The Comparative Financial Performance of Apple Inc Versus Google - Research Paper Example

The net profit represented a lesser proportion of the total sales in subsequent years. It started at 26.7% in 2012, and fell to 21.7% in 2013 and fell further to 21.6% in 2014. The same applied to the operating income as it fell from 35.3% in 2012 to 28.7% and it remained at 28.7% in 2014. The gross profit started at 43.9% in 2012 but it fell to 37.6% in 2013 and increased to 38.6% in 2014. The vertical analysis tells of the comparison between the company’s annual sales revenues and the individual items of the statement of incomes (Elliott & Elliott, 2008).

GOOGLE’S FINANCIAL INCOME PERFORMANCE

Google’s sales revenue grew by 31.95% in 2012, further rising by 19.56% in 2013 and a further 10.21% in 2014. The sales revenues have been growing but at a decreasing rate, thanks to the competition by other search engines such as Yahoo and Bing. Its gross incomes grew by 19.37% in 2012, rising further by 15.12% in 2013 and further by 19.50% in 2014. The pretax income rose by 8.60% in 2012, and rose further by 8.29% in 2013 and rose by a much greater margin in 2014 by 19.06%. The net income grew by 10.79% in 2012. It was followed by a growth by 13.22% in 2013 and a further growth by 14.03% in 2014.

APPLE’S STATEMENT OF FINANCIAL POSITION

Horizontal Analysis

The total assets increased by 17.57% in 2013 and increased further by 12% to settle at $231,839,000. The shareholders equity increased by 4.52 in 2013 but it decreased by 9.71% in 2014, losing that year at $111,547,000. The liabilities grew by 44.24% in 2013 and they grew further by 44.15% in 2014, losing that year at $120,292,000. The current liabilities closed at $63,448,000, having risen by 13.27% in 2013 and risen further by 45.33% in 2014. The horizontal analysis for the company tells of the comparison between the current year’s financial performance and the previous year’s financial performance (Elliott & Elliott, 2008).

Vertical Analysis

The vertical analysis takes the total assets as the base figure for the analysis and it equates all other items of the balance sheet to the total assets to find their proportion, which is represented as a percentage of the total assets (Kimmel & Weygandt, 2007). The current liabilities represented an all-time high proportion of the current assets in 2014, at 27.37% compared to 21.09% in 2013 and 21.89% in 2012. The total shareholders’ equity decreased in proportion from 67.14% in 2012 to 59.69% in 2013 and 48.11% in 2014. The current assets represented the highest proportion in 2013 at 35.4% as compared to 29.56% in 2014 and 32.75% in 2012. The cash represented 6.1% of the total assets in 2012 and the proportion increased to 6.89% in 2013 but fell to 5.97% in 2014.

The net tangible assets for Apple started at 64.1% in 2012, but they fell to 56.9% in 2013. In 2014, they fell further to 44.34% to close at $112,851,000. The proportion of the net tangible assets decreased over the years. The other shareholder’s equity increased by 4.52% in 2013 and decreased by 9.71% in 2014 to close at $499,000. The retained earnings increased by 2.93% in 2013 but they decreased by 16.41% to close at $101,289,000. A decline in the financial strength of Apple is proven through the decline in its statement of financial position items.

GOOGLE’S STATEMENT OF FINANCIAL POSITION PERFORMANCE

Google’s total assets grew by 29.24% in 2012, and grew further by 18.25% in 2013 and further by 18.22% in 2014. The accounts receivable grew by 39.10% in 2012 and grew further by 9.38% in 2013 and further by 23.07% in 2014. The cash and its equivalents to total assets ratio rose slightly from 51.27% in 2012 to 52.94% in 2013 but fell to 49.11% in 2014. The total equity to total assets grew from 76.46% in 2012 to 78.71% in 2013 and further to 79.69% in 2014.

STATEMENT OF CASH FLOWS ANALYSIS

Apple’s net incomes fell from 11.25% in 2013 and it increased by 6.68% in the final years. The cash flows from the operating activities increased by 5.53% in 2013 and increased further by 11.27% in 2014. The cash flows derived from the investments decreased by 29.97% in 2013 and decreased further by 33.15%. The financing activities increased by 864.61% in 2013 and increased by 129.25% in 2014. The annual change in the net cash flow showed an increase by 277.34% in 2013 and a decrease by 111.81% in 2014. The dividends paid for the three years decreased by a huge margin of 324.6% in 2013 and it improved by 5.32% in 2014. The sale purchase of the share decreased by 3257.89% in 2013 and it increased by 98.25% in 2014. The changes in the liabilities decreased by 15.47% in 2013, and increased by 61.15% in 2014. The investment cash flows decreased by 37.43% in 2013 and decreased further by 62.49%. The financing activities show how the company has been applying its finances to increase its investments (Elliott & Elliott, 2008).

Sales Forecast for Apple Inc.

The horizontal analysis shows that Apple’s sales increased by 7.2% in the first period, and by 7% in the second period. An average of the two is 7.1%, which would be applied in forecasting the increase in sales for the next years. In 2015, we would forecast that the sales revenues would grow from $182,795,000 to $195,773,445. Based on the sales forecast growth of 7.1%, we could as well forecast the sales revenues for 2016 by multiplying the sales revenues of 2015 by 1.071, to get $209,673,360.

Conclusion

The company showed a weak solvency and a decline in its financial strength as well as in its profitability (Kimmel & Weygandt, 2007). The profitability decreased considerably over the three years as the liquidity took a dip but it improved slightly towards the end of the three year period. The financial managers of the company have to manipulate the company’s finances to its advantage to prevent it from getting into financial difficulties or insolvency (Paramasivan & Subramanian, 2009). They have to ensure that the company meets its financial obligations when they fall due. The investors are mostly interested with the profitability of the company. They have to ensure that the company meets its financial obligations by raising the required incomes (Elliott & Elliott, 2008). They are also interested with the future growth of Apple. Increased profitability is a good sign for them as it builds their confidence in the company.