RATIO ANALYSIS c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c 1
RATIO ANALYSIS
RATIO ANALYSIS c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c
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RATIOS
Computer
Hardware
Apple
IBM
Profitability Ratios (%)
Gross Margin
42.31%
42.26%
52.67%
EBITDA Margin
22.58%
30.53%
-21.56
Operating Margin
18.86%
27.62%
-29.81%
Pre-Tax Margin
18.25%
27.35%
-31.91%
Effective Tax Rate
15.82%
22.99%
-22.66%
Financial Strength
Quick Ratio
0.68
0.31
0.26
Current Ratio
1.32
0.88
0.95
LT Debt to Equity
1.95
1.77
2.23
Total Debt to Equity
2.17
2.03
2.53
Interest Coverage
41.47
-
-
Valuation Ratios
Price/Earnings Ratio
24.68%
24.06%
100.88%
Price to Sales P/S
5.21%
6.08%
2.11%
Price to Book P/B
29.99%
47.34%
6.34%
Free Cash Flow per Share
17.31%
19.64%
14.17%
Management Effectiveness
(%)
Return On Assets
19.72%
25.89%
1.01%
RATIO ANALYSIS c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c
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Return On Investment
56.37%
46.31%
1.30%
Return On Equity
107.78%
160.90%
6.49%
Efficiency
Receivable Turnover
7.12%
15.61%
8.67%
Inventory Turnover
19.75%
41.18%
16.22%
Total Asset Turnover
0.93%
1.02%
0.48%
Free Cash Flow/Net Income
34.93%
72.64%
35.08%
Ratio analysis – The term ratio analysis can be defined as the evaluation of an organization’s
operational efficiency, liquidity and profitability by making the comparison of the line items that
are present in its financial statements. The quantitative analysis helps to get an insight into the
financial condition of a business entity .
Analysis – On the basis of the ratio analysis involving Apple Inc. and IBM, which operate in the
computer hardware industry, I would be willing to invest in Apple. This is because the company
has shown exceptional performance in terms of its profitability, efficiency, etc. It has also been
able to perform efficiently by making the optimum utilization of its resources as well as assets. By
investing in Apple, the investment return is likely to be better. c
Profitability Ratio analysis – The Gross profit margin of IBM is better for IBM as compared to
Apple, indicating it has higher profits after paying its cost of goods sold. However, Apple has
shown better performance while taking into account its EBITDA margin, operating margin, -tax
margin as well as the effective tax rate. Moreover, Apple’s profitability performance is better than
the industry standard for the same period.
RATIO ANALYSIS c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c
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Financial Strength analysis – The financial strength of Apple is better than that of IBM since
Apple is in a better financial position to pay off its short-term liability as compared to IBM. The
debt of IBM is higher than that of Apple, which shows that it relies on external funds in order to
carry out its business operations. Thus, in this area, Apple is in a better financial state than IBM.
Valuation Ratios analysis – The valuation ratios have been used to evaluate the value of Apple
and IBM. As Price/Earnings Ratio of IBM is higher, the firm can be considered to be growth
stock. The overall valuation of Apple is better than that of IBM in the computer hardware market.
It indicates that Apple is valued higher in the market. Its valuation is better than the industry
standard showcasing its strong financial value. c
Management Effectiveness analysis – The management of Apple is able to utilize the
shareholder’s equity and assets to produce favorable rate of return as compared to IBM. The
strong performance of management is evident from the return that the Apple Inc. company is able
to get on its investment, equity and assets .
Management Effectiveness
Efficiency analysis – Based on the management effectiveness efficiency, Apple is highly
efficient as compared to IBM. This is because Apple is able to make the better use of its resources
to achieve its business goals and objectives.
