LCBB6002: Apple's International Financial Management - Analysis

This report evaluates the significance of international financial management (IFM) in Apple, examining its dividend distribution policy, application of the efficient market hypothesis, and methods of project appraisal. It highlights the importance of IFM in managing Apple's global business environm...Read More

International
Financial
Management

Table of Contents
INTRODUCTION......................................................................................................................3
TASK.........................................................................................................................................3
Evaluate the importance of international financial management in Apple based on its
theories...................................................................................................................................3
Dividend Distribution Policy of APPLE................................................................................4
Efficient Market Hypothesis Theory of APPLE....................................................................6
Methods of Appraising projects in APPLE............................................................................6
CONCLUSION..........................................................................................................................7
REFERENCES...........................................................................................................................8

INTRODUCTION
According to Mohamed and Lashine, 2003, Rapid globalisation, economic crises, and
a constantly changing company environment have heightened the importance of current
financial management difficulties. It is because international financial management (IFM)
occurs in the era of worldwide company, with financial decisions being made, the same
pressures makes good financial controls very vital. The growth of international business can
be seen in the mode of enormously inflated international commerce volume (Beaudoin and et.
al., 2019). This essay focuses on the critical view of Internation financial management
strategy of Apple and how this has helped in the growing the firm intenationally.
TASK
Evaluate the importance of international financial management in Apple based on its theories.
According to Dudin, 2014, it is an administration system which is used to manage the
global business environment of an organisation by merchandising and making the money
through the interchange of foreign currency. These actions help the firms to connect with
overseas business firms by suppliers, lenders, partners, customers.
Importance of International financial management in APPLE
1. It helps in estimating the change rate of different currencies of countries then evaluate
each nation’s in terms of the value of its currency (Carrillo-Hidalgo and Pulido-
Fernández, 2019).
2. It benefits in discovering the pecuniary position of several republics and in arbitrating
the overseas marketplace (Duque-Grisales and Aguilera-Caracuel, 2021).
3. It assists in associating the inflation rates and the decision to invest in transnational
debt securities (Cuadrado-Ballesteros and et. al., 2019).
4. It supports in accepting basics of the foreign organisations, also maintains the balance
among them (Lainé Hanvic and Ray-Coquard, 2021).
5. It helps in resolving the financial disputes between the members of different nations
by the help of the corporation such as IFM, World Bank, etc (Susan and Djajadikerta,
2017).
Challenges faced by APPLE in International Market

According to Ian Linton, 2018, APPLE uses the differentiation strategy of giving
innovative design and technology in the market. It has established a brand loyalty which give
it a strong competitive advantage which helps in to stay strong in the international market.
APPLE has face a new and an ever changing competitive market. It has faced a technological
challenge in the foreign market by moving the communication devices and portable
environment device such as mobile phones to put hard rivalry from all borders . According to
Nathaniel Smithson, 2020, these items took the corporation to novel opponents, lower - cost
merchandises, and potential alternatives, accordingly lowering the apparent significance of
goods and jeopardising the company's strategic success. The company's key strengths, such
as publicizing, novelty, relationship building, and brand administration, are, on the other hand
put to test. In expansion, managing with a changing client base and a developing number of
unused competitors may be a trouble. The amusement industry, as well as its advances, is
experiencing quick and nonstop changes. Apple faces obstacles in keeping up its brand
character with inventive plans and innovative accomplishments (Eissa, 2020).
As the corporation's achievement and enlargement, handling interested party’s demands has
become enormously hard. Other than that, the organization's overreliance on charisma of
direction and work, as well as the need of a well-crafted progression approach, have placed
the company at risk. With Time, the enthusiasm for race has increased, mainly when it comes
to the estimating the value of Apple's product. Most of the competitors in the market can
afford to decrease the rates in order to obtain the market share. Apart from price, other
competitive variables include product characteristics, product quality and reliability, after-
sale services or products, relative prices, market and distribution capacity, and the company's
reputation.
Dividend Distribution Policy of APPLE
Dividend policy is one of the important contents of company, it performs a critical
function in corporation operations. Stable dividend price is useful to carry the sign that the
employer has excellent improvement and might appeal to greater funding from shareholders.
However, the long-time period dividend payout can result in the growth of the company’s
leverage ratio. Share price and dividends increase are two methods for providing wealth to
shareholders (Filbeck, Holzhauer and Zhao, 2017). If all earnings are paid out as surpluses,
nothing can be reinvested to create growth. Hence, Apple must decide what fraction of
earnings should be paid out as dividends and what fraction should be kept.

Apple has comprehended a consistent escalation in sales and income, sanctioning it to boom
yearly dividends. It is additionally coped to regularly rise its bonus price to owners. In July
18, 2021, it revolved into paying a $0.22 in line with percentage of periodical disbursement,
which resulted in giving an inventory yield of 0.6%. Apple's dividends remunerated a total of
$14.1 billion for the monetary year 2020. The remaining profits of 2020 turned into $57.4
billion, which placed the dividend payout ratio at 25% for the year. In 2018 and 2019, the
surplus payout ratio turned into 26% and 23%, respectively. For the past 3 years, Apple's
dividend payout ratio has continued fairly regular. In each 2020 and 2019, the organization
paid out $14.1 billion in bonuses, and in 2018 it compensated $13.7 billion. For maximum
corporations, an additional decrement is an exclusion, instead of the standard. If possible,
businesses grow their surpluses over time, supposing their earnings and revenue increase can
support it. Apple's quarterly bonus paid amid the second quarter of 2021 got to be $0.22, a
7% upsurge from the $0.205 paid during the initial quarter of the year. During the second
sector of 2016, Apple paid a split-adjusted quarterly share of $0.1425, signifying a 9.1%
annualized development rate in Apple's quarterly dividend over the last 5 years (Atalntis
Press, 2021).
Effective Interest Rate is calculated by the following formula:
By calculating the interest rate with the above formula, the effective financing rate of apple is
approximately 2.25 %.
Irrelevance and relevance theory of dividend Policy:
The dividend relevance theory argues that dividend decisions affect the company's
market value, hence the dividends are important. This theory suggests that the investors are
generally risk averse and would rather have dividends today than potential stock appreciation
and dividends tomorrow.
According to Modi- Mialni appriach, the irrelevance theroy of dividend argues that no
tax and floatation costs are paid if there is no differntiation between the amount os dividend
tax and capital gains. The investement policiy of the comapny is independent which will be
beneficial for Apple becasue it will maintain a level of certainity in the rate of return of
Apple.
R = (1 + (i/n))^n - 1

Efficient Market Hypothesis Theory of APPLE
Market effectiveness alludes how appropriately costs reflect all accessible insights.
The effective markets hypothesis (EMH) argues that markets are productive, taking off no
room to create additional earnings by making an investment on the grounds that the whole
thing is appropriately priced (Kirton, 2019). This means that there's little desire of thrashing
the marketplace, even though you may in shape marketplace returns via passive index making
an investment. It is a hypothesis that states that share prices replicate all facts and constant
dominant generation is impossible. Conferring to the EMH, shares exchange constantly at
their fair price on board, making it not possible for traders to buy undervalued shares or
promote shares for inflated costs. Subsequently, it need to be not conceivable to outdo the
general commercial centre by means of specialized inventory choice or timing of
marketplace, and the most excellent way a financial specialist can pick up way improved
yields is by buying riskier investments.
Accepting it in its sturdy system can stay hard because it articulates that everyone facts in a
marketplace, whether or not private or public, is accounted for an inventory's price. Still,
adjustments of exists to emulate the credential to which it is able to be carried out to
marketplaces:
 Quasi- strong performance: It implies wholly public (however now no longer non-
public) facts is calculated right into an inventory's contemporary-day proportion
value. Neither essential nor practical evaluation is used to attain advanced
improvements (McGinley and et. al., 2020).
 Weak performance: This sort of EMH claims that everyone beyond costs of an
inventory are meditated in ultra-modern inventory price of Apple. Therefore,
technical evaluation can't be used to expect and beat the marketplace.
Methods of Appraising projects in APPLE
1. Economic Appraisal: It is the challenge factors highlighted consist of necessities for
raw material, stage of capability utilization, expected sales, expected charges and the
probable profits. It is stated that Apple must have usually a volume of earnings clearly

in view which will govern different financial variables like sales, purchases, charges
and alike (Newman, and et. al., 2017). Festering marginalised people income in some
developed nations, which includes the United States, may want to diminish the
capacity of marketplace for luxuriant client merchandises including those who are
advertised through APPLE. A U.S. dollar might growth rate of exchange, by doing it
costlier for Apple.
2. Financial Analysis: It is finance most effective that allows an entrepreneur to convey
together the labour of one, system of any other and raw material of but another to
combine them to provide items. The activity level of APPLE expressed as capability
utilization, desires to be properly spelt out in the marketing strategy. However,
APPLE sometimes fails to acquire the targeted level of potential because of numerous
businesses like unexpected scarcity of raw material, sudden disruption in strength
supply, incapability to penetrate the marketplace mechanism, etc.
3. Market Analysis: Before the manufacturing absolutely starts, the entrepreneur
desires to expect the possible marketplace for the product. Apple anticipates that who
will be the possible consumer for the product and wherein and when the goods could
be sold (Rungcharoenkitkul, 2021). This is due to the fact production has no cost for
the manufacturer unless it is sold. In fact, the capacity of the market constitutes the
determinant of probable rewards from entrepreneurial career.
CONCLUSION
It can be concluded from the report that by comparing the national monetary markets,
the international financial markets have a diverse profile and analytics. Suitable supervision
of universal finances helps the corporation’s in gaining the efficiency and effectiveness in the
market. To grow the business internationally, the company must know the conditions and
norms of the international financial market. The project appraisal method evaluates that the
deficiency of managerial competence may drive down the organisation.

REFERENCES
Books and Journals
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McGinley, B. and et. al., 2020. Police recruit training programmes: A systematic map of
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Susan, M. and Djajadikerta, H., 2017. Understanding financial knowledge, financial attitude,
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Online References
Atalntis Press, 2021 [Online] Available through
<https://www.atlantis-press.com/proceedings/icemci-20/125947058>