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:
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Growth rates in sales
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How do the growth rates in accounts receivable compare to growth rates in sales?
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How did Apple finance its growth?
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Gross profit margin, operating profit margin, net profit margin and cash flow margin
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How does the net profit margin compare to the cash flow margin?
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DuPont analysis of
ROE -
How does Apple’s ROE compare to its sales growth rate? Is the growth rate
sustainable?
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How would Apple’s ROE be impacted if it didn’t carry so much cash?
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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?
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