Business Analysis Part II: Apple, Inc.
February 27, 2012
Apple, Inc. is appears to be a successful billion-dollar corporation, this analysis will focus on the financial health of this organization. In this analysis of Apple’s business environment focus will be placed on the income statement, balance sheet, and cash flow. A comparative analysis will be conducted to that of its top competitors. Financial Health
In any organization whether it is a large global corporation or a small business, financial management is very important to keep a checks and balance of the organization in order to maintain a stable, profitable business. To determine the financial health of a business, you must look at three key financial statements: the balance sheet, income statement, and cash flow (Nickels, McHugh, & McHugh, "Chapter 17 Understanding Accounting and Financial Information," 2010). Performing a ratio analysis will show how Apple is performing compared to its competitors. Income Statement
According to Apple’s annual income statement, their total revenue as of September 24, 2011 was $108 billion; gross profit was $44 billion. Their reported net income was $26 billion, which was a 53 percent increase. According to Apple’s income statement, they were profitable in 2011 ("Nasdaq", 2012). Balance Sheet
Apple’s reported “Total Assets” as of September 2011 were in excess of $116 billion while “Total Liabilities” were $39 billion. The “Total Equity” reported by Apple was $77 billion in which $62 billion were retained in the company ("Nasdaq", 2012). Cash Flow Statement
Apple’s net cash flow from operations are $37 billion with investing cash flows at a negative $40 billion and financing activities at $1 billion negative $1 billion ("Nasdaq", 2012). Apple’s cash balance at the beginning of the period was $11 billion and fell to $10 billion at the end of the period ("Apple Cash Flow", 2009-2012). Summary of Financial Health
After evaluating Apple’s financial statements, the organization continues to grow in revenues with a growth rate of 73.27 percent compared to IBM’s at 1.61 percent and Hewlett Packard at negative 7.01 percent. Apple’s ability to pay short-term debt is adequate with a current ratio of 1.58 however it is slightly higher compared to IBM’s of 1.21 and Hewlett Packard at 1.10. Apple’s cash and equivalents are at 10.31 billion, IBMs is minimally higher at 10.93 billion, and Hewlett Packard at 8.11 billion. Apple is very effective in using resources to increase profits and is demonstrated in its profitability ratios (EPA) which are at 13.87 which is considerably higher that both IBM at 4.62 and Hewlett Packard at 0.73 ("Apple Cash Flow", 2009-2012). It appears as though Apple is holding its own in the market right now, however they need to continue to monitor their competitors and be able to stay ahead of the market by continuing to do what they do best, innovation. Technological Advantages
Apple has been able to stay ahead of its competition by listening to their customers and creating a product that is user friendly and caters to their needs. Bajarin (March 5, 2011), “They all acknowledge that Apple’s attention to the consumer experience has been a boon for them and forced them to pay much more attention to the customer instead of technology advancements for technology advancements sake”. When Microsoft and Intel merged, they were able to advance technology but didn’t consider the user experience of the consumer (Bajarin, March 5, 2011). Apple has a very large cash bank which allows them to buy in mass quantities and also gives them access to new technology components prior to its competition which gives them an advantage in innovation (Gobry, July 4, 2011). When Motorola released their tablet, Xooms they had to sell it at a higher price because they lacked the cash reserves to buy in mass quantities therefore costing them more money to produce it...
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