FIN350 Benchmark - Teresita

docx

School

Grand Canyon University *

*We aren’t endorsed by this school

Course

350

Subject

Finance

Date

Jan 9, 2024

Type

docx

Pages

Uploaded by DukeHeatPolarBear15

Benchmark- Financial Analysis Project Apple Inc. Teresita Vega Colangelo College of Business, Grand Canyon University FIN-350, Fundamentals of Business Finance Scott Davis February 5, 2023 1

Apple Inc. Apple Inc. is an American multinational technology company headquartered in Cupertino, California. Apple was founded as Apple Computer Company on April 1, 1976, by Steve Wozniak, Steve Jobs, and Ronald Wayne. When Jobs resigned in 2011 for health reasons and died two months later, he was succeeded as CEO by Tim Cook. It is currently the largest technology company as of June 2022. Apple's mission is “to bring the best user experience to its customers through innovative hardware, software, and services.” Apple designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories, and sells a variety of related services. Some of its most popular products are iPhones, iPads, Apple Watches, Macs, AirPods, among others. As of 2022, Apple has 522 stores open in 25 different countries, 273 of which are in the United States of America [ CITATION Gav22 \l 1033 ]. From sec.gov Company $ in millions As of September 25, 2021 As of September 26, 2020 Cash / Marketable Securities $62,639 $90,943 AR $26,278 $16,120 Inventory $6,580 $4,061 Other Current Assets $39,339 $32,589 Total Current Assets $134,836 $143,713 Fixed Assets $216,166 $180,175 Total Assets $351,002 $323,888 AP $54,763 $42,296 Other Current Liabilities $70,718 $63,096 Total Current Liabilities $125,481 $105,392 Non-current Liabilities $162,431 $153,157 Total Liabilities $ 287,912 $258,549 Total Stockholder’s Equity (End. Balances) $ 63,090 $65,339 2

Total Net Sales / Revenue $365,817 $274,515 COGS $212,981 $169,559 EBIT $108,949 $66,288 Interest Expense $258 $803 Earnings / Net Profit / After Tax Profit $94,680 $57,411 Stock Price $176.32 $130.95 Ratios From chapter 14 From sec.gov x Company (Apple Inc.) Competitor (Microsoft) Ratio Category Ratio Name (choose 1 from each category) Ratio Formula *September 2020 ratio September 2021 ratio September 2021 ratio 1.Liquidity Current Ratio Current Assets / Current Liabilities 1.36 1.07 2.17 2.Effectiveness / Asset Mgmt Inventory turnover Sales or COGS / Inventory 41.75 32.37 17.95 3.Leverage Debt to Equity Total Debt / Total Equity 3.96 4.56 1.21 4.Profitability Return on Assets (ROA) Net Income Available to Common / Total Assets 0.18 0.27 0.21 *These companies end their fiscal years in September each year. 3

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Challenges, Strategies, Growth Plans, Product Changes, and Mission Statement Alignment The COVID-19 pandemic has represented a great challenge for all businesses around the world, and Apple has not been the exception. The measures taken by many countries in response to the pandemic have materially affected and may continue to affect the company's business, results of operations, financial condition, as well as the price of the company’s stock. During 2020-2021 many of the Company's retail stores, as well as channel partner outlets, temporarily closed at various times, and a significant number of Company employees worked remotely. In the fourth quarter of 2021, Apple experienced disruptions with some of its component providers and logistics services, which caused a supply shortage, directly affecting sales worldwide [CITATION UNI21 \l 1033 ]. The strategies that Apple has implemented are that the company has reopened all its retail stores and substantially all its other facilities, subject to operating restrictions to protect public health and the health and safety of employees and customers to continue working safely. Since it's not all challenges and bad news, the company increased its total net sales to 33% ($91.3 billion) during 2021 compared to 2020, driven by growth across all product and service categories, in addition to precautions that were carried out in each of its stores in the health area after the pandemic. Year-over-year net sales during 2021 also grew in each of the Company's reportable segments. Apple is fully focused on providing the highest quality products and services. Apple products are constantly changing and renewing since the company launches a new iPhone to the market every year in the month of September. Not only do the iPhones renew their models but they also offer a wide variety of versions of iPads, MacBooks, AirPods, among others. In fact, apple’s latest software for iPhones can identify inauthentic accessories, for example, fake 4

AirPods. According to Dalvin Brown in an article posted in the Wall Street Journal “Apple’s latest iPhone software, iOS 16, can notify users attempting to pair inauthentic AirPods. When setting up Apple’s earbuds, you open the case and hold them near your iPhone, and a setup animation appears on the screen [ CITATION Dal23 \l 1033 ].” This aligns with its mission statement which is “to bring the best user experience to its customers through innovative hardware, software, and services.” It's not that I'm a big fan of Apple, which I am, but from my point of view this company is on the right track to continue its success, my only suggestion from what I've read in articles and from my personal point of view as a consumer, I think that their prices are increasingly higher, leaving out other types of markets. My proposal to them would be to not stop creating their sophisticated products or lower their quality, but perhaps they could add variety to their catalog by selling slightly more austere but high-quality software products available to everyone, in order to expand their consumer market. Recent Trends in the Company’s Stock Price Apple stock performance is trending favorably since in April 2021, the company announced an increase in the current share repurchase program authorization from $225 billion to $315 billion and increased its quarterly dividend from $0.205 to $0.22 per share beginning in May 2021. During 2021, the company repurchased $85.5 billion of its common shares and paid dividends and dividend equivalents of $14.5 billion. In fact, the all-time high Apple stock closing price was 180.73 on January 03, 2022, which means the company is trending favorably since its stock price is increasing over the years. Although Apple is having a good picture now, I would be aware of any potential risk impacting the market's valuation, for example, a technology sector 5

risk. Technology-related stock values can quickly fall out of favor with investors, which can lead to a sudden sale and drastically lower market prices. There are different reasons why technology values can be affected, it can be due to intense competition, obsolescence of existing technology, and government regulation, among others [ CITATION Dir23 \l 1033 ]. Overall Financial Strength Considering the ideal current ratio for a business is above 1 Apple is doing good in both years 2021 and 2020, but we can notice a slight decrease from 1.36 in 2020 to 1.07 in 2021. The current ratio measures the dollars of current assets available to pay each dollar of current liabilities. For its leverage, we have the debt-to-equity ratio which increase from 3.96 to 4.56 from 2020 to 2021 which measures the dollars of debt financing used for every dollar of equity financing. Of course, this was due to the COVID-19 pandemic since all businesses around the world were affected by all the changes that occurred and the security measures that had to be taken. In other words, the world came to a standstill for a while, and we were all in quarantine. Fortunately for Apple, they had a better year in 2022 but the COVID-19 effects are still present in this company as in many others. Paying closer attention to Apple’s competitor Microsoft they have a higher liquidity ratio and a lower leverage ratio than Apple in 2021 which means they did better in the current ratio, having more dollars of current assets available to pay each dollar of current liability, and the debt-to-equity is preferred lower as it indicates less debt on a company's balance sheet. 6

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Evaluation of Efficiency and Effectiveness Apple’s inventory turnover decreased from 41.75 in 2020 to 32.37 in 2021, which means that sales decreased this year, this is for the reasons mentioned above about the COVID-19 pandemic. Although we see a decrease in sales the return on assets of the company increased from 0.18 in 2020 to 0.27 in 2022, this is because they had more inventory to sell so they needed a smaller investment in the future. Apple’s competitor Microsoft had a lower ratio of 0.21 compared to Apple's ratio of 0.27 [ CITATION Mac23 \l 1033 ]. The profitability in the Return on Asset ratio (ROA) measures the overall return on the firm’s assets, including financial leverage and taxes, the higher the ROA number, the better, because the company can earn more money with a smaller investment. Overall, the company has had its lows and highs but is actually recovering from last years and although we are still perceiving a non-favorable global economy Apple is on a good path to success and remains at the top companies in the technological industry ranking. 7

References Brown, D. (2023). $50 AirPods Pro? Nope. Here’s How to Spot Fake Apple Earbuds. The Wall Street Journal . Cornett, M. M., Adair, T. A., & Nofsinger, J. (2022 ). M: Finance (5 th ed.). McGraw Hill. ISBN- 13: 9781260772357 Direxion. (2023). AAPU AAPD . Retrieved from Direxion: https://www.direxion.com/product/daily-aapl-bull-and-bear-leveraged-single-stock-etfs? keyword=aapl%20stock %20today&gclid=CjwKCAiAxP2eBhBiEiwA5puhNWrblL_FZa7r8__7dDpMhdOhNYF fK0uKv-zny2_rsPzIr7ruV2meWRoCsjkQAvD_BwE MacroTrends. (2023). Microsoft 2010-2022 | MSFT . Retrieved from MacroTrends: https://www.macrotrends.net/stocks/charts/MSFT/microsoft/roa US Securities and Exchange Commission. (2021). Apple Inc 10k. Washington D.C: US Securities and Exchange Comission. Wright, G. (2022, October). Apple . Retrieved from TechTarget: https://www.techtarget.com/whatis/definition/Apple 8