Comprehensive Accounting Analysis of Apple Inc. Financial Performance

This document provides a detailed solution to an accounting assignment focused on analyzing Apple Inc.'s financial statements. The assignment covers key aspects of financial accounting, including the calculation and interpretation of cash flow from operating activities, and the analysis of cash and cash equivalents. It examines Apple's use of the indirect method for cash flow calculations, and analyzes changes in accounts receivable, inventories, and accounts payable. The assignment also delves into investing activities, including the purchase and sale of marketable securities. Furthermore, it addresses interest and taxes paid by Apple. Part 2 of the assignment examines Apple's common stock, including par value, authorized stock, and the percentage of authorized stock issued. It also covers common stock outstanding, stock repurchasing, and calculates financial ratios such as the payout ratio, earnings per share, and return on common stockholders' equity. The solution provides a thorough understanding of Apple's financial performance based on the provided data.

Running head: ACCOUNTING
Accounting
Name of the Student
Name of the University
Authors Note
Course ID

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Table of Contents
Answer to Part 1:........................................................................................................................2
Answer to question A:................................................................................................................2
Answer to question B:................................................................................................................2
Answer to question C:................................................................................................................2
Answer to question D:................................................................................................................3
Answer to question E:................................................................................................................4
Answer to question F:................................................................................................................4
Answer to part 2:........................................................................................................................5
Answer to question 1:.................................................................................................................5
Answer to question 2:.................................................................................................................5
Answer to question 3:.................................................................................................................6
Answer to question 4:.................................................................................................................7
Reference List:.........................................................................................................................10

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Answer to Part 1:
Answer to question A:
In the financial accounting the operating cash flow or in other words the cash flow
generated from the operations refers to the cash flow from the operating activities or cash
flow form the operations (Bouville, 2016). Cash flow from operating activities is referred as
the sum of cash that an organization generates from the incomes exclusive of the cash that is
related with the long term investment on the capital items.
As evident from the financial statement of the apple annual report, the present
question is based on the ascertainment of the net cash flow by the operating activities from
the cash flow statement during the year 2013 and 2014 will be stated. For Apple, INC during
the financial year ended 2013 the net cash flow from operating activities stood $53,666
million. On the other hand, taking into the considerations the net cash flow from the
operating activities during the year 2014 stood 59,713 million.
Answer to question B:
The term cash and cash equivalent comprises of the currency coins, receipts of
cheques which is yet to be deposited, reserves of petty cash, accounts of money market and
highly liquid short term investment that are having the maturity period of three months or less
during the time of purchase of treasury bills (Scott, 2015). As evident from the annual report
of the Apple 2014 it is noticed that cash and cash equivalents of stood negatively to ($415)
million. This represents that there was the decrease in the cash and cash equivalents for Apple
during the financial year of 2014.

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Answer to question C:
As evident from the annual report of the Apple uses the Indirect method of calculating
the net cash flow from the operating activities. Apple uses the indirect method by adjusting
the net income for the items that does not create an impact on the cash to ascertain the net
cash flow from the operating activities (Williams, 2014). It is noteworthy to denote that a
large number of corporation makes the use of the indirect method to ascertain the net cash
flow from the operating activities. Apple favours the indirect method because of primarily
two reasons;
a. It is easy to prepare and it is less costly
b. This method helps in focusing on the differences that are formed among the net
income and net cash generated from the operating activities.
Answer to question D:
As per the annual report of the Apple Inc, cash flow statement for the year ended
September 27, 2014. Apple reported an accounts receivable of $4232 million however during
the year ended September 28 2013 the accounts receivable for apple stood 2172. An
important assertion can be bought forward by stating that the accounts receivables of apple
increased from the year ended 2013 to 2014 with total increase of $2060. Apple also reported
a total decrease in the cash receipts for the same amount of from the total of accounts
receivables increased.
Apple Inc, also reported an inventories during the financial year of September 27,
2014 to a total amount of million 76 and in the financial year 2013 September 28 inventories
totalled approximately $973 million. It can be stated that the inventories decreased from 2013
to 2014 by 897 that stood negatively on the cash flow statement representing an increase in
inventory and decrease in cash balance (Macve, 2015). Taking into the account the accounts

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payable of Apple it increased from the year ended September 28 2013 from $2,340 to $5,938
million for the year ended September 2014. The accounts payable of the Apple has increased
by $3,598 millions this is because the Apple accounts payable increased their amount of
liabilities with decrease in their cash accounts.
Answer to question E:
For the year ended 2014 September 28 the net cash used by the investing activities for
the year ended September 2014 stood $22,579 million. There was the purchase of the
marketable securities of $217,128 representing as the highest outflow of cash. On the other
hand, the highest amount of inflow of cash in investing activities was the proceeds that were
derived from the sale of marketable securities (Trotman et al., 2015). The amount Apple
derived from the marketable securities stood $189,301. Additionally, the $18,810 million of
proceeds generated from the maturity of marketable securities is also regarded as the cash
inflow of the company.
Answer to question F:
As evident from the annual report of Apple Inc the amount of interest paid by Apple
during the financial year of 2014 September 28 stood $339 million. On the other hand, taking
into the account the annual report it is evidently noticed that Apple during the year 2014
September stood $10,026 million. The amount of interest paid and taxes paid by Apple Inc
are shown in the form of supplemental cash flow disclosure.
On a conclusive note the cash management for apple has not been on the effective this
is because the company has failed to manage its cash effectively and the figures stood
negatively for the year ended 2014. It is recommended that Apple should make use of the
cash collection system to reduce the time that is taken to collect the cash that is owed to the

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company (Smith, 2015). The cash collection attempts to decrease the length and impact of
these floats period.

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Answer to part 2:
Answer to question 1:
Apple has the par or stated value of the common stock of $0.00001. The value derived
is different from the market price of the stock but this represents the value which is stated on
the common stock certificate. This represents the price the shares were originally offered for
the purpose of sale. Par value is used by apple in the form of guarantee for the potential
investors which the company would not issue the shares under the par value (Fisher, 2015).
As evident from the annual report Apple has the total amount of $12,600,000,000 shares of
authorized common stock. Therefore, authorized stock can be defined as the amount of stock
which the corporation is authorized to sell as stated in the charter of the company.
Answer to question 2:
Authorized stock can be defined as the maximum number of common shares which
can issued by the company in the stated charter of the organization. The total number of
authorized shares that is recognized in the charter of the organization usually goes past the
number of shares that issued by the firm in the process of organization Initial Public Offer
(IPO). The authorized stock represents the total amount of stock that the company is
authorized to sell (Meaning, 2016). As evident from the annual report of the Apple, the
company has reported a total of 12,600,000,000 shares in the form of authorized stock. At the
end of the financial year September 2017, the total number of issued and outstanding share
for Apple stood 5,886,161,000. In order to compute the percentage of the authorized common
stock issues the total number of issued shares are divided by the total number of authorized
common stock and the same is then multiplied by 100.
Computation of Percentage of Authorized Common Stock
Particulars Amount ($)
Number of Shares issued 5866161000

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Authorized Common Stock 12600000000
Percentage of Authorized Common Stock (%) 46.56
At the end of the financial year September 2014 it is evident from the above stated
computation that Apple has 46.56% of the authorized common stock that has been issued by
the company.
Answer to question 3:
Common stock can be defined as the one form of ownership for an organization.
Common stock enables the stakeholders to vote on the corporate issues namely the board of
directors and accepting the takeover bids. It is noteworthy to denote that the holders of the
common stock help in exercising the control by electing the board of directors and casting
their vote on the corporate policy (Gandhi & Lustig, 2015). Common stockholders are
regarded on the bottom of the priority ladder for the purpose of ownership structure. An
important assertion can be bought forward by stating that at the time of liquidation common
shareholders have the right to the company assets only after the bondholders, debtholders and
the preferred shareholders are paid in full.
As evident from the annual report of Apple for the year ended September 28, 2013 the
total number of common stock that stood outstanding are 5,866,161,000. During the financial
year of 2014 in September 2014 Apple has reported 6,294,494,000 shares of common stock
outstanding. An important assertion can be bought forward by stating that during the financial
year of 2014, the number of outstanding shares declined by 428,333,000 or 7.30%. The fall in
the share is primarily because of the repurchasing of their stock. Therefore, a conclusion can
be drawn on reviewing the cash flow statement of apple that the buyback of the stocks in
terms of amount stood $45,000 million.

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Answer to question 4:
Pay-out Ratio: The organizations does not declare the overall amount of the income
either in the form of dividend to its common stockholders. Apple retains some portion of their
reserve with them so that the company can finance for their future business requirements as
the expansion of the capacity or acquiring of other firms. The dividend pay-out ratio is used
to measure the percentage of net income which the company has distributed in the form of
dividend to its stakeholders (Cremers et al., 2017). The ratio represents the percentage of net
income which the company aims to retain in order to finance its business requirements along
with the percentage of net income distributed in the form of dividend.
Calculation of Pay-out Ratio
Particulars Amount ($)
Total Dividend Declared 11,125
Net Income 39510
Payout Ratio 28.16%
As evident from the above stated computations Apple has declared and distributed the
dividend of 28.39% of its net income as dividend to its shareholders.
Earnings Per Share:
The earnings per share represents the share of business’s income that is allotted to
each of the outstanding share of common stock. The earnings per share also represents the net
income per share. This ratio explains the amount the stakeholders would be getting given the
entire amount of net income is distributed in the form of dividend to its stockholders. It is
computed from the profitability of the organization on the basis of the shareholders. To
compute the earnings per share the net income of the company is divided by the number of
weighted common stock outstanding.

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Computation of Earnings Per Share
Particulars Amount ($)
Net Income 39510
Weighted Common stock outstanding 6086
Earnings per share 6.49
As evident from the above stated computations the earnings per share of the Apple Inc
stood $6.49 per share given that all the earnings per share of the company is distributed
among the shareholders as dividend. An assertion can be bought forward by stating that the
earnings per share of the company stood relatively higher than the other firms.
Return on Common Stockholders’ Equity:
The return on common stockholder’s equity ratio refers to the measurement of the
organization success in deriving the net income for the benefit of the common shareholders
(Cremers et al., 2017). The shareholders are calculated by dividing the net income that is
accessible to the common stockholders by common stockholder’s equity. The ratio is
generally computed in the form of percentage.
As evident from the above stated computations the common stockholder’s equity
arrives at 33.61% that indicates Apple has used its shareholder’s wealth in an effective
manner.
Conclusion:
On a conclusive note the computation provides an in-depth understanding of the
Apple company’s financial health. It represents that the organization has managed its assets
and resources effectively. The investors in the upcoming years can use this information to
undertake their decisions.
Computation of Common stockholders
Particulars Amount ($) million

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Net Income 39510
Shareholders Equity in 2013 111547
Shareholders Equity in 2014 123549
Average Shareholder's Equity 117548
Return on Common Stockholders Equity (%) 33.61

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Reference List:
Bouville, M. (2016). When investing in stocks, the long term starts at three decades.
Cremers, M., Pareek, A., & Sautner, Z. (2017). Short-term investors, long-term investments,
and firm value.
Fisher, P. A. (2015). Common stocks and uncommon profits and other writings (Vol. 44).
John Wiley & Sons.
Gandhi, P., & Lustig, H. (2015). Size anomalies in US bank stock returns. The Journal of
Finance, 70(2), 733-768.
Macve, R. (2015). A Conceptual Framework for Financial Accounting and Reporting:
Vision, Tool, Or Threat?. Routledge.
Meaning, C. (2016). Securities regulation. Stat, 8(1118), 1.
Scott, W. R. (2015). Financial accounting theory (Vol. 2, No. 0, p. 0). Prentice Hall.
Smith, E. L. (2015). Common stocks as long term investments. Pickle Partners Publishing.
Trotman, K., Carson, E., & Gibbins, M. (2015). Financial accounting: an integrated
approach. Cengage Australia.
Williams, J. (2014). Financial accounting. McGraw-Hill Higher Education.