Evaluation of Corporate Performance - Apple - Case Study Example

Evaluation of Corporate Performance (Apple Inc) al affiliations Introduction Apple Inc. is a US transnational company that designs and produces customer electronics as well as PC software commodities. The corporations best-recognized hardware goods comprise Macintosh PCs, the iPod along with the iPhone. Apple software comprises the Mac Operating System, X OS, the iTunes social browser, the i-Life applicable of multimedia as well as ingenuity apps, the i-Work suite of production software, ultimate Cut mansion, a collection of expert audio and movie-industry software commodities, in addition to Logic Studio, a collection of audio instruments. The corporation runs more than 250 vending stores in nine nations with an online shop where hardware as well as software commodities are sold (Report of an inquiry into the published financial statements of Apple Fields Limited, 2005). Launched in Cupertino, California state in 1976 and taken over in 1977, the corporation was named Apple Computer Company, for its initial 30 decades, however dropped the term "Computer" in 2007 to mirror the corporations continuing expansion into the customer electronics marketplace other than its conventional concentration on private computers. Apple has approximately 35,000 workers internationally and had global yearly sales of US$33.49 billion in its financial year concluding September 2008.For purposes as assorted as its philosophy of wide-ranging artistic design to its unique promotion campaigns, Apple has set-up an exceptional reputation in the customer electronics business. This comprises a consumer base that is dedicated to the corporation and its product, chiefly in the US. Fortune publication called Apple the mainly admired corporation in the United States of America in 2008 and internationally during 2009. This essay will assess the financial performance of the corporation and establish whether it if financially lucrative to purchase its stock (Report of an inquiry into the published financial statements of Apple Fields Limited, 2005). Review of financial statement Apple Inc. published results that drove past everyones anticipations, comprising our expectations. Apple announced revenue of $39.2billion as well as weekly profit of $11.6 billion, or $12.30 Earnings per Share. This exceeded the $10.07 consensus approximation from the forecaster society. Apple experienced growth due to powerful sales increase from all of its commodity lines. Profits enjoyed a enormous 59 percent rise against Q2 2011 and Earnings Per Share increased by over 92 percent. Earnings per Share Growth were as well helped by a bigger gross margin, which was supported by lower product input costs coupled with Apples commodities (Curtin & Alves, 2010). Decade over decade, Apple Inc. has been able to increase profits from $170.9 billion USD to $182.8 billion USD. Most remarkably, the corporation has been capable to decrease the proportion of sales dedicated to cost of goods sold from 62.39 percent to 61.41 percent. This was a stimulator that resulted in a bottom line expansion from $37.0 billion USD to $39.5 billion USD. The following is a statement of income for the company for the past four years. Currency (Millions of US Dollars) As of September 2011 As of September 2012 As of September 2013 As of September 2014 Total Revenues 108,249.0 156,508.0 170,910.0 182,795.0 Cost of Goods Sold 64,431.0 87,846.0 106,606.0 112,258.0 Gross Profit 43,818.0 68,662.0 64,304.0 70,537.0 Selling, General & Admin Expenses, Total 7,599.0 10,040.0 10,830.0 11,993.0 R&D Expenses 2,429.0 3,381.0 4,475.0 6,041.0 Other Operating Expenses, Total 10,028.0 13,421.0 15,305.0 18,034.0 Interest Expense _ _ -136.0 -384.0 Interest and Investment Income 519.0 1,088.0 1,616.0 1,795.0 Net Interest Expense 519.0 1,088.0 1,480.0 1,411.0 Currency Exchange Gains (Loss) _ -658.0 -301.0 -105.0 Other Non- Operating Income (Expenses) -104.0 92.0 -23.0 -121.0 EBT, Excluding Unusual Items 34,205.0 55,763.0 50,155.0 53,688.0 Gain (Loss) on Sale of Investments _ _ ­_ -205.0 Income Tax Expense 8,283.0 14,030.0 13,118.0 13,973.0 Earnings from Continuing Operations 25,922.0 41,733.0 37,037.0 39,510.0 NET INCOME 25,922.0 41,733.0 37,037.0 39,510.0 Apple Inc.s gross revenue margin increased from 2011 to 2012 however then worsened considerably from 2012 to 2013. Net income margin a marker of profitability, computed as net profits divided by income. Apple Inc. has no any long-standing debt, which makes the corporation very economically autonomous. Revenues as well as Net profits are growing every year. Retained Earnings attained $9.101 B in 2007, which is a symbol for the financial strength of Apple. Because of the fact that sales are continually rising, and supported by $9.352 billion (2007) in Cash as well as equivalents, the corporation may afford upcoming acquisitions. Throughout the decades, Apple has significantly improved in its most important measures of productivity (Maksy, 2007). Pro Forma financial statements Ratio analysis of apple Inc In summary, a corporations liquidity is its capability to complete its near-term debts, and it is a key measure of economic health. Liquidity may be estimated by means of numerous ratios. Current ratio: The current ratio is the mainly crucial liquidity test. It symbolizes a corporation’s capability to meet its temporary liabilities with its temporary assets. A current ratio bigger than or equal to one signifies that current assets must be capable to meet near-term debts. A current ratio of lower than one can imply the company has liquidity problems. Current Ratio = (Current Assets) / Current Liabilities (Maksy, 2007). = 68 531/ 63 448 = 1.08 The ratio is bigger than one which signifies that Apple Inc is capable of providing financial support to its everyday operations. Quick Ratio: The quick ratio is a powerful analysis of liquidity than the current ratio. It eradicates specific current assets like stock as well as prepaid expenses that can be harder to change to cash. Similar to the current ratio, having a quick ratio higher than one implies a business must have little challenge with liquidity. The bigger the ratio, the extra liquid it is, and the well able the corporation will be to ride out whichever recession in its industry. Quick Ratio = (Cash + Accounts Receivable + Short-Term or Marketable Securities) / (Current Liabilities) (Maksy, 2006). = 52 296/ 63 448 = 0.82 The ratio is less than one which signifies that the corporation falls short of the capacity to pay temporary obligations quickly. Cash Ratio: The cash ratio is the mainly conventional liquidity ratio of all. It only calculates the ability of a companys cash, as well as the assets that are straightforwardly transformed into cash, to meet its temporary debts. In addition to the quick ratio, a bigger cash ratio usually denotes the corporation is in improved financial position. Cash Ratio = (Cash + Short-Term or Marketable Securities) / (Current Liabilities) = 25 077/ 63 448 = 0.40 In the above calculation, the ratio is less than the required value (0.5) however; it is close to it implying that Apple has the capacity of getting better to fund its everyday company activities (Maksy, 2006). Financial leverage ratios A leverage ratio refers to any one of numerous financial estimators that perceive at how much capital comes in the appearance of obligation (loans), or evaluates the ability of a corporation to pay financial debts (Maksy, 2006). The most common financial leverage ratios include the following: Total debt to assets ratio = Total debt/ Total Assets = 0.5 Total debt to Equity ratio = Total debt/ Total Equity = 0.32 Asset management of Apple Inc It refers to the management of a customers investments through a monetary services corporation, typically an investment bank. The corporation will venture on behalf of its customers as well as grant them access to a broad range of conventional along with substitute commodity offerings that cannot be to the standard investor. Profitability ratios for Apple Inc Profitability ratios weigh against income statement reports as well as categories to demonstrate a corporations capability to generate revenues from its activities. Profitability ratios concentrate on a corporations return on investment in stock as well as other resources. These ratios essentially show how well corporations may accomplish revenues from their activities. The most common profitability ratios include the following: Return on assets ratio = Net Income/ total assets (Engel & Hirst, 2012). =39510/13973= 2.83 As can be seen, Apple Inc a return of 2.83. In other terms, every dollar ventured in employed capital, apple Inc gets $2.83 Apple’s return may be so high since it sustains less assets level. Return on equity = Net Income/ shareholder’s equity = 39510/18034 = 2.19 As can be seen, subsequent to removing preferred dividends from net profits Apple’s ROE is 2.19. This implies that each dollar of ordinary shareholders equity gained approximately $2.19 this decade. In other terms, shareholders experienced 180% profit on their venture. Apples ratio is most probably regarded big for her business. This might signify that Apple’s is a growing corporation (Engel & Hirst, 2012). Market value Apple has a declining market share. The less marketplace share Apple has, the less it may impact its prospective clients and influence them to jump into making use of Apple’s closed environment goods. The company is frequently accused of violating other firms’ patents and has even lost a number of trials. This devastates Apple trade name as well as its financial condition. Calculation of EVA EVA refers to a measure of a corporations financial productivity founded on the residual prosperity computed through subtracting cost of capital from its operating income (adjusted for tariffs, on a cash foundation) (Also called "economic income") (Engel & Hirst, 2012). The method for computing EVA is as below: = Net Operating Profit after Taxes (NOPAT) - (Capital * Cost of Capital) = $39580 – $13973 = $25607 Findings Based on the results in the trend as well as common size evaluation, Apple’s general productivity is of above average. Evaluation of corporation’s Income Statement illustrated that Apple’s: increase in Net Sales, as well as Gross Income was beyond its players. Evaluation of corporation’s Cash Flow Statement illustrates that Apple’s total Cash Flow from functioning Activities was higher than the company average, and that ended in a positive Net result in Cash. Recommendations For the corporation, decreasing the cost of goods as well as upholding the same value standards may create joint investments, knowledge administration, more number of retail shops for trouble-free access, constant innovation to enlarge. For others, do not negotiate on price for excellence. Choose the goods founded on person’s needs. Be distinctive as well as different. Scale up its production capabilities. References Curtin, D., & Alves, J. (2010). Controlling financial performance for higher profits: An Apple business users guide. Somerville, Mass.: Curtin & London. Engel, E., & Hirst, D. (2012). Cases in financial reporting (7th ed.). Chicago, Ill.: Cambridge Business. Maksy, M. (2006). Real-world corporate cases in financial reporting and analysis. Schaumburg, Ill.: Bridgewood Pub. Maksy, M. (2007). Financial statement reporting and analysis: A case approach using real companies. Schaumburg, Ill.: Bridgewood Pub. Report of an inquiry into the published financial statements of Apple Fields Limited. (2005). Wellington N.Z.: Securities Commission. Read More