Financial Analysis of Apple, Inc.

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When looking at the financial performance of a company, it is important to examine the financial ratios. There are several different classifications of financial ratios. Profitability ratios show the profitability of the company. Liquidity ratios deal with the current assets and current liabilities of the company, and they determine how the company is performing with their liquid finances. Leverage ratios deal with the company’s debt, and how they affect performance. Activity ratios deal with a company’s inventory and collection period, determining how well a company is able to turn over inventory and collect debts. The other important measures of financial performance include information on dividends, common stock, and cash flows (**Use the text book citation here).  

Profitability Ratios
 
The profitability ratios of Apple show that the company is doing well financially. The gross profit margin shows the percentage of revenues available to cover the operating expenses and still turn a profit. The higher the percentage is the better off the company is. Over the years, the trend should be moving in an upward position (**Book citation.). For 2010, 2011, and 2012, Apple’s ratios were 39.38%, 40.48%, and 43.87%, respectively (Apple financials). The trend is increasing over the three-year period, and the percentages are fairly high. Therefore, it can be concluded that the gross profit margin shows positive growth.  

 Operating profit margin shows the profitability of current operations without taking interest charges and income tax into consideration. Like the gross profit margin, the trend over the years should be upward, and higher percentages are better (**Book citation.). For Apple, the ratios for 2010, 2011, and 2012 were 88.81%, 90.74%, 91.42%, respectively (Apple financials). Over time, the ratio is increasing. It is extremely high, nearing 100%. This shows positive growth for Apple.  

Net profit margin is similar to gross profit margin and operating profit margin in respect to trend. The higher the percentage, the better the company is doing, and the trend should be increasing over time (**Book). The net profit margin for Apple over the past three years has been: 21.48& in 2010, 23.95% in 2011, and 26.67% in 2012 (Apple financials). This ratio shows positive growth for Apple. It has increased over the past three years, although it is relatively low.  

The total return on assets is, as the name suggests, a ratio that determines the return on the assets that have been invested in the business. Interest is added to profits after taxes, and then divided by total assets. This is due to the fact that assets are financed by debt as well as equity. As with the previous ratios, the trend for total return on assets should be upward, and a higher percentage is preferable (**Book). For Apple, this trend shows positive growth. Though the numbers are small at 18.64% for 2010, 22.28% in 2011, and 23.70% in 2012 (Apple financials), the trend is increasing.  

Net return on total assets is similar to total return on assets. The difference between the two ratios is that net return on total assets does not take into consideration the interest paid. Net return only looks at the return on assets that were funded by equity (**Book). For Apple, this ratio shows positive financial growth. Since the company has no debt, the ratio values are the same for total return on assets and net return on total assets (Apple financials). Therefore, the growth is positive.  

Return on stockholders’ equity measures the return that stockholders are receiving on their investment in the company. An average value is in the 12-15% range, and the trend should be upward (**Book). For Apple, the ratio over the last three years is 29.32% in 2010, 33.83% in 2011, and 35.30% in 2012 (Apple financials). Even at the lowest point over the past three years, the ratio has been well above the average range. Since the ratio is high, and the trend is increasing, it...
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