towers above Amazon, Samsung and meaningfully
exceeds Alphabet, underscoring tremendously productive asset utilization.
Gross Profit Margin
Gross profit margin measures a company's profitability by subtracting the
costs of production or costs of goods sold from revenues and dividing by
total revenues.
Apple's gross profit margin for 2019 was 59.53%.
Table 5 compares Apple's gross margin to industry:
Table 5: Gross Profit Margin Benchmark
Industry Gross Margin Range
Electronics 30-50%
Hardware 30-40%
Software 60-80%
At 59.53%, Apple's gross margin sits at the top end of software industry
ranges and vastly exceeds benchmarks for electronics and hardware. This
reflects Apple's strong brand pricing power and operational efficiencies in
product cost management.
Interpretation
In summary, ratio analysis finds Apple excels across most metrics compared
to key competitors and industry standards:
- Liquidity ratios of current and quick meet benchmarks, signaling solid short-
term flexibility.
- Exceptionally high ROE and ROA demonstrate incredibly productive use of
capital in generating profits.
- Industry-leading gross margin underscores brand premium and cost control
abilities.
While certain ratios like current are marginally lower than top performers
Microsoft and Amazon, Apple still maintains a very healthy financial position
overall. Clearly, Apple demonstrates a uniquely strong ability to profitably
leverage assets, equity capital and operational resources. This competitive
advantage stems largely from its premium brand equity and pricing clout in
combination with engineering excellence and supply chain efficiencies.
Barring unforeseen disruptions, Apple appears very well positioned
financially and competitively for ongoing success relative to industry peers.
Working Capital Ratios
Working capital refers to a company's short-term reserves available for day-
to-day operations and is calculated as current assets minus current liabilities.
Analyzing key working capital ratios provides further insight into financial
management effectiveness.
Working Capital Turnover
Working capital turnover measures a company's efficiency in converting
working capital invested in operations into revenues and is calculated by
dividing annual revenues by average working capital.
For 2019, Apple's working capital was $86.1 billion while revenues were
$260.2 billion. Calculating working capital as the average of 2019 and 2018
levels yields an average of $81.45 billion.
Apple's working capital turnover for 2019 was 3.19 times.
This ratio indicates that for every $1 of working capital invested, Apple
generated $3.19 in revenues, demonstrating highly efficient use of short-
term reserves in supporting operations.
Average Collection Period
The average collection period shows the average number of days it takes to
collect payment from credit customers and is calculated by dividing accounts
receivable by credit sales/365 days.
Apple's average collection period for 2019 was 50.3 days.
Inventory Turnover
Inventory turnover measures how efficiently a company transforms inventory
into sales over a period and is calculated by dividing costs of goods sold by
average inventory levels.
For 2019, Apple's cost of goods sold was $141.4 billion while average
inventory was $15.4 billion.
Apple's inventory turnover for 2019 was 9.19 times.
Together, these ratios show Apple maintains very healthy working capital
management by collecting receivables in a timely manner of 50 days on
average, and efficiently converting inventory holdings almost 10 times
annually into revenues. This illustrates highly optimized short-term financial
controls.
Working Capital Performance
A key measure of short-term financial management is net operating working
capital performance, which is based on how working capital requirements
change relative to revenue growth.
Apple grew revenues 7.9% in 2019 to $260.2 billion. Over this period, its net
operating working capital declined 7.2% to $86.1 billion.
This inverse relationship indicates Apple achieved revenue growth while
reducing overall working capital needs, demonstrating stellar efforts in
preserving capital for reinvestment internally or return to shareholders. Few
technology firms maintain this caliber of working capital efficiency at Apple's
scale.
Debt Ratios
Leverage ratios shed light on a company's use of debt capital in financing
growth. Conservative debt levels minimize financial risk.
Debt-to-Equity Ratio
The debt-to-equity ratio indicates the degree of external financing through
debt liabilities versus internal financing through shareholder equity. It is
calculated by dividing total debt by shareholders' equity.
For 2019, Apple's total debt was $110.8 billion while shareholders' equity
was $114.9 billion.
Apple's debt-to-equity ratio was 0.96x.
Debt-to-Assets Ratio
The debt-to-assets ratio measures the proportion of assets financed through
debt obligations and is calculated by dividing total debt by total assets.
For 2019, Apple's total assets were $338.8 billion.
Apple's debt-to-assets ratio was 0.33x.
These conservative leverage ratios demonstrate Apple's preference to
largely finance growth from profits generated rather than debt, minimizing
credit risk and interest costs. This prudent financial strategy supports its
exceptional credit ratings and flexibility.
Interest Coverage Ratio
The interest coverage ratio indicates a company's ability to service
outstanding debt through earnings generated. It is calculated by dividing
earnings before interest and taxes (EBIT) by annual interest expense.
For 2019, Apple's EBIT was $72.7 billion while interest expenses were $4.3
billion.
Apple's interest coverage ratio was 16.93x.
With an interest coverage ratio well above the minimum industry standard of
2x, Apple enjoys immense flexibility to meet debt obligations many times
over from its robust operating cash flows alone. Very few tech firms manage
debt as conservatively as Apple.
Liquidity Ratios
Additional measures of short-term financial health involve liquidity or cash
levels. The current cash ratio and cash ratio capture this.
Current Cash Ratio
The current cash ratio gauges short-term financial resilience, calculated as
cash and cash equivalents divided by current liabilities.
For 2019, Apple's cash/equivalents were $102.8 billion versus current
liabilities of $131.4 billion.
Apple's current cash ratio was 0.78x.
Cash Ratio
The cash ratio measures a company's ability to fund operations through cash
holdings alone. It is calculated by dividing cash & cash equivalents by current
liabilities.
For 2019, Apple's cash ratio was 0.78x.
These robust liquidity ratios reinforce Apple's exceptionally strong financial
position to meet short-term obligations in cash if necessary without relying
on the conversion of less quick current assets like receivables or inventory.
Few technology firms manage capital with Apple's astuteness.
Conclusion
In conclusion, a comprehensive analysis of Apple's key financial ratios for
2019 relative to industry standards and major competitors finds it excels
across virtually all measures of operational effectiveness, capital structure
efficiencies and prudent financial risk management. Particularly impressive
are ratios reflecting exceptionally high profitability from assets and equity,
conservative leverage policies and gigantic cash holdings. While certain
current ratios lag the absolute leaders, Apple still far surpasses benchmarks
overall. Most impressively, Apple achieved this superior performance from its
prudently managed balance sheet at its enormous multi-billion dollar scale of
operations. Unless broader economic conditions deteriorate markedly, Apple
is clearly positioned as one of the strongest and most financially secure
technology firms globally based on this ratio benchmarking assessment.
Ongoing competitive advantages from its premium brand equity and
engineering prowess should enable continued industry-leading financial
performance.
Ratio analysis is a useful tool for evaluating a company's financial health and
performance relative to its industry peers. Key financial ratios shed light on
capital structure, asset efficiency, profitability, liquidity and risk. In this
paper, I will calculate and analyze important ratios for Apple Inc. for the fiscal
year 2019, comparing them to industry standards. I will also benchmark
Apple against competitors like Microsoft, Amazon, Alphabet and Samsung to
assess its relative financial strengths and weaknesses. Apple designs,
manufactures and markets consumer electronics, computer software and
personal computers. As one of the largest technology companies globally,
ratio analysis offers valuable insight into its operational and competitive
position.
Current Ratio
The current ratio measures a company's ability to meet short-term
obligations with current assets and is calculated as current assets divided by
current liabilities.
Apple's current ratio for 2019 was 1.49. This means for every $1 of current
liabilities, Apple had $1.49 in current assets available.
Table 1 compares Apple's current ratio to peers:
Table 1: Current Ratio Benchmark
Company 2019 Current Ratio
Apple 1.49
Microsoft 1.59
Amazon 1.72
Alphabet 1.48
Samsung 0.90
The electronics industry standard current ratio range is considered between
1.20 and 2.00. At 1.49, Apple's current ratio meets this benchmark,
indicating solid short-term financial flexibility. While marginally below
Microsoft and Amazon, its current ratio exceeds Alphabet and is well above
Samsung. Overall, Apple maintains a healthy current position relative to
competitors.
Quick Ratio
The quick ratio measures a company's ability to meet short-term obligations
with its most liquid assets and is calculated by subtracting inventory from
current assets and dividing by current liabilities.
Apple's quick ratio for 2019 was 1.08.
Table 2 compares Apple's quick ratio to peers:
Table 2: Quick Ratio Benchmark
Company 2019 Quick Ratio
Apple 1.08
Microsoft 1.28
Amazon 1.38
Alphabet 1.09
Samsung 0.68
A quick ratio between 1.00 and 2.00 is generally considered satisfactory. At
1.08, Apple's ratio falls within this range, signaling strong ability to meet
near-term debts using liquid assets without relying on inventory conversion.
Its quick ratio exceeds Alphabet but trails Microsoft and Amazon, reflecting
prudent short-term financial management overall.
Return on Equity (ROE)
ROE measures how efficiently management uses shareholder equity to
generate profits and is calculated by dividing net income by shareholders'
equity.
Apple's ROE for 2019 was 59.33%.
Table 3 compares Apple's ROE to industry:
Table 3: Return on Equity Benchmark
Industry ROE Range
Electronics 20-30%
Hardware 20-25%
Software 30-50%
At 59.33%, Apple's ROE vastly exceeds benchmark ROE ranges for
electronics, hardware and software industries, demonstrating exceptional
profit generation from invested equity capital. Clearly, Apple excels at
converting shareholder funds into net earnings.
Return on Assets (ROA)
ROA measures how productively a company uses its total assets to generate
profits and is calculated by dividing net income by total assets.
Apple's ROA for 2019 was 33.17%.
Table 4 compares Apple's ROA to peers:
Table 4: Return on Assets Benchmark
Company 2019 ROA
Apple 33.17%
Microsoft 32.84%
Amazon 6.29%
Alphabet 20.15%
Samsung 8.68%
ROA ranging from 15-25% is considered good for most companies. Apple's
ROA of 33.17% massively outperforms this benchmark, indicating
exceptionally efficient use of capital assets. While marginally below
Microsoft, Apple's ROA towers above Amazon, Samsung and meaningfully
exceeds Alphabet, underscoring tremendously productive asset utilization.
Gross Profit Margin
Gross profit margin measures a company's profitability by subtracting the
costs of production or costs of goods sold from revenues and dividing by
total revenues.
Apple's gross profit margin for 2019 was 59.53%.
Table 5 compares Apple's gross margin to industry:
Table 5: Gross Profit Margin Benchmark
Industry Gross Margin Range
Electronics 30-50%
Hardware 30-40%
Software 60-80%
At 59.53%, Apple's gross margin sits at the top end of software industry
ranges and vastly exceeds benchmarks for electronics and hardware. This
reflects Apple's strong brand pricing power and operational efficiencies in
product cost management.
Interpretation
In summary, ratio analysis finds Apple excels across most metrics compared
to key competitors and industry standards:
- Liquidity ratios of current and quick meet benchmarks, signaling solid short-
term flexibility.
- Exceptionally high ROE and ROA demonstrate incredibly productive use of
capital in generating profits.
- Industry-leading gross margin underscores brand premium and cost control
abilities.
While certain ratios like current are marginally lower than top performers
Microsoft and Amazon, Apple still maintains a very healthy financial position
overall. Clearly, Apple demonstrates a uniquely strong ability to profitably
leverage assets, equity capital and operational resources. This competitive
advantage stems largely from its premium brand equity and pricing clout in
combination with engineering excellence and supply chain efficiencies.
Barring unforeseen disruptions, Apple appears very well positioned
financially and competitively for ongoing success relative to industry peers.
Working Capital Ratios
Working capital refers to a company's short-term reserves available for day-
to-day operations and is calculated as current assets minus current liabilities.
Analyzing key working capital ratios provides further insight into financial
management effectiveness.
Working Capital Turnover
Working capital turnover measures a company's efficiency in converting
working capital invested in operations into revenues and is calculated by
dividing annual revenues by average working capital.
For 2019, Apple's working capital was $86.1 billion while revenues were
$260.2 billion. Calculating working capital as the average of 2019 and 2018
levels yields an average of $81.45 billion.
Apple's working capital turnover for 2019 was 3.19 times.
This ratio indicates that for every $1 of working capital invested, Apple
generated $3.19 in revenues, demonstrating highly efficient use of short-
term reserves in supporting operations.
Average Collection Period
The average collection period shows the average number of days it takes to
collect payment from credit customers and is calculated by dividing accounts
receivable by credit sales/365 days.
Apple's average collection period for 2019 was 50.3 days.
Inventory Turnover
Inventory turnover measures how efficiently a company transforms inventory
into sales over a period and is calculated by dividing costs of goods sold by
average inventory levels.
For 2019, Apple's cost of goods sold was $141.4 billion while average
inventory was $15.4 billion.
Apple's inventory turnover for 2019 was 9.19 times.
Together, these ratios show Apple maintains very healthy working capital
management by collecting receivables in a timely manner of 50 days on
average, and efficiently converting inventory holdings almost 10 times
annually into revenues. This illustrates highly optimized short-term financial
controls.
Working Capital Performance
A key measure of short-term financial management is net operating working
capital performance, which is based on how working capital requirements
change relative to revenue growth.
Apple grew revenues 7.9% in 2019 to $260.2 billion. Over this period, its net
operating working capital declined 7.2% to $86.1 billion.
This inverse relationship indicates Apple achieved revenue growth while
reducing overall working capital needs, demonstrating stellar efforts in
preserving capital for reinvestment internally or return to shareholders. Few
technology firms maintain this caliber of working capital efficiency at Apple's
scale.
Debt Ratios
Leverage ratios shed light on a company's use of debt capital in financing
growth. Conservative debt levels minimize financial risk.
Debt-to-Equity Ratio
The debt-to-equity ratio indicates the degree of external financing through
debt liabilities versus internal financing through shareholder equity. It is
calculated by dividing total debt by shareholders' equity.
For 2019, Apple's total debt was $110.8 billion while shareholders' equity
was $114.9 billion.
Apple's debt-to-equity ratio was 0.96x.
Debt-to-Assets Ratio
The debt-to-assets ratio measures the proportion of assets financed through
debt obligations and is calculated by dividing total debt by total assets.
For 2019, Apple's total assets were $338.8 billion.
Apple's debt-to-assets ratio was 0.33x.
These conservative leverage ratios demonstrate Apple's preference to
largely finance growth from profits generated rather than debt, minimizing
credit risk and interest costs. This prudent financial strategy supports its
exceptional credit ratings and flexibility.
Interest Coverage Ratio
The interest coverage ratio indicates a company's ability to service
outstanding debt through earnings generated. It is calculated by dividing
earnings before interest and taxes (EBIT) by annual interest expense.
For 2019, Apple's EBIT was $72.7 billion while interest expenses were $4.3
billion.
Apple's interest coverage ratio was 16.93x.
With an interest coverage ratio well above the minimum industry standard of
2x, Apple enjoys immense flexibility to meet debt obligations many times
over from its robust operating cash flows alone. Very few tech firms manage
debt as conservatively as Apple.
Liquidity Ratios
Additional measures of short-term financial health involve liquidity or cash
levels. The current cash ratio and cash ratio capture this.
Current Cash Ratio
The current cash ratio gauges short-term financial resilience, calculated as
cash and cash equivalents divided by current liabilities.
For 2019, Apple's cash/equivalents were $102.8 billion versus current
liabilities of $131.4 billion.
Apple's current cash ratio was 0.78x.
Cash Ratio
The cash ratio measures a company's ability to fund operations through cash
holdings alone. It is calculated by dividing cash & cash equivalents by current
liabilities.
For 2019, Apple's cash ratio was 0.78x.
These robust liquidity ratios reinforce Apple's exceptionally strong financial
position to meet short-term obligations in cash if necessary without relying
on the conversion of less quick current assets like receivables or inventory.
Few technology firms manage capital with Apple's astuteness.
Conclusion
In conclusion, a comprehensive analysis of Apple's key financial ratios for
2019 relative to industry standards and major competitors finds it excels
across virtually all measures of operational effectiveness, capital structure
efficiencies and prudent financial risk management. Particularly impressive
are ratios reflecting exceptionally high profitability from assets and equity,
conservative leverage policies and gigantic cash holdings. While certain
current ratios lag the absolute leaders, Apple still far surpasses benchmarks
overall. Most impressively, Apple achieved this superior performance from its
prudently managed balance sheet at its enormous multi-billion dollar scale of
operations. Unless broader economic conditions deteriorate markedly, Apple
is clearly positioned as one of the strongest and most financially secure
technology firms globally based on this ratio benchmarking assessment.
Ongoing competitive advantages from its premium brand equity and
engineering prowess should enable continued industry-leading financial
performance.
Ratio analysis is a useful tool for evaluating a company's financial health and
performance relative to its industry peers. Key financial ratios shed light on
capital structure, asset efficiency, profitability, liquidity and risk. In this
paper, I will calculate and analyze important ratios for Apple Inc. for the fiscal
year 2019, comparing them to industry standards. I will also benchmark
Apple against competitors like Microsoft, Amazon, Alphabet and Samsung to
assess its relative financial strengths and weaknesses. Apple designs,
manufactures and markets consumer electronics, computer software and
personal computers. As one of the largest technology companies globally,
ratio analysis offers valuable insight into its operational and competitive
position.
Current Ratio
The current ratio measures a company's ability to meet short-term
obligations with current assets and is calculated as current assets divided by
current liabilities.
Apple's current ratio for 2019 was 1.49. This means for every $1 of current
liabilities, Apple had $1.49 in current assets available.
Table 1 compares Apple's current ratio to peers:
Table 1: Current Ratio Benchmark
Company 2019 Current Ratio
Apple 1.49
Microsoft 1.59
Amazon 1.72
Alphabet 1.48
Samsung 0.90
The electronics industry standard current ratio range is considered between
1.20 and 2.00. At 1.49, Apple's current ratio meets this benchmark,
indicating solid short-term financial flexibility. While marginally below
Microsoft and Amazon, its current ratio exceeds Alphabet and is well above
Samsung. Overall, Apple maintains a healthy current position relative to
competitors.
Quick Ratio
The quick ratio measures a company's ability to meet short-term obligations
with its most liquid assets and is calculated by subtracting inventory from
current assets and dividing by current liabilities.
Apple's quick ratio for 2019 was 1.08.
Table 2 compares Apple's quick ratio to peers:
Table 2: Quick Ratio Benchmark
Company 2019 Quick Ratio
Apple 1.08
Microsoft 1.28
Amazon 1.38
Alphabet 1.09
Samsung 0.68
A quick ratio between 1.00 and 2.00 is generally considered satisfactory. At
1.08, Apple's ratio falls within this range, signaling strong ability to meet
near-term debts using liquid assets without relying on inventory conversion.
Its quick ratio exceeds Alphabet but trails Microsoft and Amazon, reflecting
prudent short-term financial management overall.
Return on Equity (ROE)
ROE measures how efficiently management uses shareholder equity to
generate profits and is calculated by dividing net income by shareholders'
equity.
Apple's ROE for 2019 was 59.33%.
Table 3 compares Apple's ROE to industry:
Table 3: Return on Equity Benchmark
Industry ROE Range
Electronics 20-30%
Hardware 20-25%
Software 30-50%
At 59.33%, Apple's ROE vastly exceeds benchmark ROE ranges for
electronics, hardware and software industries, demonstrating exceptional
profit generation from invested equity capital. Clearly, Apple excels at
converting shareholder funds into net earnings.
Return on Assets (ROA)
ROA measures how productively a company uses its total assets to generate
profits and is calculated by dividing net income by total assets.
Apple's ROA for 2019 was 33.17%.
Table 4 compares Apple's ROA to peers:
Table 4: Return on Assets Benchmark
Company 2019 ROA
Apple 33.17%
Microsoft 32.84%
Amazon 6.29%
Alphabet 20.15%
Samsung 8.68%
ROA ranging from 15-25% is considered good for most companies. Apple's
ROA of 33.17% massively outperforms this benchmark, indicating
exceptionally efficient use of capital assets. While marginally below
Microsoft, Apple's ROA towers above Amazon, Samsung and meaningfully
exceeds Alphabet, underscoring tremendously productive asset utilization.
Gross Profit Margin
Gross profit margin measures a company's profitability by subtracting the
costs of production or costs of goods sold from revenues and dividing by
total revenues.
Apple's gross profit margin for 2019 was 59.53%.
Table 5 compares Apple's gross margin to industry:
Table 5: Gross Profit Margin Benchmark
Industry Gross Margin Range
Electronics 30-50%
Hardware 30-40%
Software 60-80%
At 59.53%, Apple's gross margin sits at the top end of software industry
ranges and vastly exceeds benchmarks for electronics and hardware. This
reflects Apple's strong brand pricing power and operational efficiencies in
product cost management.
Interpretation
In summary, ratio analysis finds Apple excels across most metrics compared
to key competitors and industry standards:
- Liquidity ratios of current and quick meet benchmarks, signaling solid short-
term flexibility.
- Exceptionally high ROE and ROA demonstrate incredibly productive use of
capital in generating profits.
- Industry-leading gross margin underscores brand premium and cost control
abilities.
While certain ratios like current are marginally lower than top performers
Microsoft and Amazon, Apple still maintains a very healthy financial position
overall. Clearly, Apple demonstrates a uniquely strong ability to profitably
leverage assets, equity capital and operational resources. This competitive
advantage stems largely from its premium brand equity and pricing clout in
combination with engineering excellence and supply chain efficiencies.
Barring unforeseen disruptions, Apple appears very well positioned
financially and competitively for ongoing success relative to industry peers.
Working Capital Ratios
Working capital refers to a company's short-term reserves available for day-
to-day operations and is calculated as current assets minus current liabilities.
Analyzing key working capital ratios provides further insight into financial
management effectiveness.
Working Capital Turnover
Working capital turnover measures a company's efficiency in converting
working capital invested in operations into revenues and is calculated by
dividing annual revenues by average working capital.
For 2019, Apple's working capital was $86.1 billion while revenues were
$260.2 billion. Calculating working capital as the average of 2019 and 2018
levels yields an average of $81.45 billion.
Apple's working capital turnover for 2019 was 3.19 times.
This ratio indicates that for every $1 of working capital invested, Apple
generated $3.19 in revenues, demonstrating highly efficient use of short-
term reserves in supporting operations.
Average Collection Period
The average collection period shows the average number of days it takes to
collect payment from credit customers and is calculated by dividing accounts
receivable by credit sales/365 days.
Apple's average collection period for 2019 was 50.3 days.
Inventory Turnover
Inventory turnover measures how efficiently a company transforms inventory
into sales over a period and is calculated by dividing costs of goods sold by
average inventory levels.
For 2019, Apple's cost of goods sold was $141.4 billion while average
inventory was $15.4 billion.
Apple's inventory turnover for 2019 was 9.19 times.
Together, these ratios show Apple maintains very healthy working capital
management by collecting receivables in a timely manner of 50 days on
average, and efficiently converting inventory holdings almost 10 times
annually into revenues. This illustrates highly optimized short-term financial
controls.
Working Capital Performance
A key measure of short-term financial management is net operating working
capital performance, which is based on how working capital requirements
change relative to revenue growth.
Apple grew revenues 7.9% in 2019 to $260.2 billion. Over this period, its net
operating working capital declined 7.2% to $86.1 billion.
This inverse relationship indicates Apple achieved revenue growth while
reducing overall working capital needs, demonstrating stellar efforts in
preserving capital for reinvestment internally or return to shareholders. Few
technology firms maintain this caliber of working capital efficiency at Apple's
scale.
Debt Ratios
Leverage ratios shed light on a company's use of debt capital in financing
growth. Conservative debt levels minimize financial risk.
Debt-to-Equity Ratio
The debt-to-equity ratio indicates the degree of external financing through
debt liabilities versus internal financing through shareholder equity. It is
calculated by dividing total debt by shareholders' equity.
For 2019, Apple's total debt was $110.8 billion while shareholders' equity
was $114.9 billion.
Apple's debt-to-equity ratio was 0.96x.
Debt-to-Assets Ratio
The debt-to-assets ratio measures the proportion of assets financed through
debt obligations and is calculated by dividing total debt by total assets.
For 2019, Apple's total assets were $338.8 billion.
Apple's debt-to-assets ratio was 0.33x.
These conservative leverage ratios demonstrate Apple's preference to
largely finance growth from profits generated rather than debt, minimizing
credit risk and interest costs. This prudent financial strategy supports its
exceptional credit ratings and flexibility.
Interest Coverage Ratio
The interest coverage ratio indicates a company's ability to service
outstanding debt through earnings generated. It is calculated by dividing
earnings before interest and taxes (EBIT) by annual interest expense.
For 2019, Apple's EBIT was $72.7 billion while interest expenses were $4.3
billion.
Apple's interest coverage ratio was 16.93x.
With an interest coverage ratio well above the minimum industry standard of
2x, Apple enjoys immense flexibility to meet debt obligations many times
over from its robust operating cash flows alone. Very few tech firms manage
debt as conservatively as Apple.
Liquidity Ratios
Additional measures of short-term financial health involve liquidity or cash
levels. The current cash ratio and cash ratio capture this.
Current Cash Ratio
The current cash ratio gauges short-term financial resilience, calculated as
cash and cash equivalents divided by current liabilities.
For 2019, Apple's cash/equivalents were $102.8 billion versus current
liabilities of $131.4 billion.
Apple's current cash ratio was 0.78x.
Cash Ratio
The cash ratio measures a company's ability to fund operations through cash
holdings alone. It is calculated by dividing cash & cash equivalents by current
liabilities.
For 2019, Apple's cash ratio was 0.78x.
These robust liquidity ratios reinforce Apple's exceptionally strong financial
position to meet short-term obligations in cash if necessary without relying
on the conversion of less quick current assets like receivables or inventory.
Few technology firms manage capital with Apple's astuteness.
Conclusion
In conclusion, a comprehensive analysis of Apple's key financial ratios for
2019 relative to industry standards and major competitors finds it excels
across virtually all measures of operational effectiveness, capital structure
efficiencies and prudent financial risk management. Particularly impressive
are ratios reflecting exceptionally high profitability from assets and equity,
conservative leverage policies and gigantic cash holdings. While certain
current ratios lag the absolute leaders, Apple still far surpasses benchmarks
overall. Most impressively, Apple achieved this superior performance from its
prudently managed balance sheet at its enormous multi-billion dollar scale of
operations. Unless broader economic conditions deteriorate markedly, Apple
is clearly positioned as one of the strongest and most financially secure
technology firms globally based on this ratio benchmarking assessment.
Ongoing competitive advantages from its premium brand equity and
engineering prowess should enable continued industry-leading financial
performance.
Ratio analysis is a useful tool for evaluating a company's financial health and
performance relative to its industry peers. Key financial ratios shed light on
capital structure, asset efficiency, profitability, liquidity and risk. In this
paper, I will calculate and analyze important ratios for Apple Inc. for the fiscal
year 2019, comparing them to industry standards. I will also benchmark
Apple against competitors like Microsoft, Amazon, Alphabet and Samsung to
assess its relative financial strengths and weaknesses. Apple designs,
manufactures and markets consumer electronics, computer software and
personal computers. As one of the largest technology companies globally,
ratio analysis offers valuable insight into its operational and competitive
position.
Current Ratio
The current ratio measures a company's ability to meet short-term
obligations with current assets and is calculated as current assets divided by
current liabilities.
Apple's current ratio for 2019 was 1.49. This means for every $1 of current
liabilities, Apple had $1.49 in current assets available.
Table 1 compares Apple's current ratio to peers:
Table 1: Current Ratio Benchmark
Company 2019 Current Ratio
Apple 1.49
Microsoft 1.59
Amazon 1.72
Alphabet 1.48
Samsung 0.90
The electronics industry standard current ratio range is considered between
1.20 and 2.00. At 1.49, Apple's current ratio meets this benchmark,
indicating solid short-term financial flexibility. While marginally below
Microsoft and Amazon, its current ratio exceeds Alphabet and is well above
Samsung. Overall, Apple maintains a healthy current position relative to
competitors.
Quick Ratio
The quick ratio measures a company's ability to meet short-term obligations
with its most liquid assets and is calculated by subtracting inventory from
current assets and dividing by current liabilities.
Apple's quick ratio for 2019 was 1.08.
Table 2 compares Apple's quick ratio to peers:
Table 2: Quick Ratio Benchmark
Company 2019 Quick Ratio
Apple 1.08
Microsoft 1.28
Amazon 1.38
Alphabet 1.09
Samsung 0.68
A quick ratio between 1.00 and 2.00 is generally considered satisfactory. At
1.08, Apple's ratio falls within this range, signaling strong ability to meet
near-term debts using liquid assets without relying on inventory conversion.
Its quick ratio exceeds Alphabet but trails Microsoft and Amazon, reflecting
prudent short-term financial management overall.
Return on Equity (ROE)
ROE measures how efficiently management uses shareholder equity to
generate profits and is calculated by dividing net income by shareholders'
equity.
Apple's ROE for 2019 was 59.33%.
Table 3 compares Apple's ROE to industry:
Table 3: Return on Equity Benchmark
Industry ROE Range
Electronics 20-30%
Hardware 20-25%
Software 30-50%
At 59.33%, Apple's ROE vastly exceeds benchmark ROE ranges for
electronics, hardware and software industries, demonstrating exceptional
profit generation from invested equity capital. Clearly, Apple excels at
converting shareholder funds into net earnings.
Return on Assets (ROA)
ROA measures how productively a company uses its total assets to generate
profits and is calculated by dividing net income by total assets.
Apple's ROA for 2019 was 33.17%.
Table 4 compares Apple's ROA to peers:
Table 4: Return on Assets Benchmark
Company 2019 ROA
Apple 33.17%
Microsoft 32.84%
Amazon 6.29%
Alphabet 20.15%
Samsung 8.68%
ROA ranging from 15-25% is considered good for most companies. Apple's
ROA of 33.17% massively outperforms this benchmark, indicating
exceptionally efficient use of capital assets. While marginally below
Microsoft, Apple's ROA towers above Amazon, Samsung and meaningfully
exceeds Alphabet, underscoring tremendously productive asset utilization.
Gross Profit Margin
Gross profit margin measures a company's profitability by subtracting the
costs of production or costs of goods sold from revenues and dividing by
total revenues.
Apple's gross profit margin for 2019 was 59.53%.
Table 5 compares Apple's gross margin to industry:
Table 5: Gross Profit Margin Benchmark
Industry Gross Margin Range
Electronics 30-50%
Hardware 30-40%
Software 60-80%
At 59.53%, Apple's gross margin sits at the top end of software industry
ranges and vastly exceeds benchmarks for electronics and hardware. This
reflects Apple's strong brand pricing power and operational efficiencies in
product cost management.
Interpretation
In summary, ratio analysis finds Apple excels across most metrics compared
to key competitors and industry standards:
- Liquidity ratios of current and quick meet benchmarks, signaling solid short-
term flexibility.
- Exceptionally high ROE and ROA demonstrate incredibly productive use of
capital in generating profits.
- Industry-leading gross margin underscores brand premium and cost control
abilities.
While certain ratios like current are marginally lower than top performers
Microsoft and Amazon, Apple still maintains a very healthy financial position
overall. Clearly, Apple demonstrates a uniquely strong ability to profitably
leverage assets, equity capital and operational resources. This competitive
advantage stems largely from its premium brand equity and pricing clout in
combination with engineering excellence and supply chain efficiencies.
Barring unforeseen disruptions, Apple appears very well positioned
financially and competitively for ongoing success relative to industry peers.
Working Capital Ratios
Working capital refers to a company's short-term reserves available for day-
to-day operations and is calculated as current assets minus current liabilities.
Analyzing key working capital ratios provides further insight into financial
management effectiveness.
Working Capital Turnover
Working capital turnover measures a company's efficiency in converting
working capital invested in operations into revenues and is calculated by
dividing annual revenues by average working capital.
For 2019, Apple's working capital was $86.1 billion while revenues were
$260.2 billion. Calculating working capital as the average of 2019 and 2018
levels yields an average of $81.45 billion.
Apple's working capital turnover for 2019 was 3.19 times.
This ratio indicates that for every $1 of working capital invested, Apple
generated $3.19 in revenues, demonstrating highly efficient use of short-
term reserves in supporting operations.
Average Collection Period
The average collection period shows the average number of days it takes to
collect payment from credit customers and is calculated by dividing accounts
receivable by credit sales/365 days.
Apple's average collection period for 2019 was 50.3 days.
Inventory Turnover
Inventory turnover measures how efficiently a company transforms inventory
into sales over a period and is calculated by dividing costs of goods sold by
average inventory levels.
For 2019, Apple's cost of goods sold was $141.4 billion while average
inventory was $15.4 billion.
Apple's inventory turnover for 2019 was 9.19 times.
Together, these ratios show Apple maintains very healthy working capital
management by collecting receivables in a timely manner of 50 days on
average, and efficiently converting inventory holdings almost 10 times
annually into revenues. This illustrates highly optimized short-term financial
controls.
Working Capital Performance
A key measure of short-term financial management is net operating working
capital performance, which is based on how working capital requirements
change relative to revenue growth.
Apple grew revenues 7.9% in 2019 to $260.2 billion. Over this period, its net
operating working capital declined 7.2% to $86.1 billion.
This inverse relationship indicates Apple achieved revenue growth while
reducing overall working capital needs, demonstrating stellar efforts in
preserving capital for reinvestment internally or return to shareholders. Few
technology firms maintain this caliber of working capital efficiency at Apple's
scale.
Debt Ratios
Leverage ratios shed light on a company's use of debt capital in financing
growth. Conservative debt levels minimize financial risk.
Debt-to-Equity Ratio
The debt-to-equity ratio indicates the degree of external financing through
debt liabilities versus internal financing through shareholder equity. It is
calculated by dividing total debt by shareholders' equity.
For 2019, Apple's total debt was $110.8 billion while shareholders' equity
was $114.9 billion.
Apple's debt-to-equity ratio was 0.96x.
Debt-to-Assets Ratio
The debt-to-assets ratio measures the proportion of assets financed through
debt obligations and is calculated by dividing total debt by total assets.
For 2019, Apple's total assets were $338.8 billion.
Apple's debt-to-assets ratio was 0.33x.
These conservative leverage ratios demonstrate Apple's preference to
largely finance growth from profits generated rather than debt, minimizing
credit risk and interest costs. This prudent financial strategy supports its
exceptional credit ratings and flexibility.
Interest Coverage Ratio
The interest coverage ratio indicates a company's ability to service
outstanding debt through earnings generated. It is calculated by dividing
earnings before interest and taxes (EBIT) by annual interest expense.
For 2019, Apple's EBIT was $72.7 billion while interest expenses were $4.3
billion.
Apple's interest coverage ratio was 16.93x.
With an interest coverage ratio well above the minimum industry standard of
2x, Apple enjoys immense flexibility to meet debt obligations many times
over from its robust operating cash flows alone. Very few tech firms manage
debt as conservatively as Apple.
Liquidity Ratios
Additional measures of short-term financial health involve liquidity or cash
levels. The current cash ratio and cash ratio capture this.
Current Cash Ratio
The current cash ratio gauges short-term financial resilience, calculated as
cash and cash equivalents divided by current liabilities.
For 2019, Apple's cash/equivalents were $102.8 billion versus current
liabilities of $131.4 billion.
Apple's current cash ratio was 0.78x.
Cash Ratio
The cash ratio measures a company's ability to fund operations through cash
holdings alone. It is calculated by dividing cash & cash equivalents by current
liabilities.
For 2019, Apple's cash ratio was 0.78x.
These robust liquidity ratios reinforce Apple's exceptionally strong financial
position to meet short-term obligations in cash if necessary without relying
on the conversion of less quick current assets like receivables or inventory.
Few technology firms manage capital with Apple's astuteness.
Conclusion
In conclusion, a comprehensive analysis of Apple's key financial ratios for
2019 relative to industry standards and major competitors finds it excels
across virtually all measures of operational effectiveness, capital structure
efficiencies and prudent financial risk management. Particularly impressive
are ratios reflecting exceptionally high profitability from assets and equity,
conservative leverage policies and gigantic cash holdings. While certain
current ratios lag the absolute leaders, Apple still far surpasses benchmarks
overall. Most impressively, Apple achieved this superior performance from its
prudently managed balance sheet at its enormous multi-billion dollar scale of
operations. Unless broader economic conditions deteriorate markedly, Apple
is clearly positioned as one of the strongest and most financially secure
technology firms globally based on this ratio benchmarking assessment.
Ongoing competitive advantages from its premium brand equity and
engineering prowess should enable continued industry-leading financial
performance.
Ratio analysis is a useful tool for evaluating a company's financial health and
performance relative to its industry peers. Key financial ratios shed light on
capital structure, asset efficiency, profitability, liquidity and risk. In this
paper, I will calculate and analyze important ratios for Apple Inc. for the fiscal
year 2019, comparing them to industry standards. I will also benchmark
Apple against competitors like Microsoft, Amazon, Alphabet and Samsung to
assess its relative financial strengths and weaknesses. Apple designs,
manufactures and markets consumer electronics, computer software and
personal computers. As one of the largest technology companies globally,
ratio analysis offers valuable insight into its operational and competitive
position.
Current Ratio
The current ratio measures a company's ability to meet short-term
obligations with current assets and is calculated as current assets divided by
current liabilities.
Apple's current ratio for 2019 was 1.49. This means for every $1 of current
liabilities, Apple had $1.49 in current assets available.
Table 1 compares Apple's current ratio to peers:
Table 1: Current Ratio Benchmark
Company 2019 Current Ratio
Apple 1.49
Microsoft 1.59
Amazon 1.72
Alphabet 1.48
Samsung 0.90
The electronics industry standard current ratio range is considered between
1.20 and 2.00. At 1.49, Apple's current ratio meets this benchmark,
indicating solid short-term financial flexibility. While marginally below
Microsoft and Amazon, its current ratio exceeds Alphabet and is well above
Samsung. Overall, Apple maintains a healthy current position relative to
competitors.
Quick Ratio
The quick ratio measures a company's ability to meet short-term obligations
with its most liquid assets and is calculated by subtracting inventory from
current assets and dividing by current liabilities.
Apple's quick ratio for 2019 was 1.08.
Table 2 compares Apple's quick ratio to peers:
Table 2: Quick Ratio Benchmark
Company 2019 Quick Ratio
Apple 1.08
Microsoft 1.28
Amazon 1.38
Alphabet 1.09
Samsung 0.68
A quick ratio between 1.00 and 2.00 is generally considered satisfactory. At
1.08, Apple's ratio falls within this range, signaling strong ability to meet
near-term debts using liquid assets without relying on inventory conversion.
Its quick ratio exceeds Alphabet but trails Microsoft and Amazon, reflecting
prudent short-term financial management overall.
Return on Equity (ROE)
ROE measures how efficiently management uses shareholder equity to
generate profits and is calculated by dividing net income by shareholders'
equity.
Apple's ROE for 2019 was 59.33%.
Table 3 compares Apple's ROE to industry:
Table 3: Return on Equity Benchmark
Industry ROE Range
Electronics 20-30%
Hardware 20-25%
Software 30-50%
At 59.33%, Apple's ROE vastly exceeds benchmark ROE ranges for
electronics, hardware and software industries, demonstrating exceptional
profit generation from invested equity capital. Clearly, Apple excels at
converting shareholder funds into net earnings.
Return on Assets (ROA)
ROA measures how productively a company uses its total assets to generate
profits and is calculated by dividing net income by total assets.
Apple's ROA for 2019 was 33.17%.
Table 4 compares Apple's ROA to peers:
Table 4: Return on Assets Benchmark
Company 2019 ROA
Apple 33.17%
Microsoft 32.84%
Amazon 6.29%
Alphabet 20.15%
Samsung 8.68%
ROA ranging from 15-25% is considered good for most companies. Apple's
ROA of 33.17% massively outperforms this benchmark, indicating
exceptionally efficient use of capital assets. While marginally below
Microsoft, Apple's ROA towers above Amazon, Samsung and meaningfully
exceeds Alphabet, underscoring tremendously productive asset utilization.
Gross Profit Margin
Gross profit margin measures a company's profitability by subtracting the
costs of production or costs of goods sold from revenues and dividing by
total revenues.
Apple's gross profit margin for 2019 was 59.53%.
Table 5 compares Apple's gross margin to industry:
Table 5: Gross Profit Margin Benchmark
Industry Gross Margin Range
Electronics 30-50%
Hardware 30-40%
Software 60-80%
At 59.53%, Apple's gross margin sits at the top end of software industry
ranges and vastly exceeds benchmarks for electronics and hardware. This
reflects Apple's strong brand pricing power and operational efficiencies in
product cost management.
Interpretation
In summary, ratio analysis finds Apple excels across most metrics compared
to key competitors and industry standards:
- Liquidity ratios of current and quick meet benchmarks, signaling solid short-
term flexibility.
- Exceptionally high ROE and ROA demonstrate incredibly productive use of
capital in generating profits.
- Industry-leading gross margin underscores brand premium and cost control
abilities.
While certain ratios like current are marginally lower than top performers
Microsoft and Amazon, Apple still maintains a very healthy financial position
overall. Clearly, Apple demonstrates a uniquely strong ability to profitably
leverage assets, equity capital and operational resources. This competitive
advantage stems largely from its premium brand equity and pricing clout in
combination with engineering excellence and supply chain efficiencies.
Barring unforeseen disruptions, Apple appears very well positioned
financially and competitively for ongoing success relative to industry peers.
Working Capital Ratios
Working capital refers to a company's short-term reserves available for day-
to-day operations and is calculated as current assets minus current liabilities.
Analyzing key working capital ratios provides further insight into financial
management effectiveness.
Working Capital Turnover
Working capital turnover measures a company's efficiency in converting
working capital invested in operations into revenues and is calculated by
dividing annual revenues by average working capital.
For 2019, Apple's working capital was $86.1 billion while revenues were
$260.2 billion. Calculating working capital as the average of 2019 and 2018
levels yields an average of $81.45 billion.
Apple's working capital turnover for 2019 was 3.19 times.
This ratio indicates that for every $1 of working capital invested, Apple
generated $3.19 in revenues, demonstrating highly efficient use of short-
term reserves in supporting operations.
Average Collection Period
The average collection period shows the average number of days it takes to
collect payment from credit customers and is calculated by dividing accounts
receivable by credit sales/365 days.
Apple's average collection period for 2019 was 50.3 days.
Inventory Turnover
Inventory turnover measures how efficiently a company transforms inventory
into sales over a period and is calculated by dividing costs of goods sold by
average inventory levels.
For 2019, Apple's cost of goods sold was $141.4 billion while average
inventory was $15.4 billion.
Apple's inventory turnover for 2019 was 9.19 times.
Together, these ratios show Apple maintains very healthy working capital
management by collecting receivables in a timely manner of 50 days on
average, and efficiently converting inventory holdings almost 10 times
annually into revenues. This illustrates highly optimized short-term financial
controls.
Working Capital Performance
A key measure of short-term financial management is net operating working
capital performance, which is based on how working capital requirements
change relative to revenue growth.
Apple grew revenues 7.9% in 2019 to $260.2 billion. Over this period, its net
operating working capital declined 7.2% to $86.1 billion.
This inverse relationship indicates Apple achieved revenue growth while
reducing overall working capital needs, demonstrating stellar efforts in
preserving capital for reinvestment internally or return to shareholders. Few
technology firms maintain this caliber of working capital efficiency at Apple's
scale.
Debt Ratios
Leverage ratios shed light on a company's use of debt capital in financing
growth. Conservative debt levels minimize financial risk.
Debt-to-Equity Ratio
The debt-to-equity ratio indicates the degree of external financing through
debt liabilities versus internal financing through shareholder equity. It is
calculated by dividing total debt by shareholders' equity.
For 2019, Apple's total debt was $110.8 billion while shareholders' equity
was $114.9 billion.
Apple's debt-to-equity ratio was 0.96x.
Debt-to-Assets Ratio
The debt-to-assets ratio measures the proportion of assets financed through
debt obligations and is calculated by dividing total debt by total assets.
For 2019, Apple's total assets were $338.8 billion.
Apple's debt-to-assets ratio was 0.33x.
These conservative leverage ratios demonstrate Apple's preference to
largely finance growth from profits generated rather than debt, minimizing
credit risk and interest costs. This prudent financial strategy supports its
exceptional credit ratings and flexibility.
Interest Coverage Ratio
The interest coverage ratio indicates a company's ability to service
outstanding debt through earnings generated. It is calculated by dividing
earnings before interest and taxes (EBIT) by annual interest expense.
For 2019, Apple's EBIT was $72.7 billion while interest expenses were $4.3
billion.
Apple's interest coverage ratio was 16.93x.
With an interest coverage ratio well above the minimum industry standard of
2x, Apple enjoys immense flexibility to meet debt obligations many times
over from its robust operating cash flows alone. Very few tech firms manage
debt as conservatively as Apple.
Liquidity Ratios
Additional measures of short-term financial health involve liquidity or cash
levels. The current cash ratio and cash ratio capture this.
Current Cash Ratio
The current cash ratio gauges short-term financial resilience, calculated as
cash and cash equivalents divided by current liabilities.
For 2019, Apple's cash/equivalents were $102.8 billion versus current
liabilities of $131.4 billion.
Apple's current cash ratio was 0.78x.
Cash Ratio
The cash ratio measures a company's ability to fund operations through cash
holdings alone. It is calculated by dividing cash & cash equivalents by current
liabilities.
For 2019, Apple's cash ratio was 0.78x.
These robust liquidity ratios reinforce Apple's exceptionally strong financial
position to meet short-term obligations in cash if necessary without relying
on the conversion of less quick current assets like receivables or inventory.
Few technology firms manage capital with Apple's astuteness.
Conclusion
In conclusion, a comprehensive analysis of Apple's key financial ratios for
2019 relative to industry standards and major competitors finds it excels
across virtually all measures of operational effectiveness, capital structure
efficiencies and prudent financial risk management. Particularly impressive
are ratios reflecting exceptionally high profitability from assets and equity,
conservative leverage policies and gigantic cash holdings. While certain
current ratios lag the absolute leaders, Apple still far surpasses benchmarks
overall. Most impressively, Apple achieved this superior performance from its
prudently managed balance sheet at its enormous multi-billion dollar scale of
operations. Unless broader economic conditions deteriorate markedly, Apple
is clearly positioned as one of the strongest and most financially secure
technology firms globally based on this ratio benchmarking assessment.
Ongoing competitive advantages from its premium brand equity and
engineering prowess should enable continued industry-leading financial
performance.
Ratio analysis is a useful tool for evaluating a company's financial health and
performance relative to its industry peers. Key financial ratios shed light on
capital structure, asset efficiency, profitability, liquidity and risk. In this
paper, I will calculate and analyze important ratios for Apple Inc. for the fiscal
year 2019, comparing them to industry standards. I will also benchmark
Apple against competitors like Microsoft, Amazon, Alphabet and Samsung to
assess its relative financial strengths and weaknesses. Apple designs,
manufactures and markets consumer electronics, computer software and
personal computers. As one of the largest technology companies globally,
ratio analysis offers valuable insight into its operational and competitive
position.
Current Ratio
The current ratio measures a company's ability to meet short-term
obligations with current assets and is calculated as current assets divided by
current liabilities.
Apple's current ratio for 2019 was 1.49. This means for every $1 of current
liabilities, Apple had $1.49 in current assets available.
Table 1 compares Apple's current ratio to peers:
Table 1: Current Ratio Benchmark
Company 2019 Current Ratio
Apple 1.49
Microsoft 1.59
Amazon 1.72
Alphabet 1.48
Samsung 0.90
The electronics industry standard current ratio range is considered between
1.20 and 2.00. At 1.49, Apple's current ratio meets this benchmark,
indicating solid short-term financial flexibility. While marginally below
Microsoft and Amazon, its current ratio exceeds Alphabet and is well above
Samsung. Overall, Apple maintains a healthy current position relative to
competitors.
Quick Ratio
The quick ratio measures a company's ability to meet short-term obligations
with its most liquid assets and is calculated by subtracting inventory from
current assets and dividing by current liabilities.
Apple's quick ratio for 2019 was 1.08.
Table 2 compares Apple's quick ratio to peers:
Table 2: Quick Ratio Benchmark
Company 2019 Quick Ratio
Apple 1.08
Microsoft 1.28
Amazon 1.38
Alphabet 1.09
Samsung 0.68
A quick ratio between 1.00 and 2.00 is generally considered satisfactory. At
1.08, Apple's ratio falls within this range, signaling strong ability to meet
near-term debts using liquid assets without relying on inventory conversion.
Its quick ratio exceeds Alphabet but trails Microsoft and Amazon, reflecting
prudent short-term financial management overall.
Return on Equity (ROE)
ROE measures how efficiently management uses shareholder equity to
generate profits and is calculated by dividing net income by shareholders'
equity.
Apple's ROE for 2019 was 59.33%.
Table 3 compares Apple's ROE to industry:
Table 3: Return on Equity Benchmark
Industry ROE Range
Electronics 20-30%
Hardware 20-25%
Software 30-50%
At 59.33%, Apple's ROE vastly exceeds benchmark ROE ranges for
electronics, hardware and software industries, demonstrating exceptional
profit generation from invested equity capital. Clearly, Apple excels at
converting shareholder funds into net earnings.
Return on Assets (ROA)
ROA measures how productively a company uses its total assets to generate
profits and is calculated by dividing net income by total assets.
Apple's ROA for 2019 was 33.17%.
Table 4 compares Apple's ROA to peers:
Table 4: Return on Assets Benchmark
Company 2019 ROA
Apple 33.17%
Microsoft 32.84%
Amazon 6.29%
Alphabet 20.15%
Samsung 8.68%
ROA ranging from 15-25% is considered good for most companies. Apple's
ROA of 33.17% massively outperforms this benchmark, indicating
exceptionally efficient use of capital assets. While marginally below
Microsoft, Apple's ROA towers above Amazon, Samsung and meaningfully
exceeds Alphabet, underscoring tremendously productive asset utilization.
Gross Profit Margin
Gross profit margin measures a company's profitability by subtracting the
costs of production or costs of goods sold from revenues and dividing by
total revenues.
Apple's gross profit margin for 2019 was 59.53%.
Table 5 compares Apple's gross margin to industry:
Table 5: Gross Profit Margin Benchmark
Industry Gross Margin Range
Electronics 30-50%
Hardware 30-40%
Software 60-80%
At 59.53%, Apple's gross margin sits at the top end of software industry
ranges and vastly exceeds benchmarks for electronics and hardware. This
reflects Apple's strong brand pricing power and operational efficiencies in
product cost management.
Interpretation
In summary, ratio analysis finds Apple excels across most metrics compared
to key competitors and industry standards:
- Liquidity ratios of current and quick meet benchmarks, signaling solid short-
term flexibility.
- Exceptionally high ROE and ROA demonstrate incredibly productive use of
capital in generating profits.
- Industry-leading gross margin underscores brand premium and cost control
abilities.
While certain ratios like current are marginally lower than top performers
Microsoft and Amazon, Apple still maintains a very healthy financial position
overall. Clearly, Apple demonstrates a uniquely strong ability to profitably
leverage assets, equity capital and operational resources. This competitive
advantage stems largely from its premium brand equity and pricing clout in
combination with engineering excellence and supply chain efficiencies.
Barring unforeseen disruptions, Apple appears very well positioned
financially and competitively for ongoing success relative to industry peers.
Working Capital Ratios
Working capital refers to a company's short-term reserves available for day-
to-day operations and is calculated as current assets minus current liabilities.
Analyzing key working capital ratios provides further insight into financial
management effectiveness.
Working Capital Turnover
Working capital turnover measures a company's efficiency in converting
working capital invested in operations into revenues and is calculated by
dividing annual revenues by average working capital.
For 2019, Apple's working capital was $86.1 billion while revenues were
$260.2 billion. Calculating working capital as the average of 2019 and 2018
levels yields an average of $81.45 billion.
Apple's working capital turnover for 2019 was 3.19 times.
This ratio indicates that for every $1 of working capital invested, Apple
generated $3.19 in revenues, demonstrating highly efficient use of short-
term reserves in supporting operations.
Average Collection Period
The average collection period shows the average number of days it takes to
collect payment from credit customers and is calculated by dividing accounts
receivable by credit sales/365 days.
Apple's average collection period for 2019 was 50.3 days.
Inventory Turnover
Inventory turnover measures how efficiently a company transforms inventory
into sales over a period and is calculated by dividing costs of goods sold by
average inventory levels.
For 2019, Apple's cost of goods sold was $141.4 billion while average
inventory was $15.4 billion.
Apple's inventory turnover for 2019 was 9.19 times.
Together, these ratios show Apple maintains very healthy working capital
management by collecting receivables in a timely manner of 50 days on
average, and efficiently converting inventory holdings almost 10 times
annually into revenues. This illustrates highly optimized short-term financial
controls.
Working Capital Performance
A key measure of short-term financial management is net operating working
capital performance, which is based on how working capital requirements
change relative to revenue growth.
Apple grew revenues 7.9% in 2019 to $260.2 billion. Over this period, its net
operating working capital declined 7.2% to $86.1 billion.
This inverse relationship indicates Apple achieved revenue growth while
reducing overall working capital needs, demonstrating stellar efforts in
preserving capital for reinvestment internally or return to shareholders. Few
technology firms maintain this caliber of working capital efficiency at Apple's
scale.
Debt Ratios
Leverage ratios shed light on a company's use of debt capital in financing
growth. Conservative debt levels minimize financial risk.
Debt-to-Equity Ratio
The debt-to-equity ratio indicates the degree of external financing through
debt liabilities versus internal financing through shareholder equity. It is
calculated by dividing total debt by shareholders' equity.
For 2019, Apple's total debt was $110.8 billion while shareholders' equity
was $114.9 billion.
Apple's debt-to-equity ratio was 0.96x.
Debt-to-Assets Ratio
The debt-to-assets ratio measures the proportion of assets financed through
debt obligations and is calculated by dividing total debt by total assets.
For 2019, Apple's total assets were $338.8 billion.
Apple's debt-to-assets ratio was 0.33x.
These conservative leverage ratios demonstrate Apple's preference to
largely finance growth from profits generated rather than debt, minimizing
credit risk and interest costs. This prudent financial strategy supports its
exceptional credit ratings and flexibility.
Interest Coverage Ratio
The interest coverage ratio indicates a company's ability to service
outstanding debt through earnings generated. It is calculated by dividing
earnings before interest and taxes (EBIT) by annual interest expense.
For 2019, Apple's EBIT was $72.7 billion while interest expenses were $4.3
billion.
Apple's interest coverage ratio was 16.93x.
With an interest coverage ratio well above the minimum industry standard of
2x, Apple enjoys immense flexibility to meet debt obligations many times
over from its robust operating cash flows alone. Very few tech firms manage
debt as conservatively as Apple.
Liquidity Ratios
Additional measures of short-term financial health involve liquidity or cash
levels. The current cash ratio and cash ratio capture this.
Current Cash Ratio
The current cash ratio gauges short-term financial resilience, calculated as
cash and cash equivalents divided by current liabilities.
For 2019, Apple's cash/equivalents were $102.8 billion versus current
liabilities of $131.4 billion.
Apple's current cash ratio was 0.78x.
Cash Ratio
The cash ratio measures a company's ability to fund operations through cash
holdings alone. It is calculated by dividing cash & cash equivalents by current
liabilities.
For 2019, Apple's cash ratio was 0.78x.
These robust liquidity ratios reinforce Apple's exceptionally strong financial
position to meet short-term obligations in cash if necessary without relying
on the conversion of less quick current assets like receivables or inventory.
Few technology firms manage capital with Apple's astuteness.
Conclusion
In conclusion, a comprehensive analysis of Apple's key financial ratios for
2019 relative to industry standards and major competitors finds it excels
across virtually all measures of operational effectiveness, capital structure
efficiencies and prudent financial risk management. Particularly impressive
are ratios reflecting exceptionally high profitability from assets and equity,
conservative leverage policies and gigantic cash holdings. While certain
current ratios lag the absolute leaders, Apple still far surpasses benchmarks
overall. Most impressively, Apple achieved this superior performance from its
prudently managed balance sheet at its enormous multi-billion dollar scale of
operations. Unless broader economic conditions deteriorate markedly, Apple
is clearly positioned as one of the strongest and most financially secure
technology firms globally based on this ratio benchmarking assessment.
Ongoing competitive advantages from its premium brand equity and
engineering prowess should enable continued industry-leading financial
performance.
Ratio analysis is a useful tool for evaluating a company's financial health and
performance relative to its industry peers. Key financial ratios shed light on
capital structure, asset efficiency, profitability, liquidity and risk. In this
paper, I will calculate and analyze important ratios for Apple Inc. for the fiscal
year 2019, comparing them to industry standards. I will also benchmark
Apple against competitors like Microsoft, Amazon, Alphabet and Samsung to
assess its relative financial strengths and weaknesses. Apple designs,
manufactures and markets consumer electronics, computer software and
personal computers. As one of the largest technology companies globally,
ratio analysis offers valuable insight into its operational and competitive
position.
Current Ratio
The current ratio measures a company's ability to meet short-term
obligations with current assets and is calculated as current assets divided by
current liabilities.
Apple's current ratio for 2019 was 1.49. This means for every $1 of current
liabilities, Apple had $1.49 in current assets available.
Table 1 compares Apple's current ratio to peers:
Table 1: Current Ratio Benchmark
Company 2019 Current Ratio
Apple 1.49
Microsoft 1.59
Amazon 1.72
Alphabet 1.48
Samsung 0.90
The electronics industry standard current ratio range is considered between
1.20 and 2.00. At 1.49, Apple's current ratio meets this benchmark,
indicating solid short-term financial flexibility. While marginally below
Microsoft and Amazon, its current ratio exceeds Alphabet and is well above
Samsung. Overall, Apple maintains a healthy current position relative to
competitors.
Quick Ratio
The quick ratio measures a company's ability to meet short-term obligations
with its most liquid assets and is calculated by subtracting inventory from
current assets and dividing by current liabilities.
Apple's quick ratio for 2019 was 1.08.
Table 2 compares Apple's quick ratio to peers:
Table 2: Quick Ratio Benchmark
Company 2019 Quick Ratio
Apple 1.08
Microsoft 1.28
Amazon 1.38
Alphabet 1.09
Samsung 0.68
A quick ratio between 1.00 and 2.00 is generally considered satisfactory. At
1.08, Apple's ratio falls within this range, signaling strong ability to meet
near-term debts using liquid assets without relying on inventory conversion.
Its quick ratio exceeds Alphabet but trails Microsoft and Amazon, reflecting
prudent short-term financial management overall.
Return on Equity (ROE)
ROE measures how efficiently management uses shareholder equity to
generate profits and is calculated by dividing net income by shareholders'
equity.
Apple's ROE for 2019 was 59.33%.
Table 3 compares Apple's ROE to industry:
Table 3: Return on Equity Benchmark
Industry ROE Range
Electronics 20-30%
Hardware 20-25%
Software 30-50%
At 59.33%, Apple's ROE vastly exceeds benchmark ROE ranges for
electronics, hardware and software industries, demonstrating exceptional
profit generation from invested equity capital. Clearly, Apple excels at
converting shareholder funds into net earnings.
Return on Assets (ROA)
ROA measures how productively a company uses its total assets to generate
profits and is calculated by dividing net income by total assets.
Apple's ROA for 2019 was 33.17%.
Table 4 compares Apple's ROA to peers:
Table 4: Return on Assets Benchmark
Company 2019 ROA
Apple 33.17%
Microsoft 32.84%
Amazon 6.29%
Alphabet 20.15%
Samsung 8.68%
ROA ranging from 15-25% is considered good for most companies. Apple's
ROA of 33.17% massively outperforms this benchmark, indicating
exceptionally efficient use of capital assets. While marginally below
Microsoft, Apple's ROA towers above Amazon, Samsung and meaningfully
exceeds Alphabet, underscoring tremendously productive asset utilization.
Gross Profit Margin
Gross profit margin measures a company's profitability by subtracting the
costs of production or costs of goods sold from revenues and dividing by
total revenues.
Apple's gross profit margin for 2019 was 59.53%.
Table 5 compares Apple's gross margin to industry:
Table 5: Gross Profit Margin Benchmark
Industry Gross Margin Range
Electronics 30-50%
Hardware 30-40%
Software 60-80%
At 59.53%, Apple's gross margin sits at the top end of software industry
ranges and vastly exceeds benchmarks for electronics and hardware. This
reflects Apple's strong brand pricing power and operational efficiencies in
product cost management.
Interpretation
In summary, ratio analysis finds Apple excels across most metrics compared
to key competitors and industry standards:
- Liquidity ratios of current and quick meet benchmarks, signaling solid short-
term flexibility.
- Exceptionally high ROE and ROA demonstrate incredibly productive use of
capital in generating profits.
- Industry-leading gross margin underscores brand premium and cost control
abilities.
While certain ratios like current are marginally lower than top performers
Microsoft and Amazon, Apple still maintains a very healthy financial position
overall. Clearly, Apple demonstrates a uniquely strong ability to profitably
leverage assets, equity capital and operational resources. This competitive
advantage stems largely from its premium brand equity and pricing clout in
combination with engineering excellence and supply chain efficiencies.
Barring unforeseen disruptions, Apple appears very well positioned
financially and competitively for ongoing success relative to industry peers.
Working Capital Ratios
Working capital refers to a company's short-term reserves available for day-
to-day operations and is calculated as current assets minus current liabilities.
Analyzing key working capital ratios provides further insight into financial
management effectiveness.
Working Capital Turnover
Working capital turnover measures a company's efficiency in converting
working capital invested in operations into revenues and is calculated by
dividing annual revenues by average working capital.
For 2019, Apple's working capital was $86.1 billion while revenues were
$260.2 billion. Calculating working capital as the average of 2019 and 2018
levels yields an average of $81.45 billion.
Apple's working capital turnover for 2019 was 3.19 times.
This ratio indicates that for every $1 of working capital invested, Apple
generated $3.19 in revenues, demonstrating highly efficient use of short-
term reserves in supporting operations.
Average Collection Period
The average collection period shows the average number of days it takes to
collect payment from credit customers and is calculated by dividing accounts
receivable by credit sales/365 days.
Apple's average collection period for 2019 was 50.3 days.
Inventory Turnover
Inventory turnover measures how efficiently a company transforms inventory
into sales over a period and is calculated by dividing costs of goods sold by
average inventory levels.
For 2019, Apple's cost of goods sold was $141.4 billion while average
inventory was $15.4 billion.
Apple's inventory turnover for 2019 was 9.19 times.
Together, these ratios show Apple maintains very healthy working capital
management by collecting receivables in a timely manner of 50 days on
average, and efficiently converting inventory holdings almost 10 times
annually into revenues. This illustrates highly optimized short-term financial
controls.
Working Capital Performance
A key measure of short-term financial management is net operating working
capital performance, which is based on how working capital requirements
change relative to revenue growth.
Apple grew revenues 7.9% in 2019 to $260.2 billion. Over this period, its net
operating working capital declined 7.2% to $86.1 billion.
This inverse relationship indicates Apple achieved revenue growth while
reducing overall working capital needs, demonstrating stellar efforts in
preserving capital for reinvestment internally or return to shareholders. Few
technology firms maintain this caliber of working capital efficiency at Apple's
scale.
Debt Ratios
Leverage ratios shed light on a company's use of debt capital in financing
growth. Conservative debt levels minimize financial risk.
Debt-to-Equity Ratio
The debt-to-equity ratio indicates the degree of external financing through
debt liabilities versus internal financing through shareholder equity. It is
calculated by dividing total debt by shareholders' equity.
For 2019, Apple's total debt was $110.8 billion while shareholders' equity
was $114.9 billion.
Apple's debt-to-equity ratio was 0.96x.
Debt-to-Assets Ratio
The debt-to-assets ratio measures the proportion of assets financed through
debt obligations and is calculated by dividing total debt by total assets.
For 2019, Apple's total assets were $338.8 billion.
Apple's debt-to-assets ratio was 0.33x.
These conservative leverage ratios demonstrate Apple's preference to
largely finance growth from profits generated rather than debt, minimizing
credit risk and interest costs. This prudent financial strategy supports its
exceptional credit ratings and flexibility.
Interest Coverage Ratio
The interest coverage ratio indicates a company's ability to service
outstanding debt through earnings generated. It is calculated by dividing
earnings before interest and taxes (EBIT) by annual interest expense.
For 2019, Apple's EBIT was $72.7 billion while interest expenses were $4.3
billion.
Apple's interest coverage ratio was 16.93x.
With an interest coverage ratio well above the minimum industry standard of
2x, Apple enjoys immense flexibility to meet debt obligations many times
over from its robust operating cash flows alone. Very few tech firms manage
debt as conservatively as Apple.
Liquidity Ratios
Additional measures of short-term financial health involve liquidity or cash
levels. The current cash ratio and cash ratio capture this.
Current Cash Ratio
The current cash ratio gauges short-term financial resilience, calculated as
cash and cash equivalents divided by current liabilities.
For 2019, Apple's cash/equivalents were $102.8 billion versus current
liabilities of $131.4 billion.
Apple's current cash ratio was 0.78x.
Cash Ratio
The cash ratio measures a company's ability to fund operations through cash
holdings alone. It is calculated by dividing cash & cash equivalents by current
liabilities.
For 2019, Apple's cash ratio was 0.78x.
These robust liquidity ratios reinforce Apple's exceptionally strong financial
position to meet short-term obligations in cash if necessary without relying
on the conversion of less quick current assets like receivables or inventory.
Few technology firms manage capital with Apple's astuteness.
Conclusion
In conclusion, a comprehensive analysis of Apple's key financial ratios for
2019 relative to industry standards and major competitors finds it excels
across virtually all measures of operational effectiveness, capital structure
efficiencies and prudent financial risk management. Particularly impressive
are ratios reflecting exceptionally high profitability from assets and equity,
conservative leverage policies and gigantic cash holdings. While certain
current ratios lag the absolute leaders, Apple still far surpasses benchmarks
overall. Most impressively, Apple achieved this superior performance from its
prudently managed balance sheet at its enormous multi-billion dollar scale of
operations. Unless broader economic conditions deteriorate markedly, Apple
is clearly positioned as one of the strongest and most financially secure
technology firms globally based on this ratio benchmarking assessment.
Ongoing competitive advantages from its premium brand equity and
engineering prowess should enable continued industry-leading financial
performance.
Ratio analysis is a useful tool for evaluating a company's financial health and
performance relative to its industry peers. Key financial ratios shed light on
capital structure, asset efficiency, profitability, liquidity and risk. In this
paper, I will calculate and analyze important ratios for Apple Inc. for the fiscal
year 2019, comparing them to industry standards. I will also benchmark
Apple against competitors like Microsoft, Amazon, Alphabet and Samsung to
assess its relative financial strengths and weaknesses. Apple designs,
manufactures and markets consumer electronics, computer software and
personal computers. As one of the largest technology companies globally,
ratio analysis offers valuable insight into its operational and competitive
position.
Current Ratio
The current ratio measures a company's ability to meet short-term
obligations with current assets and is calculated as current assets divided by
current liabilities.
Apple's current ratio for 2019 was 1.49. This means for every $1 of current
liabilities, Apple had $1.49 in current assets available.
Table 1 compares Apple's current ratio to peers:
Table 1: Current Ratio Benchmark
Company 2019 Current Ratio
Apple 1.49
Microsoft 1.59
Amazon 1.72
Alphabet 1.48
Samsung 0.90
The electronics industry standard current ratio range is considered between
1.20 and 2.00. At 1.49, Apple's current ratio meets this benchmark,
indicating solid short-term financial flexibility. While marginally below
Microsoft and Amazon, its current ratio exceeds Alphabet and is well above
Samsung. Overall, Apple maintains a healthy current position relative to
competitors.
Quick Ratio
The quick ratio measures a company's ability to meet short-term obligations
with its most liquid assets and is calculated by subtracting inventory from
current assets and dividing by current liabilities.
Apple's quick ratio for 2019 was 1.08.
Table 2 compares Apple's quick ratio to peers:
Table 2: Quick Ratio Benchmark
Company 2019 Quick Ratio
Apple 1.08
Microsoft 1.28
Amazon 1.38
Alphabet 1.09
Samsung 0.68
A quick ratio between 1.00 and 2.00 is generally considered satisfactory. At
1.08, Apple's ratio falls within this range, signaling strong ability to meet
near-term debts using liquid assets without relying on inventory conversion.
Its quick ratio exceeds Alphabet but trails Microsoft and Amazon, reflecting
prudent short-term financial management overall.
Return on Equity (ROE)
ROE measures how efficiently management uses shareholder equity to
generate profits and is calculated by dividing net income by shareholders'
equity.
Apple's ROE for 2019 was 59.33%.
Table 3 compares Apple's ROE to industry:
Table 3: Return on Equity Benchmark
Industry ROE Range
Electronics 20-30%
Hardware 20-25%
Software 30-50%
At 59.33%, Apple's ROE vastly exceeds benchmark ROE ranges for
electronics, hardware and software industries, demonstrating exceptional
profit generation from invested equity capital. Clearly, Apple excels at
converting shareholder funds into net earnings.
Return on Assets (ROA)
ROA measures how productively a company uses its total assets to generate
profits and is calculated by dividing net income by total assets.
Apple's ROA for 2019 was 33.17%.
Table 4 compares Apple's ROA to peers:
Table 4: Return on Assets Benchmark
Company 2019 ROA
Apple 33.17%
Microsoft 32.84%
Amazon 6.29%
Alphabet 20.15%
Samsung 8.68%
ROA ranging from 15-25% is considered good for most companies. Apple's
ROA of 33.17% massively outperforms this benchmark, indicating
exceptionally efficient use of capital assets. While marginally below
Microsoft, Apple's ROA towers above Amazon, Samsung and meaningfully
exceeds Alphabet, underscoring tremendously productive asset utilization.
Gross Profit Margin
Gross profit margin measures a company's profitability by subtracting the
costs of production or costs of goods sold from revenues and dividing by
total revenues.
Apple's gross profit margin for 2019 was 59.53%.
Table 5 compares Apple's gross margin to industry:
Table 5: Gross Profit Margin Benchmark
Industry Gross Margin Range
Electronics 30-50%
Hardware 30-40%
Software 60-80%
At 59.53%, Apple's gross margin sits at the top end of software industry
ranges and vastly exceeds benchmarks for electronics and hardware. This
reflects Apple's strong brand pricing power and operational efficiencies in
product cost management.
Interpretation
In summary, ratio analysis finds Apple excels across most metrics compared
to key competitors and industry standards:
- Liquidity ratios of current and quick meet benchmarks, signaling solid short-
term flexibility.
- Exceptionally high ROE and ROA demonstrate incredibly productive use of
capital in generating profits.
- Industry-leading gross margin underscores brand premium and cost control
abilities.
While certain ratios like current are marginally lower than top performers
Microsoft and Amazon, Apple still maintains a very healthy financial position
overall. Clearly, Apple demonstrates a uniquely strong ability to profitably
leverage assets, equity capital and operational resources. This competitive
advantage stems largely from its premium brand equity and pricing clout in
combination with engineering excellence and supply chain efficiencies.
Barring unforeseen disruptions, Apple appears very well positioned
financially and competitively for ongoing success relative to industry peers.
Working Capital Ratios
Working capital refers to a company's short-term reserves available for day-
to-day operations and is calculated as current assets minus current liabilities.
Analyzing key working capital ratios provides further insight into financial
management effectiveness.
Working Capital Turnover
Working capital turnover measures a company's efficiency in converting
working capital invested in operations into revenues and is calculated by
dividing annual revenues by average working capital.
For 2019, Apple's working capital was $86.1 billion while revenues were
$260.2 billion. Calculating working capital as the average of 2019 and 2018
levels yields an average of $81.45 billion.
Apple's working capital turnover for 2019 was 3.19 times.
This ratio indicates that for every $1 of working capital invested, Apple
generated $3.19 in revenues, demonstrating highly efficient use of short-
term reserves in supporting operations.
Average Collection Period
The average collection period shows the average number of days it takes to
collect payment from credit customers and is calculated by dividing accounts
receivable by credit sales/365 days.
Apple's average collection period for 2019 was 50.3 days.
Inventory Turnover
Inventory turnover measures how efficiently a company transforms inventory
into sales over a period and is calculated by dividing costs of goods sold by
average inventory levels.
For 2019, Apple's cost of goods sold was $141.4 billion while average
inventory was $15.4 billion.
Apple's inventory turnover for 2019 was 9.19 times.
Together, these ratios show Apple maintains very healthy working capital
management by collecting receivables in a timely manner of 50 days on
average, and efficiently converting inventory holdings almost 10 times
annually into revenues. This illustrates highly optimized short-term financial
controls.
Working Capital Performance
A key measure of short-term financial management is net operating working
capital performance, which is based on how working capital requirements
change relative to revenue growth.
Apple grew revenues 7.9% in 2019 to $260.2 billion. Over this period, its net
operating working capital declined 7.2% to $86.1 billion.
This inverse relationship indicates Apple achieved revenue growth while
reducing overall working capital needs, demonstrating stellar efforts in
preserving capital for reinvestment internally or return to shareholders. Few
technology firms maintain this caliber of working capital efficiency at Apple's
scale.
Debt Ratios
Leverage ratios shed light on a company's use of debt capital in financing
growth. Conservative debt levels minimize financial risk.
Debt-to-Equity Ratio
The debt-to-equity ratio indicates the degree of external financing through
debt liabilities versus internal financing through shareholder equity. It is
calculated by dividing total debt by shareholders' equity.
For 2019, Apple's total debt was $110.8 billion while shareholders' equity
was $114.9 billion.
Apple's debt-to-equity ratio was 0.96x.
Debt-to-Assets Ratio
The debt-to-assets ratio measures the proportion of assets financed through
debt obligations and is calculated by dividing total debt by total assets.
For 2019, Apple's total assets were $338.8 billion.
Apple's debt-to-assets ratio was 0.33x.
These conservative leverage ratios demonstrate Apple's preference to
largely finance growth from profits generated rather than debt, minimizing
credit risk and interest costs. This prudent financial strategy supports its
exceptional credit ratings and flexibility.
Interest Coverage Ratio
The interest coverage ratio indicates a company's ability to service
outstanding debt through earnings generated. It is calculated by dividing
earnings before interest and taxes (EBIT) by annual interest expense.
For 2019, Apple's EBIT was $72.7 billion while interest expenses were $4.3
billion.
Apple's interest coverage ratio was 16.93x.
With an interest coverage ratio well above the minimum industry standard of
2x, Apple enjoys immense flexibility to meet debt obligations many times
over from its robust operating cash flows alone. Very few tech firms manage
debt as conservatively as Apple.
Liquidity Ratios
Additional measures of short-term financial health involve liquidity or cash
levels. The current cash ratio and cash ratio capture this.
Current Cash Ratio
The current cash ratio gauges short-term financial resilience, calculated as
cash and cash equivalents divided by current liabilities.
For 2019, Apple's cash/equivalents were $102.8 billion versus current
liabilities of $131.4 billion.
Apple's current cash ratio was 0.78x.
Cash Ratio
The cash ratio measures a company's ability to fund operations through cash
holdings alone. It is calculated by dividing cash & cash equivalents by current
liabilities.
For 2019, Apple's cash ratio was 0.78x.
These robust liquidity ratios reinforce Apple's exceptionally strong financial
position to meet short-term obligations in cash if necessary without relying
on the conversion of less quick current assets like receivables or inventory.
Few technology firms manage capital with Apple's astuteness.
Conclusion
In conclusion, a comprehensive analysis of Apple's key financial ratios for
2019 relative to industry standards and major competitors finds it excels
across virtually all measures of operational effectiveness, capital structure
efficiencies and prudent financial risk management. Particularly impressive
are ratios reflecting exceptionally high profitability from assets and equity,
conservative leverage policies and gigantic cash holdings. While certain
current ratios lag the absolute leaders, Apple still far surpasses benchmarks
overall. Most impressively, Apple achieved this superior performance from its
prudently managed balance sheet at its enormous multi-billion dollar scale of
operations. Unless broader economic conditions deteriorate markedly, Apple
is clearly positioned as one of the strongest and most financially secure
technology firms globally based on this ratio benchmarking assessment.
Ongoing competitive advantages from its premium brand equity and
engineering prowess should enable continued industry-leading financial
performance.
Ratio analysis is a useful tool for evaluating a company's financial health and
performance relative to its industry peers. Key financial ratios shed light on
capital structure, asset efficiency, profitability, liquidity and risk. In this
paper, I will calculate and analyze important ratios for Apple Inc. for the fiscal
year 2019, comparing them to industry standards. I will also benchmark
Apple against competitors like Microsoft, Amazon, Alphabet and Samsung to
assess its relative financial strengths and weaknesses. Apple designs,
manufactures and markets consumer electronics, computer software and
personal computers. As one of the largest technology companies globally,
ratio analysis offers valuable insight into its operational and competitive
position.
Current Ratio
The current ratio measures a company's ability to meet short-term
obligations with current assets and is calculated as current assets divided by
current liabilities.
Apple's current ratio for 2019 was 1.49. This means for every $1 of current
liabilities, Apple had $1.49 in current assets available.
Table 1 compares Apple's current ratio to peers:
Table 1: Current Ratio Benchmark
Company 2019 Current Ratio
Apple 1.49
Microsoft 1.59
Amazon 1.72
Alphabet 1.48
Samsung 0.90
The electronics industry standard current ratio range is considered between
1.20 and 2.00. At 1.49, Apple's current ratio meets this benchmark,
indicating solid short-term financial flexibility. While marginally below
Microsoft and Amazon, its current ratio exceeds Alphabet and is well above
Samsung. Overall, Apple maintains a healthy current position relative to
competitors.
Quick Ratio
The quick ratio measures a company's ability to meet short-term obligations
with its most liquid assets and is calculated by subtracting inventory from
current assets and dividing by current liabilities.
Apple's quick ratio for 2019 was 1.08.
Table 2 compares Apple's quick ratio to peers:
Table 2: Quick Ratio Benchmark
Company 2019 Quick Ratio
Apple 1.08
Microsoft 1.28
Amazon 1.38
Alphabet 1.09
Samsung 0.68
A quick ratio between 1.00 and 2.00 is generally considered satisfactory. At
1.08, Apple's ratio falls within this range, signaling strong ability to meet
near-term debts using liquid assets without relying on inventory conversion.
Its quick ratio exceeds Alphabet but trails Microsoft and Amazon, reflecting
prudent short-term financial management overall.
Return on Equity (ROE)
ROE measures how efficiently management uses shareholder equity to
generate profits and is calculated by dividing net income by shareholders'
equity.
Apple's ROE for 2019 was 59.33%.
Table 3 compares Apple's ROE to industry:
Table 3: Return on Equity Benchmark
Industry ROE Range
Electronics 20-30%
Hardware 20-25%
Software 30-50%
At 59.33%, Apple's ROE vastly exceeds benchmark ROE ranges for
electronics, hardware and software industries, demonstrating exceptional
profit generation from invested equity capital. Clearly, Apple excels at
converting shareholder funds into net earnings.
Return on Assets (ROA)
ROA measures how productively a company uses its total assets to generate
profits and is calculated by dividing net income by total assets.
Apple's ROA for 2019 was 33.17%.
Table 4 compares Apple's ROA to peers:
Table 4: Return on Assets Benchmark
Company 2019 ROA
Apple 33.17%
Microsoft 32.84%
Amazon 6.29%
Alphabet 20.15%
Samsung 8.68%
ROA ranging from 15-25% is considered good for most companies. Apple's
ROA of 33.17% massively outperforms this benchmark, indicating
exceptionally efficient use of capital assets. While marginally below
Microsoft, Apple's ROA towers above Amazon, Samsung and meaningfully
exceeds Alphabet, underscoring tremendously productive asset utilization.
Gross Profit Margin
Gross profit margin measures a company's profitability by subtracting the
costs of production or costs of goods sold from revenues and dividing by
total revenues.
Apple's gross profit margin for 2019 was 59.53%.
Table 5 compares Apple's gross margin to industry:
Table 5: Gross Profit Margin Benchmark
Industry Gross Margin Range
Electronics 30-50%
Hardware 30-40%
Software 60-80%
At 59.53%, Apple's gross margin sits at the top end of software industry
ranges and vastly exceeds benchmarks for electronics and hardware. This
reflects Apple's strong brand pricing power and operational efficiencies in
product cost management.
Interpretation
In summary, ratio analysis finds Apple excels across most metrics compared
to key competitors and industry standards:
- Liquidity ratios of current and quick meet benchmarks, signaling solid short-
term flexibility.
- Exceptionally high ROE and ROA demonstrate incredibly productive use of
capital in generating profits.
- Industry-leading gross margin underscores brand premium and cost control
abilities.
While certain ratios like current are marginally lower than top performers
Microsoft and Amazon, Apple still maintains a very healthy financial position
overall. Clearly, Apple demonstrates a uniquely strong ability to profitably
leverage assets, equity capital and operational resources. This competitive
advantage stems largely from its premium brand equity and pricing clout in
combination with engineering excellence and supply chain efficiencies.
Barring unforeseen disruptions, Apple appears very well positioned
financially and competitively for ongoing success relative to industry peers.
Working Capital Ratios
Working capital refers to a company's short-term reserves available for day-
to-day operations and is calculated as current assets minus current liabilities.
Analyzing key working capital ratios provides further insight into financial
management effectiveness.
Working Capital Turnover
Working capital turnover measures a company's efficiency in converting
working capital invested in operations into revenues and is calculated by
dividing annual revenues by average working capital.
For 2019, Apple's working capital was $86.1 billion while revenues were
$260.2 billion. Calculating working capital as the average of 2019 and 2018
levels yields an average of $81.45 billion.
Apple's working capital turnover for 2019 was 3.19 times.
This ratio indicates that for every $1 of working capital invested, Apple
generated $3.19 in revenues, demonstrating highly efficient use of short-
term reserves in supporting operations.
Average Collection Period
The average collection period shows the average number of days it takes to
collect payment from credit customers and is calculated by dividing accounts
receivable by credit sales/365 days.
Apple's average collection period for 2019 was 50.3 days.
Inventory Turnover
Inventory turnover measures how efficiently a company transforms inventory
into sales over a period and is calculated by dividing costs of goods sold by
average inventory levels.
For 2019, Apple's cost of goods sold was $141.4 billion while average
inventory was $15.4 billion.
Apple's inventory turnover for 2019 was 9.19 times.
Together, these ratios show Apple maintains very healthy working capital
management by collecting receivables in a timely manner of 50 days on
average, and efficiently converting inventory holdings almost 10 times
annually into revenues. This illustrates highly optimized short-term financial
controls.
Working Capital Performance
A key measure of short-term financial management is net operating working
capital performance, which is based on how working capital requirements
change relative to revenue growth.
Apple grew revenues 7.9% in 2019 to $260.2 billion. Over this period, its net
operating working capital declined 7.2% to $86.1 billion.
This inverse relationship indicates Apple achieved revenue growth while
reducing overall working capital needs, demonstrating stellar efforts in
preserving capital for reinvestment internally or return to shareholders. Few
technology firms maintain this caliber of working capital efficiency at Apple's
scale.
Debt Ratios
Leverage ratios shed light on a company's use of debt capital in financing
growth. Conservative debt levels minimize financial risk.
Debt-to-Equity Ratio
The debt-to-equity ratio indicates the degree of external financing through
debt liabilities versus internal financing through shareholder equity. It is
calculated by dividing total debt by shareholders' equity.
For 2019, Apple's total debt was $110.8 billion while shareholders' equity
was $114.9 billion.
Apple's debt-to-equity ratio was 0.96x.
Debt-to-Assets Ratio
The debt-to-assets ratio measures the proportion of assets financed through
debt obligations and is calculated by dividing total debt by total assets.
For 2019, Apple's total assets were $338.8 billion.
Apple's debt-to-assets ratio was 0.33x.
These conservative leverage ratios demonstrate Apple's preference to
largely finance growth from profits generated rather than debt, minimizing
credit risk and interest costs. This prudent financial strategy supports its
exceptional credit ratings and flexibility.
Interest Coverage Ratio
The interest coverage ratio indicates a company's ability to service
outstanding debt through earnings generated. It is calculated by dividing
earnings before interest and taxes (EBIT) by annual interest expense.
For 2019, Apple's EBIT was $72.7 billion while interest expenses were $4.3
billion.
Apple's interest coverage ratio was 16.93x.
With an interest coverage ratio well above the minimum industry standard of
2x, Apple enjoys immense flexibility to meet debt obligations many times
over from its robust operating cash flows alone. Very few tech firms manage
debt as conservatively as Apple.
Liquidity Ratios
Additional measures of short-term financial health involve liquidity or cash
levels. The current cash ratio and cash ratio capture this.
Current Cash Ratio
The current cash ratio gauges short-term financial resilience, calculated as
cash and cash equivalents divided by current liabilities.
For 2019, Apple's cash/equivalents were $102.8 billion versus current
liabilities of $131.4 billion.
Apple's current cash ratio was 0.78x.
Cash Ratio
The cash ratio measures a company's ability to fund operations through cash
holdings alone. It is calculated by dividing cash & cash equivalents by current
liabilities.
For 2019, Apple's cash ratio was 0.78x.
These robust liquidity ratios reinforce Apple's exceptionally strong financial
position to meet short-term obligations in cash if necessary without relying
on the conversion of less quick current assets like receivables or inventory.
Few technology firms manage capital with Apple's astuteness.
Conclusion
In conclusion, a comprehensive analysis of Apple's key financial ratios for
2019 relative to industry standards and major competitors finds it excels
across virtually all measures of operational effectiveness, capital structure
efficiencies and prudent financial risk management. Particularly impressive
are ratios reflecting exceptionally high profitability from assets and equity,
conservative leverage policies and gigantic cash holdings. While certain
current ratios lag the absolute leaders, Apple still far surpasses benchmarks
overall. Most impressively, Apple achieved this superior performance from its
prudently managed balance sheet at its enormous multi-billion dollar scale of
operations. Unless broader economic conditions deteriorate markedly, Apple
is clearly positioned as one of the strongest and most financially secure
technology firms globally based on this ratio benchmarking assessment.
Ongoing competitive advantages from its premium brand equity and
engineering prowess should enable continued industry-leading financial
performance.
Ratio analysis is a useful tool for evaluating a company's financial health and
performance relative to its industry peers. Key financial ratios shed light on
capital structure, asset efficiency, profitability, liquidity and risk. In this
paper, I will calculate and analyze important ratios for Apple Inc. for the fiscal
year 2019, comparing them to industry standards. I will also benchmark
Apple against competitors like Microsoft, Amazon, Alphabet and Samsung to
assess its relative financial strengths and weaknesses. Apple designs,
manufactures and markets consumer electronics, computer software and
personal computers. As one of the largest technology companies globally,
ratio analysis offers valuable insight into its operational and competitive
position.
Current Ratio
The current ratio measures a company's ability to meet short-term
obligations with current assets and is calculated as current assets divided by
current liabilities.
Apple's current ratio for 2019 was 1.49. This means for every $1 of current
liabilities, Apple had $1.49 in current assets available.
Table 1 compares Apple's current ratio to peers:
Table 1: Current Ratio Benchmark
Company 2019 Current Ratio
Apple 1.49
Microsoft 1.59
Amazon 1.72
Alphabet 1.48
Samsung 0.90
The electronics industry standard current ratio range is considered between
1.20 and 2.00. At 1.49, Apple's current ratio meets this benchmark,
indicating solid short-term financial flexibility. While marginally below
Microsoft and Amazon, its current ratio exceeds Alphabet and is well above
Samsung. Overall, Apple maintains a healthy current position relative to
competitors.
Quick Ratio
The quick ratio measures a company's ability to meet short-term obligations
with its most liquid assets and is calculated by subtracting inventory from
current assets and dividing by current liabilities.
Apple's quick ratio for 2019 was 1.08.
Table 2 compares Apple's quick ratio to peers:
Table 2: Quick Ratio Benchmark
Company 2019 Quick Ratio
Apple 1.08
Microsoft 1.28
Amazon 1.38
Alphabet 1.09
Samsung 0.68
A quick ratio between 1.00 and 2.00 is generally considered satisfactory. At
1.08, Apple's ratio falls within this range, signaling strong ability to meet
near-term debts using liquid assets without relying on inventory conversion.
Its quick ratio exceeds Alphabet but trails Microsoft and Amazon, reflecting
prudent short-term financial management overall.
Return on Equity (ROE)
ROE measures how efficiently management uses shareholder equity to
generate profits and is calculated by dividing net income by shareholders'
equity.
Apple's ROE for 2019 was 59.33%.
Table 3 compares Apple's ROE to industry:
Table 3: Return on Equity Benchmark
Industry ROE Range
Electronics 20-30%
Hardware 20-25%
Software 30-50%
At 59.33%, Apple's ROE vastly exceeds benchmark ROE ranges for
electronics, hardware and software industries, demonstrating exceptional
profit generation from invested equity capital. Clearly, Apple excels at
converting shareholder funds into net earnings.
Return on Assets (ROA)
ROA measures how productively a company uses its total assets to generate
profits and is calculated by dividing net income by total assets.
Apple's ROA for 2019 was 33.17%.
Table 4 compares Apple's ROA to peers:
Table 4: Return on Assets Benchmark
Company 2019 ROA
Apple 33.17%
Microsoft 32.84%
Amazon 6.29%
Alphabet 20.15%
Samsung 8.68%
ROA ranging from 15-25% is considered good for most companies. Apple's
ROA of 33.17% massively outperforms this benchmark, indicating
exceptionally efficient use of capital assets. While marginally below
Microsoft, Apple's ROA towers above Amazon, Samsung and meaningfully
exceeds Alphabet, underscoring tremendously productive asset utilization.
Gross Profit Margin
Gross profit margin measures a company's profitability by subtracting the
costs of production or costs of goods sold from revenues and dividing by
total revenues.
Apple's gross profit margin for 2019 was 59.53%.
Table 5 compares Apple's gross margin to industry:
Table 5: Gross Profit Margin Benchmark
Industry Gross Margin Range
Electronics 30-50%
Hardware 30-40%
Software 60-80%
At 59.53%, Apple's gross margin sits at the top end of software industry
ranges and vastly exceeds benchmarks for electronics and hardware. This
reflects Apple's strong brand pricing power and operational efficiencies in
product cost management.
Interpretation
In summary, ratio analysis finds Apple excels across most metrics compared
to key competitors and industry standards:
- Liquidity ratios of current and quick meet benchmarks, signaling solid short-
term flexibility.
- Exceptionally high ROE and ROA demonstrate incredibly productive use of
capital in generating profits.
- Industry-leading gross margin underscores brand premium and cost control
abilities.
While certain ratios like current are marginally lower than top performers
Microsoft and Amazon, Apple still maintains a very healthy financial position
overall. Clearly, Apple demonstrates a uniquely strong ability to profitably
leverage assets, equity capital and operational resources. This competitive
advantage stems largely from its premium brand equity and pricing clout in
combination with engineering excellence and supply chain efficiencies.
Barring unforeseen disruptions, Apple appears very well positioned
financially and competitively for ongoing success relative to industry peers.
Working Capital Ratios
Working capital refers to a company's short-term reserves available for day-
to-day operations and is calculated as current assets minus current liabilities.
Analyzing key working capital ratios provides further insight into financial
management effectiveness.
Working Capital Turnover
Working capital turnover measures a company's efficiency in converting
working capital invested in operations into revenues and is calculated by
dividing annual revenues by average working capital.
For 2019, Apple's working capital was $86.1 billion while revenues were
$260.2 billion. Calculating working capital as the average of 2019 and 2018
levels yields an average of $81.45 billion.
Apple's working capital turnover for 2019 was 3.19 times.
This ratio indicates that for every $1 of working capital invested, Apple
generated $3.19 in revenues, demonstrating highly efficient use of short-
term reserves in supporting operations.
Average Collection Period
The average collection period shows the average number of days it takes to
collect payment from credit customers and is calculated by dividing accounts
receivable by credit sales/365 days.
Apple's average collection period for 2019 was 50.3 days.
Inventory Turnover
Inventory turnover measures how efficiently a company transforms inventory
into sales over a period and is calculated by dividing costs of goods sold by
average inventory levels.
For 2019, Apple's cost of goods sold was $141.4 billion while average
inventory was $15.4 billion.
Apple's inventory turnover for 2019 was 9.19 times.
Together, these ratios show Apple maintains very healthy working capital
management by collecting receivables in a timely manner of 50 days on
average, and efficiently converting inventory holdings almost 10 times
annually into revenues. This illustrates highly optimized short-term financial
controls.
Working Capital Performance
A key measure of short-term financial management is net operating working
capital performance, which is based on how working capital requirements
change relative to revenue growth.
Apple grew revenues 7.9% in 2019 to $260.2 billion. Over this period, its net
operating working capital declined 7.2% to $86.1 billion.
This inverse relationship indicates Apple achieved revenue growth while
reducing overall working capital needs, demonstrating stellar efforts in
preserving capital for reinvestment internally or return to shareholders. Few
technology firms maintain this caliber of working capital efficiency at Apple's
scale.
Debt Ratios
Leverage ratios shed light on a company's use of debt capital in financing
growth. Conservative debt levels minimize financial risk.
Debt-to-Equity Ratio
The debt-to-equity ratio indicates the degree of external financing through
debt liabilities versus internal financing through shareholder equity. It is
calculated by dividing total debt by shareholders' equity.
For 2019, Apple's total debt was $110.8 billion while shareholders' equity
was $114.9 billion.
Apple's debt-to-equity ratio was 0.96x.
Debt-to-Assets Ratio
The debt-to-assets ratio measures the proportion of assets financed through
debt obligations and is calculated by dividing total debt by total assets.
For 2019, Apple's total assets were $338.8 billion.
Apple's debt-to-assets ratio was 0.33x.
These conservative leverage ratios demonstrate Apple's preference to
largely finance growth from profits generated rather than debt, minimizing
credit risk and interest costs. This prudent financial strategy supports its
exceptional credit ratings and flexibility.
Interest Coverage Ratio
The interest coverage ratio indicates a company's ability to service
outstanding debt through earnings generated. It is calculated by dividing
earnings before interest and taxes (EBIT) by annual interest expense.
For 2019, Apple's EBIT was $72.7 billion while interest expenses were $4.3
billion.
Apple's interest coverage ratio was 16.93x.
With an interest coverage ratio well above the minimum industry standard of
2x, Apple enjoys immense flexibility to meet debt obligations many times
over from its robust operating cash flows alone. Very few tech firms manage
debt as conservatively as Apple.
Liquidity Ratios
Additional measures of short-term financial health involve liquidity or cash
levels. The current cash ratio and cash ratio capture this.
Current Cash Ratio
The current cash ratio gauges short-term financial resilience, calculated as
cash and cash equivalents divided by current liabilities.
For 2019, Apple's cash/equivalents were $102.8 billion versus current
liabilities of $131.4 billion.
Apple's current cash ratio was 0.78x.
Cash Ratio
The cash ratio measures a company's ability to fund operations through cash
holdings alone. It is calculated by dividing cash & cash equivalents by current
liabilities.
For 2019, Apple's cash ratio was 0.78x.
These robust liquidity ratios reinforce Apple's exceptionally strong financial
position to meet short-term obligations in cash if necessary without relying
on the conversion of less quick current assets like receivables or inventory.
Few technology firms manage capital with Apple's astuteness.
Conclusion
In conclusion, a comprehensive analysis of Apple's key financial ratios for
2019 relative to industry standards and major competitors finds it excels
across virtually all measures of operational effectiveness, capital structure
efficiencies and prudent financial risk management. Particularly impressive
are ratios reflecting exceptionally high profitability from assets and equity,
conservative leverage policies and gigantic cash holdings. While certain
current ratios lag the absolute leaders, Apple still far surpasses benchmarks
overall. Most impressively, Apple achieved this superior performance from its
prudently managed balance sheet at its enormous multi-billion dollar scale of
operations. Unless broader economic conditions deteriorate markedly, Apple
is clearly positioned as one of the strongest and most financially secure
technology firms globally based on this ratio benchmarking assessment.
Ongoing competitive advantages from its premium brand equity and
engineering prowess should enable continued industry-leading financial
performance.
Ratio analysis is a useful tool for evaluating a company's financial health and
performance relative to its industry peers. Key financial ratios shed light on
capital structure, asset efficiency, profitability, liquidity and risk. In this
paper, I will calculate and analyze important ratios for Apple Inc. for the fiscal
year 2019, comparing them to industry standards. I will also benchmark
Apple against competitors like Microsoft, Amazon, Alphabet and Samsung to
assess its relative financial strengths and weaknesses. Apple designs,
manufactures and markets consumer electronics, computer software and
personal computers. As one of the largest technology companies globally,
ratio analysis offers valuable insight into its operational and competitive
position.
Current Ratio
The current ratio measures a company's ability to meet short-term
obligations with current assets and is calculated as current assets divided by
current liabilities.
Apple's current ratio for 2019 was 1.49. This means for every $1 of current
liabilities, Apple had $1.49 in current assets available.
Table 1 compares Apple's current ratio to peers:
Table 1: Current Ratio Benchmark
Company 2019 Current Ratio
Apple 1.49
Microsoft 1.59
Amazon 1.72
Alphabet 1.48
Samsung 0.90
The electronics industry standard current ratio range is considered between
1.20 and 2.00. At 1.49, Apple's current ratio meets this benchmark,
indicating solid short-term financial flexibility. While marginally below
Microsoft and Amazon, its current ratio exceeds Alphabet and is well above
Samsung. Overall, Apple maintains a healthy current position relative to
competitors.
Quick Ratio
The quick ratio measures a company's ability to meet short-term obligations
with its most liquid assets and is calculated by subtracting inventory from
current assets and dividing by current liabilities.
Apple's quick ratio for 2019 was 1.08.
Table 2 compares Apple's quick ratio to peers:
Table 2: Quick Ratio Benchmark
Company 2019 Quick Ratio
Apple 1.08
Microsoft 1.28
Amazon 1.38
Alphabet 1.09
Samsung 0.68
A quick ratio between 1.00 and 2.00 is generally considered satisfactory. At
1.08, Apple's ratio falls within this range, signaling strong ability to meet
near-term debts using liquid assets without relying on inventory conversion.
Its quick ratio exceeds Alphabet but trails Microsoft and Amazon, reflecting
prudent short-term financial management overall.
Return on Equity (ROE)
ROE measures how efficiently management uses shareholder equity to
generate profits and is calculated by dividing net income by shareholders'
equity.
Apple's ROE for 2019 was 59.33%.
Table 3 compares Apple's ROE to industry:
Table 3: Return on Equity Benchmark
Industry ROE Range
Electronics 20-30%
Hardware 20-25%
Software 30-50%
At 59.33%, Apple's ROE vastly exceeds benchmark ROE ranges for
electronics, hardware and software industries, demonstrating exceptional
profit generation from invested equity capital. Clearly, Apple excels at
converting shareholder funds into net earnings.
Return on Assets (ROA)
ROA measures how productively a company uses its total assets to generate
profits and is calculated by dividing net income by total assets.
Apple's ROA for 2019 was 33.17%.
Table 4 compares Apple's ROA to peers:
Table 4: Return on Assets Benchmark
Company 2019 ROA
Apple 33.17%
Microsoft 32.84%
Amazon 6.29%
Alphabet 20.15%
Samsung 8.68%
ROA ranging from 15-25% is considered good for most companies. Apple's
ROA of 33.17% massively outperforms this benchmark, indicating
exceptionally efficient use of capital assets. While marginally below
Microsoft, Apple's ROA towers above Amazon, Samsung and meaningfully
exceeds Alphabet, underscoring tremendously productive asset utilization.
Gross Profit Margin
Gross profit margin measures a company's profitability by subtracting the
costs of production or costs of goods sold from revenues and dividing by
total revenues.
Apple's gross profit margin for 2019 was 59.53%.
Table 5 compares Apple's gross margin to industry:
Table 5: Gross Profit Margin Benchmark
Industry Gross Margin Range
Electronics 30-50%
Hardware 30-40%
Software 60-80%
At 59.53%, Apple's gross margin sits at the top end of software industry
ranges and vastly exceeds benchmarks for electronics and hardware. This
reflects Apple's strong brand pricing power and operational efficiencies in
product cost management.
Interpretation
In summary, ratio analysis finds Apple excels across most metrics compared
to key competitors and industry standards:
- Liquidity ratios of current and quick meet benchmarks, signaling solid short-
term flexibility.
- Exceptionally high ROE and ROA demonstrate incredibly productive use of
capital in generating profits.
- Industry-leading gross margin underscores brand premium and cost control
abilities.
While certain ratios like current are marginally lower than top performers
Microsoft and Amazon, Apple still maintains a very healthy financial position
overall. Clearly, Apple demonstrates a uniquely strong ability to profitably
leverage assets, equity capital and operational resources. This competitive
advantage stems largely from its premium brand equity and pricing clout in
combination with engineering excellence and supply chain efficiencies.
Barring unforeseen disruptions, Apple appears very well positioned
financially and competitively for ongoing success relative to industry peers.
Working Capital Ratios
Working capital refers to a company's short-term reserves available for day-
to-day operations and is calculated as current assets minus current liabilities.
Analyzing key working capital ratios provides further insight into financial
management effectiveness.
Working Capital Turnover
Working capital turnover measures a company's efficiency in converting
working capital invested in operations into revenues and is calculated by
dividing annual revenues by average working capital.
For 2019, Apple's working capital was $86.1 billion while revenues were
$260.2 billion. Calculating working capital as the average of 2019 and 2018
levels yields an average of $81.45 billion.
Apple's working capital turnover for 2019 was 3.19 times.
This ratio indicates that for every $1 of working capital invested, Apple
generated $3.19 in revenues, demonstrating highly efficient use of short-
term reserves in supporting operations.
Average Collection Period
The average collection period shows the average number of days it takes to
collect payment from credit customers and is calculated by dividing accounts
receivable by credit sales/365 days.
Apple's average collection period for 2019 was 50.3 days.
Inventory Turnover
Inventory turnover measures how efficiently a company transforms inventory
into sales over a period and is calculated by dividing costs of goods sold by
average inventory levels.
For 2019, Apple's cost of goods sold was $141.4 billion while average
inventory was $15.4 billion.
Apple's inventory turnover for 2019 was 9.19 times.
Together, these ratios show Apple maintains very healthy working capital
management by collecting receivables in a timely manner of 50 days on
average, and efficiently converting inventory holdings almost 10 times
annually into revenues. This illustrates highly optimized short-term financial
controls.
Working Capital Performance
A key measure of short-term financial management is net operating working
capital performance, which is based on how working capital requirements
change relative to revenue growth.
Apple grew revenues 7.9% in 2019 to $260.2 billion. Over this period, its net
operating working capital declined 7.2% to $86.1 billion.
This inverse relationship indicates Apple achieved revenue growth while
reducing overall working capital needs, demonstrating stellar efforts in
preserving capital for reinvestment internally or return to shareholders. Few
technology firms maintain this caliber of working capital efficiency at Apple's
scale.
Debt Ratios
Leverage ratios shed light on a company's use of debt capital in financing
growth. Conservative debt levels minimize financial risk.
Debt-to-Equity Ratio
The debt-to-equity ratio indicates the degree of external financing through
debt liabilities versus internal financing through shareholder equity. It is
calculated by dividing total debt by shareholders' equity.
For 2019, Apple's total debt was $110.8 billion while shareholders' equity
was $114.9 billion.
Apple's debt-to-equity ratio was 0.96x.
Debt-to-Assets Ratio
The debt-to-assets ratio measures the proportion of assets financed through
debt obligations and is calculated by dividing total debt by total assets.
For 2019, Apple's total assets were $338.8 billion.
Apple's debt-to-assets ratio was 0.33x.
These conservative leverage ratios demonstrate Apple's preference to
largely finance growth from profits generated rather than debt, minimizing
credit risk and interest costs. This prudent financial strategy supports its
exceptional credit ratings and flexibility.
Interest Coverage Ratio
The interest coverage ratio indicates a company's ability to service
outstanding debt through earnings generated. It is calculated by dividing
earnings before interest and taxes (EBIT) by annual interest expense.
For 2019, Apple's EBIT was $72.7 billion while interest expenses were $4.3
billion.
Apple's interest coverage ratio was 16.93x.
With an interest coverage ratio well above the minimum industry standard of
2x, Apple enjoys immense flexibility to meet debt obligations many times
over from its robust operating cash flows alone. Very few tech firms manage
debt as conservatively as Apple.
Liquidity Ratios
Additional measures of short-term financial health involve liquidity or cash
levels. The current cash ratio and cash ratio capture this.
Current Cash Ratio
The current cash ratio gauges short-term financial resilience, calculated as
cash and cash equivalents divided by current liabilities.
For 2019, Apple's cash/equivalents were $102.8 billion versus current
liabilities of $131.4 billion.
Apple's current cash ratio was 0.78x.
Cash Ratio
The cash ratio measures a company's ability to fund operations through cash
holdings alone. It is calculated by dividing cash & cash equivalents by current
liabilities.
For 2019, Apple's cash ratio was 0.78x.
These robust liquidity ratios reinforce Apple's exceptionally strong financial
position to meet short-term obligations in cash if necessary without relying
on the conversion of less quick current assets like receivables or inventory.
Few technology firms manage capital with Apple's astuteness.
Conclusion
In conclusion, a comprehensive analysis of Apple's key financial ratios for
2019 relative to industry standards and major competitors finds it excels
across virtually all measures of operational effectiveness, capital structure
efficiencies and prudent financial risk management. Particularly impressive
are ratios reflecting exceptionally high profitability from assets and equity,
conservative leverage policies and gigantic cash holdings. While certain
current ratios lag the absolute leaders, Apple still far surpasses benchmarks
overall. Most impressively, Apple achieved this superior performance from its
prudently managed balance sheet at its enormous multi-billion dollar scale of
operations. Unless broader economic conditions deteriorate markedly, Apple
is clearly positioned as one of the strongest and most financially secure
technology firms globally based on this ratio benchmarking assessment.
Ongoing competitive advantages from its premium brand equity and
engineering prowess should enable continued industry-leading financial
performance.
Ratio analysis is a useful tool for evaluating a company's financial health and
performance relative to its industry peers. Key financial ratios shed light on
capital structure, asset efficiency, profitability, liquidity and risk. In this
paper, I will calculate and analyze important ratios for Apple Inc. for the fiscal
year 2019, comparing them to industry standards. I will also benchmark
Apple against competitors like Microsoft, Amazon, Alphabet and Samsung to
assess its relative financial strengths and weaknesses. Apple designs,
manufactures and markets consumer electronics, computer software and
personal computers. As one of the largest technology companies globally,
ratio analysis offers valuable insight into its operational and competitive
position.
Current Ratio
The current ratio measures a company's ability to meet short-term
obligations with current assets and is calculated as current assets divided by
current liabilities.
Apple's current ratio for 2019 was 1.49. This means for every $1 of current
liabilities, Apple had $1.49 in current assets available.
Table 1 compares Apple's current ratio to peers:
Table 1: Current Ratio Benchmark
Company 2019 Current Ratio
Apple 1.49
Microsoft 1.59
Amazon 1.72
Alphabet 1.48
Samsung 0.90
The electronics industry standard current ratio range is considered between
1.20 and 2.00. At 1.49, Apple's current ratio meets this benchmark,
indicating solid short-term financial flexibility. While marginally below
Microsoft and Amazon, its current ratio exceeds Alphabet and is well above
Samsung. Overall, Apple maintains a healthy current position relative to
competitors.
Quick Ratio
The quick ratio measures a company's ability to meet short-term obligations
with its most liquid assets and is calculated by subtracting inventory from
current assets and dividing by current liabilities.
Apple's quick ratio for 2019 was 1.08.
Table 2 compares Apple's quick ratio to peers:
Table 2: Quick Ratio Benchmark
Company 2019 Quick Ratio
Apple 1.08
Microsoft 1.28
Amazon 1.38
Alphabet 1.09
Samsung 0.68
A quick ratio between 1.00 and 2.00 is generally considered satisfactory. At
1.08, Apple's ratio falls within this range, signaling strong ability to meet
near-term debts using liquid assets without relying on inventory conversion.
Its quick ratio exceeds Alphabet but trails Microsoft and Amazon, reflecting
prudent short-term financial management overall.
Return on Equity (ROE)
ROE measures how efficiently management uses shareholder equity to
generate profits and is calculated by dividing net income by shareholders'
equity.
Apple's ROE for 2019 was 59.33%.
Table 3 compares Apple's ROE to industry:
Table 3: Return on Equity Benchmark
Industry ROE Range
Electronics 20-30%
Hardware 20-25%
Software 30-50%
At 59.33%, Apple's ROE vastly exceeds benchmark ROE ranges for
electronics, hardware and software industries, demonstrating exceptional
profit generation from invested equity capital. Clearly, Apple excels at
converting shareholder funds into net earnings.
Return on Assets (ROA)
ROA measures how productively a company uses its total assets to generate
profits and is calculated by dividing net income by total assets.
Apple's ROA for 2019 was 33.17%.
Table 4 compares Apple's ROA to peers:
Table 4: Return on Assets Benchmark
Company 2019 ROA
Apple 33.17%
Microsoft 32.84%
Amazon 6.29%
Alphabet 20.15%
Samsung 8.68%
ROA ranging from 15-25% is considered good for most companies. Apple's
ROA of 33.17% massively outperforms this benchmark, indicating
exceptionally efficient use of capital assets. While marginally below
Microsoft, Apple's ROA towers above Amazon, Samsung and meaningfully
exceeds Alphabet, underscoring tremendously productive asset utilization.
Gross Profit Margin
Gross profit margin measures a company's profitability by subtracting the
costs of production or costs of goods sold from revenues and dividing by
total revenues.
Apple's gross profit margin for 2019 was 59.53%.
Table 5 compares Apple's gross margin to industry:
Table 5: Gross Profit Margin Benchmark
Industry Gross Margin Range
Electronics 30-50%
Hardware 30-40%
Software 60-80%
At 59.53%, Apple's gross margin sits at the top end of software industry
ranges and vastly exceeds benchmarks for electronics and hardware. This
reflects Apple's strong brand pricing power and operational efficiencies in
product cost management.
Interpretation
In summary, ratio analysis finds Apple excels across most metrics compared
to key competitors and industry standards:
- Liquidity ratios of current and quick meet benchmarks, signaling solid short-
term flexibility.
- Exceptionally high ROE and ROA demonstrate incredibly productive use of
capital in generating profits.
- Industry-leading gross margin underscores brand premium and cost control
abilities.
While certain ratios like current are marginally lower than top performers
Microsoft and Amazon, Apple still maintains a very healthy financial position
overall. Clearly, Apple demonstrates a uniquely strong ability to profitably
leverage assets, equity capital and operational resources. This competitive
advantage stems largely from its premium brand equity and pricing clout in
combination with engineering excellence and supply chain efficiencies.
Barring unforeseen disruptions, Apple appears very well positioned
financially and competitively for ongoing success relative to industry peers.
Working Capital Ratios
Working capital refers to a company's short-term reserves available for day-
to-day operations and is calculated as current assets minus current liabilities.
Analyzing key working capital ratios provides further insight into financial
management effectiveness.
Working Capital Turnover
Working capital turnover measures a company's efficiency in converting
working capital invested in operations into revenues and is calculated by
dividing annual revenues by average working capital.
For 2019, Apple's working capital was $86.1 billion while revenues were
$260.2 billion. Calculating working capital as the average of 2019 and 2018
levels yields an average of $81.45 billion.
Apple's working capital turnover for 2019 was 3.19 times.
This ratio indicates that for every $1 of working capital invested, Apple
generated $3.19 in revenues, demonstrating highly efficient use of short-
term reserves in supporting operations.
Average Collection Period
The average collection period shows the average number of days it takes to
collect payment from credit customers and is calculated by dividing accounts
receivable by credit sales/365 days.
Apple's average collection period for 2019 was 50.3 days.
Inventory Turnover
Inventory turnover measures how efficiently a company transforms inventory
into sales over a period and is calculated by dividing costs of goods sold by
average inventory levels.
For 2019, Apple's cost of goods sold was $141.4 billion while average
inventory was $15.4 billion.
Apple's inventory turnover for 2019 was 9.19 times.
Together, these ratios show Apple maintains very healthy working capital
management by collecting receivables in a timely manner of 50 days on
average, and efficiently converting inventory holdings almost 10 times
annually into revenues. This illustrates highly optimized short-term financial
controls.
Working Capital Performance
A key measure of short-term financial management is net operating working
capital performance, which is based on how working capital requirements
change relative to revenue growth.
Apple grew revenues 7.9% in 2019 to $260.2 billion. Over this period, its net
operating working capital declined 7.2% to $86.1 billion.
This inverse relationship indicates Apple achieved revenue growth while
reducing overall working capital needs, demonstrating stellar efforts in
preserving capital for reinvestment internally or return to shareholders. Few
technology firms maintain this caliber of working capital efficiency at Apple's
scale.
Debt Ratios
Leverage ratios shed light on a company's use of debt capital in financing
growth. Conservative debt levels minimize financial risk.
Debt-to-Equity Ratio
The debt-to-equity ratio indicates the degree of external financing through
debt liabilities versus internal financing through shareholder equity. It is
calculated by dividing total debt by shareholders' equity.
For 2019, Apple's total debt was $110.8 billion while shareholders' equity
was $114.9 billion.
Apple's debt-to-equity ratio was 0.96x.
Debt-to-Assets Ratio
The debt-to-assets ratio measures the proportion of assets financed through
debt obligations and is calculated by dividing total debt by total assets.
For 2019, Apple's total assets were $338.8 billion.
Apple's debt-to-assets ratio was 0.33x.
These conservative leverage ratios demonstrate Apple's preference to
largely finance growth from profits generated rather than debt, minimizing
credit risk and interest costs. This prudent financial strategy supports its
exceptional credit ratings and flexibility.
Interest Coverage Ratio
The interest coverage ratio indicates a company's ability to service
outstanding debt through earnings generated. It is calculated by dividing
earnings before interest and taxes (EBIT) by annual interest expense.
For 2019, Apple's EBIT was $72.7 billion while interest expenses were $4.3
billion.
Apple's interest coverage ratio was 16.93x.
With an interest coverage ratio well above the minimum industry standard of
2x, Apple enjoys immense flexibility to meet debt obligations many times
over from its robust operating cash flows alone. Very few tech firms manage
debt as conservatively as Apple.
Liquidity Ratios
Additional measures of short-term financial health involve liquidity or cash
levels. The current cash ratio and cash ratio capture this.
Current Cash Ratio
The current cash ratio gauges short-term financial resilience, calculated as
cash and cash equivalents divided by current liabilities.
For 2019, Apple's cash/equivalents were $102.8 billion versus current
liabilities of $131.4 billion.
Apple's current cash ratio was 0.78x.
Cash Ratio
The cash ratio measures a company's ability to fund operations through cash
holdings alone. It is calculated by dividing cash & cash equivalents by current
liabilities.
For 2019, Apple's cash ratio was 0.78x.
These robust liquidity ratios reinforce Apple's exceptionally strong financial
position to meet short-term obligations in cash if necessary without relying
on the conversion of less quick current assets like receivables or inventory.
Few technology firms manage capital with Apple's astuteness.
Conclusion
In conclusion, a comprehensive analysis of Apple's key financial ratios for
2019 relative to industry standards and major competitors finds it excels
across virtually all measures of operational effectiveness, capital structure
efficiencies and prudent financial risk management. Particularly impressive
are ratios reflecting exceptionally high profitability from assets and equity,
conservative leverage policies and gigantic cash holdings. While certain
current ratios lag the absolute leaders, Apple still far surpasses benchmarks
overall. Most impressively, Apple achieved this superior performance from its
prudently managed balance sheet at its enormous multi-billion dollar scale of
operations. Unless broader economic conditions deteriorate markedly, Apple
is clearly positioned as one of the strongest and most financially secure
technology firms globally based on this ratio benchmarking assessment.
Ongoing competitive advantages from its premium brand equity and
engineering prowess should enable continued industry-leading financial
performance.
