Accounting and Financial Management - Analysis of Apple Inc.

This report analyzes the operational and accounting activities of Apple Inc. and assesses the financial activities of the company. It covers the background of the company, owner's method of financing, working capital adequacy, cash flows, financing history, dividend history, and future plans.

Running head: ACCOUNTING AND FINANCIAL MANAGEMENT
Accounting and Financial Management
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Executive Summary
This report has been constructed in order to have an idea about the operational as well as the
accounting activities of Apple Inc. This report has therefore addressed the background of the
company and how with the advent of time has grown and has established themselves in the
market. The financial activities of the company have been assessed and thereby the actual
scenario of the company is known.

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Table of Contents
General history and background of Apple Inc...........................................................................3
Owner’s method of financing the company’s start up...............................................................3
Owner investment..................................................................................................................3
30 day credit through using the purchase order.....................................................................4
Working capital adequacy, cash flows and financing history....................................................4
Dividend history.........................................................................................................................5
Future plan.................................................................................................................................6
Reference List............................................................................................................................7

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General history and background of Apple Inc
Apple is the American multinational technology entity that has its headquarter in
Cupertino, California and is engaged in developing, selling and designing computer software,
online services and consumer electronics. It was established on 1st April 1976 by 3 men –
Steve Jobs, Ronald Wayne and Steve Wozniak. At that time the company just was a garage in
California established with intention of selling the Apple 1 PC (personal computer) that was
hand built by Mr. Wozniak. However, Apple 1 was hardly qualified as the finished product
with lack of built in human interface device like Keyboard or case (Welcome to the Apple
Store, 2018). After 5 years 1st Macintosh was developed and the company set themselves
different from targeted firms in advertisement, for example IBM. Apple Inc pioneered the
way through computer industry and not once but in multiple times though out the company’s
existence. It is undeniable after 30 years that the company had profound impact on the
technology, influencing and innovating not only how the people use computers but also the
activities for the purposes they are used for.
Owner’s method of financing the company’s start up
Owner investment
For buying the supplies to create 1st products for the purpose of sale Jobs sold his VW
bus in exchange for $ 750 and Wozniak sold his HP 65 calculator in exchange of $ 500. The
amount of working capital generated from this they designed a product and planned to sell
each for $ 50 and expected clear $ 700 after cost. Further, on April 1, 1076 both together
drew up the partnership agreement for the Apple computer. Audience at Homebrew
Computer Club was not impressed while Wozniak and Jobs presented the 1st printed circuit

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boards, however only one person stayed there for talking afterwards. Paul Terrell had 3 stores
for computers and visions for building the national chain.
30 day credit through using the purchase order
Jobs met with Terrel next day, however, Terrel wanted the assembled computer and
not the printed circuit boards for selling it to the end users not the tinkerers (Francis et al.,
2015). However, he was ready to pay an amount of $ 500 each for each delivery
(Kasperskaya & Xifré, 2016). The new entity required $ 15,000 of the parts for filling the
order as they would sell only the parts for up-front cash.
A bank turned down 2 scruffy guys for loan and another store for computer parts
declined the equity stake for new venture. However, finally Jobs convinced manager of
Cramer electronics for calling Paul Terrel to confirm that he actually committed $ 25,000
order. It was eventually confirmed by Terrel and Jobs got parts on credit for 30 days. When
the computers were delivered and payment made after 30 days Apple was on margin of being
the profitable one. Apple was valued at $ 5,309 in 1977 January. However, by end of the
1980 December it became public with $ 1.79 billion.
Working capital adequacy, cash flows and financing history
Ratio Formula 2017 2016
Working capital ratio Current assets / current liabilities 1.28 1.35
Operating cash flow
ratio
Cash flow from operation/current
liabilities 0.63 0.83
Debt equity ratio Total liabilities/total equity 0.64 0.60
Working capital ratio indicates whether the current assets of the company are
sufficient for paying off its current obligations. From the annual report of the company for the
year ended 2018 it can be identified that the current assets of the company for both years
ended 2016 and 2017 are more as compared to the short term obligation (Kothari et al.,

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2015). Further, the working capital ratio of the company is indicating that the current assets
are sufficient to pay off its current liabilities (Otley, 2016).
Looking into the cash flow statement it can be identified that the operating cash flow
ratio of the company that measures the short term liquidity of the company is indicating that
for both the years that is for 2017 and 2016 it generated lower cash from operational activities
as compared to the requirement for paying off the short term obligations (Brandau et al.,
2017). Further, it is identified that reduction in cash equivalents from various activities
including operating activities, financing activities and investing activities for the year ended
2018 amounted to $ 195 million and year-end cash and cash equivalent amounted to $ 20,289
million.
If the capital structure of the company is taken into consideration, then it can be
noticed that the debt amount of the company was less than the equity amount. Hence, the
company is majorly dependent on its own fund for financing (Karadag, 2015). Long term
debt of the company for the year ended 2017 amounted to $ 97,207. It issues the unsecured
promissory notes, that is commercial paper and the net proceeds are used for general
corporate purposes (Welcome to the Apple Store, 2018). However, it received $ 555 million
through issuance of the common stock, $ 28,662 from issuance of term debt. Apple’s stocks
are income oriented as the stocks are not anticipated to grow at significantly above average of
the market.
Dividend history
Date Dividends
2/6/2014 3.05
5/8/2014 3.29
8/7/2014 0.47
11/6/2014 0.47

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2/5/2015 0.47
5/7/2015 0.52
8/6/2015 0.52
11/5/2015 0.52
2/4/2016 0.52
5/5/2016 0.57
8/4/2016 0.57
11/3/2016 0.57
2/9/2017 0.57
5/11/2017 0.63
8/10/2017 0.63
11/10/2017 0.63
2/9/2018 0.63
5/11/2018 0.73
8/10/2018 0.73
11/8/2018 0.73
From the above table it can be found that the company is regular I paying dividend to
its shareholders and the dividend is paid 4 times a year that is in February, May, August and
November. However, the dividends of the company are in increasing trend from August 2014
to November 2018.
Looking at the earning trends of the company it can be said that the net income for the
year ended 2015 was $ 53,394 million and increased to $ 45,687 million in 2016. However,
the company was able to increase the earnings to $ 48,351 million in 2017.
Future plan
Regarding the future plan of Apple, it can be stated that the priorities are saying no to
bunch of the ideas (Khan, 2015). The organization has to bring out the best idea out of the
rest and accordingly improve their operational activities. The company along with the

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changes in technology and innovation has to incorporate the same with the help of which
their brand image and competitive edge can be enhanced.
Reference List
Brandau, M., Endenich, C., Luther, R., & Trapp, R. (2017). Separation–integration–and
now…? A historical perspective on the relationship between German management
accounting and financial accounting. Accounting History, 22(1), 67-91.
Francis, B., Hasan, I., Park, J. C., & Wu, Q. (2015). Gender differences in financial reporting
decision making: Evidence from accounting conservatism. Contemporary Accounting
Research, 32(3), 1285-1318.
Karadag, H. (2015). Financial management challenges in small and medium-sized
enterprises: A strategic management approach. EMAJ: Emerging Markets Journal,
5(1), 26-40.
Kasperskaya, Y., & Xifré, R. (2016). The Effectiveness of Reforms in Public Sector
Accounting and Financial Management: The Case of Spain, 2010-2015.
Khan, M. (2015). Accounting: Financial. In Encyclopedia of Public Administration and
Public Policy, Third Edition-5 Volume Set (pp. 1-6). Routledge.
Kothari, S. P., Mizik, N., & Roychowdhury, S. (2015). Managing for the moment: The role
of earnings management via real activities versus accruals in SEO valuation. The
Accounting Review, 91(2), 559-586.
Otley, D. (2016). The contingency theory of management accounting and control: 1980–
2014. Management accounting research, 31, 45-62.

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Welcome to the Apple Store. (2018). Apple Retail. Retrieved 16 December 2018, from
https://www.apple.com/us_kiosk_53068/shop