Financial Analysis Report: Apple Inc.

This report provides a detailed analysis of the financial performance of Apple Inc. including company background, trend assessment, ratio analysis, and cash flow statement analysis.

Financial Analysis report

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
a. Company background..............................................................................................................3
b. Trend assessment....................................................................................................................4
c. Ratio analysis..........................................................................................................................6
d. Cash flow statement analysis..................................................................................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Financial statement analysis is the process used in evaluating the performance of the
organization based on its financial statements for the purpose of decision-making. This report
provides a detailed analysis of the company Apple Inc, it products and competitors along with
ratio analysis.
a. Company background
Apple Inc. is the company which works on designing and manufacturing and selling the
products like smartphone, computers, tablets, wearables and other accessories related to it. The
company was incorporated in the year 1977 in Califonia.
Products offered by the company are stated below.
 iPhone which is the organization's line of smartphones which is based on macOS
operating system.
 Mac, which the line of computer operated on macOS operating system.
 iPad, it is the multi purpose tablet which uses iPadOS operating system introduced in
2019.
 Wearables, Home and Accessories, it includes Apple TV, Apple Watch, Beats products
and other Apple brands and third party accessories.
Markets
The Apple Inc's customers are mainly the consumers, small and medium-sized
businesses, education, enterprise and government markets. The company sells its products
through its retail and online stores.
Subsidiaries
Following is the list of subsidiaries of Apple Inc.
 Apple Canada Inc., Canada
 Apple Computer Trading (Shanghai) Co., Ltd., China
 Apple Distribution International, Ireland
 Apple Europe Limited, United Kingdom
 Apple France, France
 Apple GmbH, Germany
 Apple Japan, Inc., Japan
 Apple Operations, Ireland

 Apple Operations Europe, Ireland
 Apple Operations International Limited, Ireland
 Apple Pty Limited, Australia
 Apple Sales International, Ireland
 Apple Value Services, LLC, Virginia, U.S.
 Braeburn Capital, Inc., Nevada, US
Risks
 Global and regional economic conditions would have adverse impact over the company's
business operation which will affect its growth as majority of the supply chain and
assembling activities are outside US which depends upon economic conditions.
 Competitive global market in respect to products and services characterized by
aggressive pricing. The success of the company depends upon the continuous and timely
introduction of innovative and creative products.
 The major risk is that the company depends upon performance of its retailers, carriers,
resellers and wholesalers as they are in direct contact with the customers.
 Future of the organization depends upon the support received from the third party
software developers.
Competition
The company's products and services are highly competitive and is confronted by
aggressive competition. Most of the competitors sell out smart phones and computer devices and
other electronic devices on other operating devices with very low cost structure. The company is
facing tough competition from competitors having significant resources and experience.
b. Trend assessment
The below table shows the trend analysis of Apple Inc based on which it can be said that
There has been fluctuation in net sales taking 2017 as the base. In 2019 there was increase in cost
of sales which resulted into decrease in gross margin (Vaca-Tapia and et.al, 2018). There is a
drastic fall in the change in operating income as it was 15.57% in 2018 which then reduced to
4.22% in 2019.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended

2017 (Base
year) 2018 2019
Total net sales 15.86% 13.50%
Cost of sales 16.10% 14.70%
Gross margin 15.48% 11.57%
Operating expenses 15.27% 28.39%
Operating income 15.57% 4.22%
Other income/(expenses), net -26.96% -34.17%
Income before provision for income taxes 13.75% 2.57%
Provision for income taxes -15.03% -33.40%
Net Income 23.12% 14.28%
This table states about percentage change in the items of balance sheet. The current assets
of the company has shown an increasing trend from 27.72% to 140.74% in 2019. There is a
decrease in the inventory level as well. There is a continuous fall in the long term marketable
securities (Arkan, 2016). Therefore, there is a fall in total assets by 9.81% taking 2017 as base
year. In case of liabilities, there is huge fall in the accounts payable of the company while there is
increase in the other current liabilities. There is an overall increase in the change in total
liabilities from 2.80% in 2018 to 7017% in 2019.
CONSOLIDATED BALANCE SHEET
Years ended
2017 (Base
year) 2018 2019
ASSETS:
Current assets
Cash and cash equivalents 27.72% 140.74%
Short-term marketable securities -25.06% -4.04%
Accounts receivable 29.72% 28.26%
Inventories -18.52% -4.19%
Vendor non-trade receivables 45.00% 28.54%
Other current assets -13.27% -11.37%

Total current assets 2.09% 26.56%
Non-current assets:
Marketable securities -12.28% -45.90%
Property, plant and equipment, net 22.26% 10.64%
Intangible assets -100.00% -100.00%
Other non-current assets 119.28% 224.52%
Total non-current assets -4.98% -28.77%
Total assets -2.56% -9.81%
LIABILITIES AND SHAREHOLDERS’
EQUITY:
Current liabilities:
Accounts payable 13.94% -5.74%
Other current liabilities 29.46% 46.52%
Deferred revenue -26.84% -26.84%
Commercial paper -0.11% -50.07%
Term debt 35.22% 57.94%
Total current liabilities 14.99% 4.86%
Non-current liabilities:
Term debt -5.56% -3.57%
Other non-current liabilities 16.77% 13.09%
Total non-current liabilities 1.32% 1.56%
Total liabilities 2.80% 7.17%
Total shareholders’ equity -20.07% -32.50%
c. Ratio analysis
Apple Inc.

2019 2018 2017
Liquidity ratio
Current assets 162819 131339 128645
Current liability 105718 115929 100814
Inventory 4106 3956 4855
Current ratio
Current
assets / current
liabilities 0.39 0.41 1.28
Profitability Ratios
Net Assets 338516 365725 375319
Sales 260174 265595 229234
Asset turnover ratio
Sales / Net
assets 0.77 0.73 0.61
Solvency ratio
Fixed assets 175697 234386 246674
Long term liabilities 142310 142649 140458
Fixed assets to long term
liability ratio
Fixed
assets/Long
term liabilities 1.23 1.64 1.76
Analysis and interpretation:
Liquidity ratios: This ratio is used for determining the current liquidity position of the
business in respect to amount of cash and cash equivalent being available to meet it short term
needs.
Current ratio
The current ratio of Apple Inc. has shown a decrease over the three years which indicates
that the liquidity position of the company is not good (Easton and Sommers, 2018).

Solvency ratios: This ratio states that about the company's ability to meet its debt
obligations. It refers to both short term and long term.
Fixed assets to long term liability ratio
This ratio indicates that there is reduction in the ratio which is good sign of growth where
company is paying off its debts. The company is effectively utilizing its assets.
Profitability ratios: It describes the ability of the business to generate profits against the
cost and expenses.
Asset turnover ratio
This ratio refers to ability of the organization in optimum utilizing its assets (Dicle and
Meyer, 2018). The ratio of Apple Inc has remained stable with minor change thus, the
organization is required to take corrective steps to improve it.
d. Cash flow statement analysis
The trend analysis of cash flow statement shows that there is an increase in opening cash
balance in 2019 taking 2017 as base year. There is a significant increase in the deferred tax
benefit. Also, there is a huge fall in the current assets of the company (Terreno and Sattler,
2018). The cash flow from operating and investing activities has reduced. While financing
activity has shown an upward trend.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended
2017 2018 2019
Cash, cash equivalents and restricted cash,
beginning balances -0.95% 26.50%
Operating activities:
Net income 23.12% 14.28%
Adjustments to reconcile net income to cash
generated by operating activities:
Depreciation and amortization 7.34% 14.28%
Share-based compensation expense 10.33% 25.37%
Deferred income tax expense/(benefit) -646.26% -105.70%

Other 167.47% 292.77%
Changes in operating assets and liabilities:
Accounts receivable, net 154.28% -111.71%
Inventories -130.41% -89.39%
Vendor non-trade receivables 88.29% -168.90%
Other current and non-current assets 92.05% -116.42%
Accounts payable 2.33% -121.45%
Deferred revenue -99.49% 5.40%
Other current and non-current liabilities 3420.97% -530.40%
Cash generated by operating activities 20.57% 8.04%
Investing activities:
Purchases of marketable securities -55.26% -75.15%
Proceeds from maturities of marketable securities 75.86% 26.21%
Proceeds from sales of marketable securities -49.41% -39.74%
Payments for acquisition of property, plant and
equipment 6.92% -15.71%
Payments made in connection with business
acquisitions, net 119.15% 89.67%
Purchases of non-marketable securities 259.12% 92.13%
Proceeds from non-marketable securities 180.16% 1196.83%
Other 500.81% 769.35%
Cash generated by/(used in) investing activities -134.59% -198.82%
Financing activities:
Proceeds from issuance of common stock 20.54% 40.72%
Payments for taxes related to net share settlement
of equity awards 34.85% 50.32%
Payments for dividends and dividend equivalents 7.39% 10.57%

Repurchases of common stock 121.09% 103.33%
Proceeds from issuance of term debt, net -75.69% -75.71%
Repayments of term debt 85.71% 151.57%
Proceeds from/(Repayments of) commercial
paper, net -100.96% -255.17%
Other 0.00% 0.00%
Cash used in financing activities 388.91% 406.15%
Increase/(Decrease) in cash, cash equivalents
and restricted cash -2984.10% -12567.18%
Cash, cash equivalents and restricted cash,
ending balances 27.72% 147.54%
CONCLUSION
The overall financial health of Apple Inc. is good. The company is effective in managing
its financing activities, paying out its debt obligation and management of its overall cash flow.
But, the company needs to focus in managing its liquidity position and profitability s well. It
should focus on cash flow from operating activities. It can take steps like increase in current
assets and reduction in current liabilities and monitor its production process to determine where
it is lacking in effectively utilizing its fixed assets. Also, should conduct proper analysis in while
investing.

REFERENCES
Books and Journals
Arkan, T., 2016. The importance of financial ratios in predicting stock price trends: A case study
in emerging markets. Finanse, Rynki Finansowe, Ubezpieczenia. (79). pp.13-26.
Dicle, M. F. and Meyer, J., 2018. Financial Statement and Ratio Analysis: A Classroom
Perspective. Available at SSRN 3223965.
Easton, M. and Sommers, Z., 2018. Financial Statement Analysis & Valuation, 5e.
Terreno, D. D. and Sattler, S. A., 2018. Informative content of cash flows in the analysis of
risk. Available at SSRN 3252230.
Vaca-Tapia, A. C. and et.al, 2018, January. Knowledge Based of an Expert System Using the
Horizontal Analysis for Financial Statements of National, Private TV Companies in
Ecuador. In International Conference on Information Technology & Systems (pp. 1044-
1054). Springer, Cham.