table securities, which had reached $137 billion in December 2012 based on its first quarter filing. Apple’s cash pile had grown over the prior decade as a result of the successes of the iPod (launched in 2001), the iPhone (launched in 2007), and the iPad (launched in 2010). By late 2012, shareholders were growing restless due to the fact that no new groundbreaking devices had been launched since the iPad in 2010 as Apple’s market share in both the phone and tablet industries was steadily decreasing, mostly due to Android-powered devices. Apple was not using its cash hoard or returning it to shareholders. Apple’s shareholders had also seen the firm’s stock price decline from its high of over $700 in September 2012 to around $420 in April 2013. Using your remarkable financial analysis skills, address the following: Question How did Apple amass so much cash in the first place? From the
In 2013, Apple’s shareholders had become increasingly concerned about the amount that it held in cash and marketable securities, which had reached $137 billion in December 2012 based on its first quarter filing. Apple’s cash pile had grown over the prior decade as a result of the successes of the iPod (launched in 2001), the iPhone (launched in 2007), and the iPad (launched in 2010). By late 2012, shareholders were growing restless due to the fact that no new groundbreaking devices had been launched since the iPad in 2010 as Apple’s market share in both the phone and tablet industries was steadily decreasing, mostly due to Android-powered devices. Apple was not using its cash hoard or returning it to shareholders. Apple’s shareholders had also seen the firm’s stock price decline from its high of over $700 in September 2012 to around $420 in April 2013. Using your remarkable financial analysis skills, address the following: Question
How did Apple amass so much cash in the first place? From the beginning of 2000 until its peak in 2012, Apple’s stock price rose from $27.97 to $702.10, an increase of over 25 times. Conduct an analysis of Apple’s annual financial data from 2000 to 2012 and determine what specific attributes of its operational performance account for its cash generation and stock performance. Consider the following:
-
Growth rates in sales
-
How do the growth rates in accounts receivable compare to growth rates in sales?
-
How did Apple finance its growth?
-
Gross profit margin, operating profit margin, net profit margin and cash flow margin
-
How does the net profit margin compare to the cash flow margin?
-
DuPont analysis of
ROE -
How does Apple’s ROE compare to its sales growth rate? Is the growth rate
sustainable?
-
How would Apple’s ROE be impacted if it didn’t carry so much cash?
-
Why might Apple have needed to hold on to so much cash in excess of what it needed
to operate? What are the critical ingredients for success in this industry?
![Financial Statements data ($mil) for FY En 9/30/2000 9/29/2001 9/28/2002 9/27/2003 9/25/2004 9/24/2005 9/30/2006 9/29/2007 9/27/2008 9/26/2009 9/25/2010 9/24/2011 9/29/2012
108,249 156,508
64,431
87,846
43,818
68,662
7,599
10,040
Total Revenue/Sales
Cost of Goods Sold (COGS)
Gross Profit
Sales, General & Admin. (SG&A)
Research & Development (R&D)
EBIT
Net Income
Cash Flow (from operations)
Cash and Equivalents
Short- & Long-term Investments
Accounts Receivable (AR)
Inventory
Total Assets
Accounts Payable (AP)
Long-term Debt
Total Shareholder's Equity
7,983
5,817
2,166
1,256
530
786
868
1191
3622
953
33
6,803
1,157
300
4,107
5,363
4,128
1,235
1,138
-333
-25
185
2310
2154
466
11
6,021
801
317
3,920
5,742
4,139
1,603
1,109
48
65
89
2252
2124
565
45
6,298
911
316
4,095
6,207
4,499
1,708
1,212
25
69
289
3396
1170
766
56
6,815
1,154
0
4,223
8,279
6,022
2,257
1,430
336
266
934
2969
2495
774
101
8,050
1,451
0
5,076
13,931
9,889
4,042
1,864
1,643
1,328
2,535
3491
4770
895
165
11,516
1,779
0
7,428
19,315
13,717
5,598
2,433
2,453
1,989
2,220
6392
3718
1,252
270
17,205
3,390
0
9,984
24,578
16,426
8,152
2,963
4,407
3,495
5,470
9352
6034
1,637
346
25,347
4,970
0
14,532
37,491
24,294
13,197
3,761
8,327
6,119
9,596
11875
12615
2,422
509
36,171
5,520
0
22,297
42,905
25,683
17,222
4,149
11,740
8,235
10,159
5263
28729
3,361
455
47,501
5,601
0
31,640
65,225
39,541
25,684
5,517
18,385
14,013
18,595
11261
39750
5,510
1,051
75,183
12,015
47,791
33,790
25,922
37,529
9815
71755
5,369
776
116,371
14,632
76,615
55,241
41,733
50,856
10746
110505
10,930
791
176,064
21,175
118,210](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9a670ca7-8bea-4835-b14f-d42c1bdbe3d1%2F17f3087b-bdaa-4f70-a18d-009aecf9b005%2Fhmdw05f_processed.png&w=3840&q=75)
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