Financial Performance and Analysis Report: Apple Inc. (2015-2018)

This report provides a comprehensive financial analysis of Apple Inc., examining its performance from 2015 to 2018. The analysis employs various financial ratios, including profitability, liquidity, efficiency, management efficiency, and capital structure ratios, to assess the company's financial health and trends. The report delves into the factors influencing Apple's share price and its decisions regarding dividend payments. The data for the analysis is sourced from Apple Inc.'s annual reports. The report offers insights into the company's financial strategies and provides a detailed evaluation of its performance using relevant financial tools. The report also includes an executive summary, table of contents, introduction, analysis, conclusion, recommendations, and a list of references.

Running head: FINANCIAL STATEMENT ANALYSIS
FINANCIAL STATEMENT ANALYSIS
Name of Student
Name of University
Author’s Note

2FINANCIAL STATEMENT ANALYSIS
EXECUTIVE SUMMARY:
This report discusses about the financial position of Apple Inc. In order to analyse the financial
positions of the company, ratio analysis has been used. Ratios like profitability ratio, liquidity
ratio, efficiency ratio, management efficiency ratio and capital structure ratio are being analysed.
The data of the financial statements are being taken from the annual report of 2015, 2016, 2017
and 2018. The report also analyses about the reasons that assist the share price of Apple Inc. to
increase. The report also discusses about the reasons behind the company’s decisions to opt for
dividend payments.

3FINANCIAL STATEMENT ANALYSIS
Table of Contents
INTRODUCTION:..............................................................................................................5
Background......................................................................................................................5
ANALYSIS:........................................................................................................................6
Profitability Ratios...........................................................................................................7
Liquidity Ratio:................................................................................................................8
Efficiency Ratios...........................................................................................................10
Management Efficiency Ratio:......................................................................................11
Capital Structure Ratio:.................................................................................................13
REASONS FOR INCREASE IN SHARE PRICE:...........................................................14
REASONS FOR OPTING DIVIDEND PAYMENT OF SHARES:................................15
CONCLUSION AND RECOMENDATION:...................................................................15
REFERENCES:.................................................................................................................17

4FINANCIAL STATEMENT ANALYSIS

5FINANCIAL STATEMENT ANALYSIS
INTRODUCTION:
Apple Inc. is considered as one of the largest and unique company in the whole electronic
sector. It is famous for providing unique design and different marketing strategy over 33 years.
Apple is considered as the cult brand especially in 21st century. The company is also known for
its innovation and business operations. Steve Jobs, the founder and ex- CEO of Apple Inc. once
stated: “A lot of companies have chosen to downsize, and maybe that was the right thing for
them. We chose a different path. Our belief was that if we kept putting great products in front of
customers, they would continue to open their wallets. It is this attitude and the provocative but
entertaining way the company introduces new products and presents itself to the public that made
curiosity to oversee the financial structure of the company”.
Background
Apple Inc. was founded jointly by Steve Jobs, Steve Wozniak and Ronald Wayne in
1977. It was established in United States, California. The company changed its name from Apple
Computers Inc. to Apple Inc. in 2007, which marked the starting of a new era in Apple’s history
(Baligar and Fageria 2015). The change of name came in when the company developed their
product line. The company shifted their business from computers and service to mobile phones
and iPods. In later decade of 21st century Apple extend their product line, which includes new
products like Laptop, iPad and many more. In order to support this devices Apple also created
new software.
As per the annual report of Apple Inc. in 2019, the total revenue of the company stands at
US $260.174 billion (Encyclopedia Britannica. 2020). The operating income of the company
also stands near US $63.930 billion. After analysing the income statement of the company it is

6FINANCIAL STATEMENT ANALYSIS
clear that the company’s net income stands at US $55.256 billion. The net income and operating
income indicates the financial performance of Apple Inc. in 2019. After analysing the annual
report it is also evident that the company employs 137,000 employees over the world. The
reason behind such success was the investments they made in the research and development
department of the company back in 2007 and 2008 (Zhu et al 2017). Thus, Apple Inc. launched
innovative products that revolutionize the laptop and smartphone industry. Among them the most
notable ones are iPhone in 2007, time capsule software in 2008 and iPad in 2010 (Encyclopedia
Britannica. 2020). The new innovative products help the company to attain success in no time
and hence the company became the largest and most valuable company of the world.
As per the analysis of the annual report of 2008, 2009 and 2010, it is being observed that
Apple Inc. increased its revenue by 14.4% in 2008 to 2009 period, and then 52% in 2009-2010
periods (Encyclopedia Britannica. 2020). Thus, these embark a journey, which enables them to
beat big giants like Google and Microsoft and stay in top for the rest of the period.
In order to analyse the financial performance of Apple Inc. for last four financial years
the ratio analysis has been conducted. The ratios are being conducted based on the financial
performance of 2015, 2016, 2017 and 2018.
ANALYSIS:
In order to understand the company’s development and the performance ratio analysis is
being used. Comparison of different ratios helps to express the real financial performance of the
company. In order to compare and identify the financial performance of Apple five types of
ratios are being used. They are profitability ratio, management efficiency ratio, capital structure
ratio, solvency ratio and efficiency ratio (Kost et al 2015).

7FINANCIAL STATEMENT ANALYSIS
Profitability Ratios
In order to assess the company’s ability to generate profit from the market the
profitability ratio of the company are being measured. The profitability ratio depends on the
revenue, operating costs, assets and shareholder’s equity of the company. Profitability ratios
always come in percentage. Profitability ratio has direct relationship with the business
performance. The increase in profitability ratio states that the organization is performing well
(Khaldun and Muda 2014). Thus, to measure the performance of Apple Inc. gross profit ratio,
operating profit ratio and net profit ratio has been used.
In order to identify the relationship between the gross profit and net sales of the company,
gross profit ratio is being calculated. As per the annual report of Apple Inc. it can be stated that
the gross profit ratio for 2015, 2016, 2017 and 2018 are 40.06%, 39.08%, 38.47% and 38.34%
respectively (Annualreports.com. 2020). It can be clearly identified that the gross profit ratio of
Apple is in increasing term. This means that the organization is performing exceptionally well in
the market (Khaldun and Muda 2014). The rise in the gross profit ratio indicates that company’s
gross profit increased by considerable means. It is also indicates that the operating expenses of
the company is very low in comparison to the revenue of the company (Petchsakulwong and
Jansakul 2018). In order to identify the company’s ability to earn profit from the market after
paying all the variable costs like raw materials, wages, etc., operating profit ratio is being used.
Apple Inc. operating profit ratio for the year 2015, 2016, 2017 and 2018 are 30.48%, 27.84%,
26.76% and 26.69%. As per the analysis it can be stated that operating profit ratio of the
company has decreased in 2018. The main reason behind such decrease is due to the increase in
the variable cost (Natalia 2014). Net profit ratio, which is also a profitability ratio, states the
relationship between the net profit of the company and the net sales of the company. As per the

8FINANCIAL STATEMENT ANALYSIS
analysis of the net profit ratio of Apple Inc. in 2015, 2016, 2017 and 2018 are 22.85%, 21.19%,
21.09% and 22.41% respectively (Annualreports.com. 2020). The change in the net profit ratio
of Apple Inc. over the years is not high, so it can be safely stated that the company is performing
well in the market for the last four years.
2018 2017 2016 2015
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
Profitability Ratio:
Gross Profit Ratio
Operating Profit Ratio
Net Profit Ratio
Figure 1: Profitability Ratio
(Sourced by Author)
Liquidity Ratio:
In order to analyse the ability of the company to pay off their debt using the current assets
of the company liquidity ratio are being used. Liquidity ratio depends on the current assets and
the current liabilities of the company (Khaldun and Muda 2014). The ideal liquidity ratio is 2:1.
The high liquidity ratio indicates that the company has to sufficient assets which can pay off their
debts (Qiu et al 2018). In order to identify the liquidity ratio of Apple Inc. three types of liquidity
ratio are being calculated. They are current ratio and solvency ratio. The normal result for the

9FINANCIAL STATEMENT ANALYSIS
current ratio is 2:1 (Ferrouh 2014). The higher the current ratio, the more liquid resources are
available for the company to pay its short term debts. The current ratio for Apple was higher in
2009 but is still within the industry norm in 2010.
In order to identify the current ratio of Apple Inc. the current assets and current liabilities
of the company are being considered. As per the analysis it can be determined that the current
ratio of Apple Inc. in 2015, 2016, 2017 and 2018 are 1.11, 1.35, 1.28 and 1.12
(Annualreports.com. 2020). The analysis states that Apple Inc. liquidity power is quite high,
which means that current assets of Apple Inc. is higher than their current liabilities. Quick ratio is
also another type of liquidity ratio that states the company’s liquidity position (Ehiedu 2014).
After analysing the quick ratio of Apple Inc. for 2015, 2016, 2017 and 2018, the liquidity
position stands at 1.08, 1.33, 1.23 and 1.09 (Annualreports.com. 2020). The quick ratio also
states that the liquidity position of Apple Inc. is quite strong. Thus, it can be stated that the
company’s current assets are much high in comparison to current liabilities of the company.
2018 2017 2016 2015
-
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
Current Ratio
Quick Ratio
Figure 2: Liquidity Ratio

10FINANCIAL STATEMENT ANALYSIS
(Sourced by Author)
Efficiency Ratios
The ability to express the resources profitably of the company is known as efficiency
ratio.
An increase of the ratio figures over the years show an efficient management of
resources. Thus, efficiency ratio helps to analyse the company’s ability to use assets and
liabilities internally (Wang,Wang and He 2015). In order to identify Apple Inc. ability to use
assets and liabilities both receivables turnover ratio and inventory turnover ratio are being
calculated.
In order to identify the ability of Apple Inc. to collect payments from their clients,
receivables turnover ratio are being used. As per the analysis it can be determined that
receivables turnover ratio of 2015, 2016, 2017 and 2018 are 6.25, 14.80, 10.82 and 8.33
respectively (Annualreports.com. 2020). As per the analysis it can be stated that Apple Inc.
receivables turnover ratio is not so good, which indicates that the ability of the company to
collect cash from its creditors are not so efficient. Inventory turnover ratio is also being
calculated to identify Apple Inc. ability to use the inventory to generate profit from the market
(Baligar and Fageria 2015). In order to do so the cost of goods sold and average inventory needs
to be measured. As per the analysis of inventory ratio of Apple Inc. in 2015, 2016, 2017 and
2018 are 1.98, 1.56, 0.64 and 0.51 respectively (Annualreports.com. 2020). The analysis
showcased that the ability of the company to transfer inventory into profit is very less and most

11FINANCIAL STATEMENT ANALYSIS
notable thing is that it has decreased in recent years (Hoseinzadeh et al 2017). Thus, the
company needs to focus on converting the inventory into profit, so that the revenue of the
company increases in future.
2018 2017 2016 2015
-
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
Receivables Turnover Ratio
Inventory Turnover
Figure 3: Efficiency Ratio
(Sourced by Author)
Management Efficiency Ratio:
Management Efficient Ratio is like the efficient ratio, which shows the ability of the
company to meet its investor. The management of the company can handle any kind of situation.
In order to identify the ability of the management of Apple Inc. several management efficiency
ratios are being used.
In order to analyses the management efficiency ratio of Apple Inc. return on assets
(ROA) are being measured. After analysing the profits generated ability of Apple Inc. from the
annual report of Apple Inc. for 2015, 2016, 2017 and 2018 it can analysed that the return on

12FINANCIAL STATEMENT ANALYSIS
assets for the company in 2015, 2016, 2017 and 2018 are 100.47%, 65.44%, 16.34% and 19%
respectively (Annualreports.com 2020). The ratio indicates that Apple Inc. ability to earn from
the market is lowering, which is a matter of concern for the company. If not analysed and
mitigated then the company may face serious of problems in future. Apple Inc. ability to utilize
the capital for generating profit is being measured using the return on capital employed. As per
this analysis Apple’s earnings before interest and tax and capital employed are being taken for
the year 2015, 2016, 2017 and 2018. The return on capital employed for 2015, 2016, 2017 and
2018 are -107.46%, -87.36%, 23.35% and 29.29% (Annualreports.com. 2020). Thus, the analysis
states that Apple Inc. ability to earn profit using the capital are in developing stage and it can be
safely state that it will rise in future. In order to identify Apple Inc. ability to earn profit using the
asset like shareholder equity return on equity re being measured. A per the analysis the return net
assets for 2015, 2016, 2017 and 2018 are 44.74%, 35.62%, 36.07% and 55.56% respectively
(Annualreports.com. 2020). The analysis states that the return on equity of Apple Inc. is quite
high.
2018 2017 2016 2015
-200%
-100%
0%
100%
200%
300%
400%
500%
600%
700%
800%
Return on Assets
Return on Capital
Employed
Return on Equity