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Financial Analysis of Apple

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Added on  2021-05-28

Financial Analysis of Apple

   Added on 2021-05-28

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Introduction Financial analysis is an integral success factor in any business. Through financial analysis, the business managers are able to picture to growth of the business, profitability,risks factors, as well as predict the future of the business. Financial analyses are usually based on the financial statements of the business recorded one several financial years. To carry out the analysis, financial ratios are used, which compare the business performance across the years. Since such ratios are based on the particular business performance, they can be used to compare the business with its competitors. This makes it easy to determineis the business is outperforming the competitors, and thus identify the areas of improvement. In this analysis, two companies will be used; Apple Inc. and the Samsung Corporation. These two companies are from the same industry; computer and similar devices manufacturers as well as the related software. Financial statements were obtainedfrom their respective websites, for the purpose of this analysis. The charts negated from the analysis will be attached at the appendix section. The analysis was based on the following areas. •Profitability of the company To determine the profitability of each company, profitability ratios were used. Theresults from each ratio are explained below. The trends over the last five years are shown in Appendix II attached at the end of this report. •Return on Assets This study source was downloaded by 100000813193656 from CourseHero.com on 05-27-2021 09:26:22 GMT -05:00https://www.coursehero.com/file/25288485/Apple-vs-Samsung-Financial-Analysisdocx/ThisstudyresourcewassharedviaCourseHero.com
Financial Analysis of Apple_1
The analysis showed that Apple has a healthier return on assets. While the return in assets for Apple was 20.45%, Samsung has a ROA of 9.02%. This an indication that Apple obtained more than double in return of everyunit of Asset in the company during the financial year, compared to Samsung. •Gross margin profit Based on the gross margin profit ratio, Apple was more profitable that Samsung during their latest reported financial years. Apple reported a gross margin profit of 40.06, while Samsung has a gross margin profit of 37.79. •Operating margin During the 2015-09 financial year, Apple reported an operating margin of 30.48. On the other hand, Samsung had an operating margin of 12.14. Under this ratio, it is clear that Apple was more profitable compared to Samsung.•Return on equity As per the latest reported financial year’s statements, Apple had a ROE 46.25, whereas Samsung had a ROE of 13.09. This is a clear indication that Apple was more profitable on this indicator than Samsung. •Liquidity Liquidity is the ability of a firm to meet its short term obligations. A company with a high liquidity is considered to be in a healthier financial status than that which has a low liquidity ratio. The trends in liquidity of the two firms are shown This study source was downloaded by 100000813193656 from CourseHero.com on 05-27-2021 09:26:22 GMT -05:00https://www.coursehero.com/file/25288485/Apple-vs-Samsung-Financial-Analysisdocx/ThisstudyresourcewassharedviaCourseHero.com
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in appendix I. •Current ratio The current ratio for the Apple Company as reported in the latest financial year was 1.11, while that of Samsung was 2.21. This shows that Samsung was in a better position to meet its short—term obligations as compared tothe Apple Company. •Quick ratio Apple’s quick ratio in the latest reported financial year was 0.89, while that of Samsung was 1.73. This shows that Samsung had a higher liquiditythan Apple. •Financial leverage Apple’s financial leverage was 2.43, while that of Samsung was 1.42. Thisshows that Apple obtained much of its financing from Loans, which may indicate a potential risk, in case of failure to generate profits from the borrowed money. In that case, Samsung is in a healthier financial status based on this measure. •Measures of efficiency The measures of efficiency evaluate the ability of the copay to generate revenue from the assets. The trends in these ratios are shown in Appendix III.•Asset turnover rate The assets turnover rate reported by the Apple Company in its latest financial statement was 0.89, whereas that of the Samsung Company was This study source was downloaded by 100000813193656 from CourseHero.com on 05-27-2021 09:26:22 GMT -05:00https://www.coursehero.com/file/25288485/Apple-vs-Samsung-Financial-Analysisdocx/ThisstudyresourcewassharedviaCourseHero.com
Financial Analysis of Apple_3

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