Efficiency Analysis and Recommendations for Apple Inc. (Finance)

This report analyzes the efficiency of Apple Inc., focusing on receivables and inventory management. It highlights the company's receivables collection period, which has slightly worsened, and the challenges in inventory turnover. The report recommends shortening the credit period or providing incentives to customers, such as discount coupons, to improve receivables turnover. Additionally, it suggests minimizing interest-free financing options and applying penalties for late payments. The analysis is based on financial data from 2016 and 2018, providing insights into the company's performance and offering actionable recommendations for improvement. The report emphasizes the need to streamline financial processes to enhance overall efficiency and profitability.

MEMO
To: CFO, Apple Inc
From: STUDENT NAME
DATE: September 26, 2019
Subject: Recommendation for improvement of efficiency (receivables)
Dear Sir
Based on the ratio analysis of the company with regards to efficiency, interesting
observations have come to light. The receivables collection period for the company has
worsened slightly during the last two years as the days to collect the receivables is estimated
at about one month (Apple, 2016; 2018). This computation is based on the assumption that all
sales are on credit which is not true. IF the same is factored, then the collection period would
be even worse.
With regards to inventory management there is a deterioration of performance in the last
three years as the company is finding relatively difficult to sell the products owing to which
the holding period has gone up marginally. However, if this trend is reversed, then inventory
management should not be a concern as the inventory turnover period is limited to less than
10 days. The asset utilisation of the company for generation of sales has marginally dropped
in 2017 when compared to 2016 but has since improved in 2018 which is encouraging
(Apple, 2016; 2018).
In order to improve receivables management, it is recommended that company should shorten
the credit period or provide incentives to customers to make a prepayment. This can be done
in the form of discount coupon on the future purchases which would also aid sale in the
future. Also, the company needs to ensure that interest free financing options are minimised
and penalties be applicable on the customers failing to make the payment in time. With the
above measures, the receivable turnover ratios would improve going forward.
Yours faithfully
STUDENT NAME

References
Apple (2016) Form 10-K, Retrieved from
https://s2.q4cdn.com/470004039/files/doc_financials/2016/annual/10-
K_2016_9.24.2016_-_as_filed.pdf
Apple (2018) Form 10-K, Retrieved from
https://www.sec.gov/Archives/edgar/data/320193/000032019318000145/a10-
k20189292018.htm#s774D98D6A1E053D995022229C35FD4F6