Financial Analysis Project Apple Essay Example
Financial Analysis Project Apple Essay Example

Financial Analysis Project Apple Essay Example

Available Only on StudyHippo
  • Pages: 10 (2513 words)
  • Published: April 20, 2017
  • Type: Case Study
View Entire Sample
Text preview


Apple inc. is a corporation that was created in 1977 in California. The company product lineup consists of a large range of personal mobile communication devices, media devices, computing devices, and a variety of services and software. It also consists of networking hardware and third-party software and hardware products since this company does manufacture its own hardware it creates its own accessories for the products it creates as well as the software used in the hardware.

The hardware portion of Apple includes laptops, desktop, which consist of all-in-one designs that one you could consider a trademark, media peripherals and accessories. They have desktops, and operating systems for computers it sells. They also make other software for the Mac operating system which is used in their desktops and laptops. The iLife su


ite is more dedicated to the consumers in the multimedia field such as photography; music, movies, and DVDs. They also have iWork which is the equivalent of Microsoft Office.

They also consist of any portable laptop devices such as MacBook, MacBook Pro, and the MacBook air. Each laptop is specifically made for a certain type of user such as professionals or consumers. Another main product that this company does offer is iTunes. They have been the first major company to give a free media player but also sell music through the player by the song instead of selling the whole album. They have expanded the itunes products to movies, books, audio books, games, podcasts and even application. They have also integrated the App Store and the iBook store for the iPhone, iPod and iTouch.

The major breakthrough in this company's product line up is the iPhone. It i

View entire sample
Join StudyHippo to see entire essay

a smart phone handheld personal computing device which is used with AT;T service. Because of the iPhone many users have been influenced to purchase more Apple devices and hardware and also because the iPhone is extremely compatible with its own lineup of devices and hardware manufactured by Apple. After the iPhone the iPad came out which is a bigger version of the iPhone but, without phone capabilities. It is the equivalent of tablet PC/netbook and also a main competitor for the Kindle.

The company also produces many peripheral products for computing devices such as monitors, printers, computer memory and still cameras, and other computing devices that are needed for their desktops or laptop. Another product is the Apple TV which allows customers to watch content from Netflix, YouTube, and mobile me as well as anything else you have stored on one of the Mac computer connected. The software products mainly consist of the Mac OSx and IOS operating system. The IOS is for the mobile devices such as iPod iTouch and the Mac OS X is for desktops and laptops. Another major breakthrough ince the invention of the iPhone and the release of a service called mobile me which is an annual subscription which allows you to back up any information on your device. Another service apple offers is called AppleCare. It is an extension of warranty on your iPhone or iPod or any other products Apple offers.

Within their music entertainment products are a long line of personal entertainment electronics. The ipods have gone under many generations and now have a large line of ipods within different price ranges for many levels of income. They include

the ipod shuffle, nano, classic, and touch.

The following graph shows a five-year comparison of the total shareholder return, including a dividend reinvested basis, for all parties shown on the graph. The Dow Jones U. S. Technology Index was added to the graph to show the stock performance of companies whose products and services are similar to the company.

The latest information pertaining to Apple inc is stating their senior vice president of Mac Software Engineering, will be departing from the company. The VP of Mac Software Engineering, Craig Federighi, will assume the senior VP responsibilities. This announcement was made public on March,23,2011. He stated that he has had 22 years of experience working with Steve Jobs in making products. The VP who will take responsibility as acting senior VP has worked in apple for the past two years and has been doing great, according to the former senior VP. In other news the situation in Japan will affect Apple’s supply chain.

It may impact Apple’s short term earnings caused by lost sales, higher costs, and new product delays, such as the iphone 5. Although the earnings will be conservative this quarter, in the long term perspective investors do not need to be alarmed. The iPad or iphone delay makes the product more elusive. Potential consumers who were planning on buying these products are not going to switch to another mobile device. News that indirectly affects apple is the acquisition of Tmobile by ATT. T-mobile has 30 million customers which is great opportunity for apple to get more people using their products.

With that in mind, there are significant regulatory hurdles and according to AT;T, they expect this transaction

to take a year to go through the necessary approval process. Apple will be able to expand their iphone and ipad products causing an increase in those product sales.


The income statement below shows the past 3 years operating expenses and revenue as well as sales. As you can tell from the graph their net sales has grown as well as well as R;D which is vital to this industry. SG;A has gone up due to new store expansions.

This increase was due primarily to an increase in headcount and related expenses in the current year to support expanded R;D activities. Also contributing to this increase in R;D expense in 2010 was the capitalization in 2009 of software development costs of $71 million related to Mac OS X Snow Leopard.

Although total R;D expense increased 34% during 2010, it declined as a percentage of net sales given the 52% year-over-year increase in net sales in 2010. SG;A expense increased $1. 4 billion or 33% to $5. 5 billion in 2010 compared to 2009. This increase was due primarily to the Company's continued expansion of its Retail segment, higher spending on marketing and advertising programs, increased stock-based compensation expenses and variable costs associated with the overall growth of the Company's net sales, but it although these areas increased, it helped increase the operating income to 18,385, then after other expense and taxes they were left with 14,013 which is almost a 50% increase as of last year’s 8,235 net income. The company’s net profit has gone up which means that a company is making more profit on each dollar of sales, due to the fact that

the company has sold more software, accessories, and service.

Their iphone accessories and iphone sales had increased from last years’ sales to 95% this year and these accessories have a higher gross margin. The iPhone and iphone related products and service sales in 2010 were 25,179 which is a 93% increase from last years’ 13,033. The direct sales generally have higher associated gross margins than its indirect sales through its channel partners. We can conclude that Apple has had more direct sales.

The current ratio for apple indicates that, at year end 2010, current assets covered current liabilities 2. 0 times, down from 2009 a good amount. Current ratio falls despite profit being made, the industry’s ratio did not have an impact of all falling this past year. The dip was due to current liabilities for lease or rent payments for the new stores opened.

This ratio indicates sort term solvency, and as you can see above it had been going up until 2009. They have increased their quick ratio. The industry did not affect this. Cash flow liquidity ratio: Cash+ marketable securities+ cash flow from operating activities/current liabilities = The company had small growth in accounts payable and a dip in marketable securities.

Their accounts payable has increase a large amount more than likely due to more rent or lease expense for the new stores it has opened within the past year. The marketable securities dip was caused by the market, since no gains or losses were incurred to sales of marketable securities and of course more liabilities were incurred under the accounts payable due to new stores such as rent or lease expense.

The average collection perod is

increasing over time and signifies that the redit may be too lienient and a/r not sufficiently liquid. Net sales went up 20 mil, but the percentage on a/r stayed constant so it does the company did not loosened credit lines for the customer. What caused a small increase in accounts receivable is the fact that trade receivables from two of the Company's customers accounted for 15% and 12% of trade receivables as of September 25, 2010 and one of the Company's customers accounted for 16% of trade receivables as of September 26, 2009. The Company's cellular network carriers accounted for 64% and 51% of trade receivables as of September 25, 2010 and as of September 26, 2009, respectively. So the percentages have increased.

Vendor non-trade receivables from two of the Company's vendors accounted for 57% and 24%, respectively, of non-trade receivables as of September 25, 2010 and two of the Company's vendors accounted for 40% and 36%, respectively, of non-trade receivables as of September 26, 2009. The Company does not reflect the sale of these components in net sales and does not recognize any profits on these sales until the related products are sold by the Company, at which time any profit is recognized as a reduction of cost of sales.


In an investors point of view the EPS is satisfactory. As long as the investor is aware they will not receive dividends and the dividends will be reused in case the company needs it. From a creditors’ point of view it is more than an excellent company to lend money to since, they always have a positive cash generation and have a large amount of cash available and

no long term debt.

In general, they are the only company that has retail stores for their computers among the industry. HP and Dell do not have a retail store to showcase their latest products. They also have great marketing and world expansion strategies causing substantial sales growth. They have a great research and development department as you can tell by new products creating Apple to have a high percentage of market indicating the company is ahead of competitors. Their weaknesses include not paying dividends which may confuse investors. They also have a lack of business partnerships. The company is dependent on the products it outsources, if anything were to occur in that region, Apple could lose their suppliers or cause delays.

Also, consumer demand may influence their suppliers to stop producing the custom products for apple and could shift to regular products. Revenue is depended on launch of new products or services. Steve Jobs is a major visionary icon for Apple inc. , when he passes away or will not be able to be a part of the business due to health reasons, the company will take a severe blow until, if the company can, recuperate. | |


Premature Revenue Recognition: According to generally accepted accounting principles, revenue should not be recognized until there is evidence that a true cells taken place that is delivery of products has occurred or title of those products has passed to the buyer or service has been rendered the price has been determined and collection is expected unfortunately many firms violate this accounting principle by recording revenue before the conditions have been met. APPLE INC.

Net sales consist primarily of revenue from

the sale of hardware, software, digital content and applications, peripherals, and service and support contracts. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collection is probable. The Company has allocated revenue between these two deliverables using the relative selling price method. Because the Company has neither VSOE nor TPE for the two deliverables, the allocation of revenue has been based on the Company's ESPs. Amounts allocated to the delivered hardware and the related essential software are recognized at the time of sale provided the other conditions for revenue recognition have been met.

Amounts allocated to the embedded unspecified software upgrade right are deferred and recognized on a straight-line basis over the 24-month estimated life of each of these devices. All product cost of sales, including estimated warranty costs, are recognized at the time of sale. Costs for engineering and sales and marketing are expensed as incurred. If the estimated life of the hardware product should change, the future rate of amortization of the revenue allocated to the software upgrade right will also change. No changes were made to their revenue recognition policy. I read their 2009 notes and they stated the exact revenue recognition policy.

The relationship among sales accounts receivable and inventory for Apple Inc. was all increasing Accounts Receivable increased Accounts Receivable was 1% and so is inventory on the common size sheet they do not increase her change by much they took up the same amount of percentage they increased just . 1%. The sales increased $20,000 for this past year that's half of 40,000 Faz about a 50% increase

from last year sales. From 2009 they stated The Company has historically experienced increased net sales in its first and fourth fiscal quarters compared to other quarters in its fiscal year due to seasonal demand related to the holiday season and the beginning of the school year.

Then in 2010- The Company has historically experienced increased net sales in its first and fourth fiscal quarters compared to other quarters in its fiscal year due to seasonal demand of consumer markets related to the holiday season and the beginning of the school year; however, this pattern has been less pronounced following the introductions of iPhone and iPad. This company did not have a random 4th qtr spike. They 9/25 is when they start their first qtr. The end of their 4th qrt is before this date. 2. Gross Vs Net Basis: The Company recognizes revenue in accordance with industry specific software accounting guidance for the following types of sales transactions: (i) standalone sales of software products, (ii) sales of software upgrades and (iii) sales of software bundled with hardware not essential to the functionality of the hardware.

For multi-element arrangements that include tangible products containing software essential to the tangible product's functionality and undelivered software elements relating to the tangible product's essential software, the Company allocates revenue to all deliverables based on their relative selling prices.

For transactions involving price protection, the Company recognizes revenue net of the estimated amount to be refunded, provided the refund amount can be reasonably and reliably estimated and the other conditions for revenue recognition have been met. The Company's policy requires that, if refunds cannot be reliably estimated, revenue is not recognized until reliable estimates can

be made or the price protection lapses. For customer incentive programs, the estimated cost of these programs is recognized at the later of the date at which the Company has sold the product or the date at which the program is offered.

Get an explanation on any task
Get unstuck with the help of our AI assistant in seconds