Financial Statement Analysis Portfolio: Eymen Ltd and Apple Inc.

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PORTFOLIO

Table of Contents
INTRODUCTION................................................................................................................................................ 3
PART 1................................................................................................................................................................... 4
PART 2................................................................................................................................................................... 8
CONCLUSION................................................................................................................................................... 12
REFERENCES................................................................................................................................................... 13

INTRODUCTION
This report is being prepared in the form of the portfolio that reflects and
demonstrates the calculations with the use of the ratio analysis and also variable
costing. A complete portfolio is being prepared which also includes the financial
statements of the company and it also includes the income statements with the use of
the variable costing. This portfolio is being divided into two parts which are part 1 and
part 2. Part 1 provides the income statement of the profit and loss using marginal
costing and under absorptions while the second part provides the financial statement
of the company with the help of the ratio analysis.

PART 1
The income statement of Eymen ltd is as follows that has been prepared using
marginal and absorption costing method for the month of May and June.
INCOME STATEMENT OF EYMEN(ABSORPTION COSTING METHOD) FOR MAY
PARTICULARS MAY
Sales revenue £4200000
Opening Inventory -
The variable cost of
production
Direct Labour £750,000
Direct Materials £550,000
Fixed overheads £600,000 (1900000)
Less closing inventory -
Profit £2300000
Thus the profit earned by the Eymen is £2300000 for the May month which has been
calculated by the absorption costing method. Here there is not opening and closing
inventory (Collis and Hussey, 2017).

INCOME STATEMENT OF EYMEN (ABSORPTION COSTING METHOD
) FOR JUNE
PARTICULARS JUNE
Sales revenue 3600000
Opening Inventory -
The variable cost of
production
Direct Labour £750,000
Direct Material £550,000
(1900000)
Less closing inventory £40,000
Less: Fixed overheads £600,000
Profit 1660000
The profit calculated with the help of the Absorption costing method is £ 1660000.

INCOME STATEMENT OF EYMEN (MARGINAL COSTING METHOD
) FOR MAY
PARTICULARS MAY
Sales revenue 4200000
Opening Inventory -
The variable cost of
production
Direct Labour £750,000
Direct Material £550,000
(2900000)
Less closing inventory -
Fixed overheads £600,000
Profit £2300000
The profit earned by the Eymen is £ 2300000 for the May month that has been
calculated using Marginal costing method.
INCOME STATEMENT OF EYMEN (MARGINAL COSTING METHOD
) FOR JUNE
The income statement with using marginal costing method for the year
June shows the profit of £ 1660000
PARTICULARS JUNE
Sales revenue 3600000
Less- Cost of Sales
Opening Inventory -
The variable cost of
production
Direct Materials £550,000
Direct Labour £750,000
Fixed overheads £600,000 (1900000)
Less closing inventory £40,000
Profit £1660000

PART 2
Apple is a multinational organization that develops, designs and sell computer
hardware, consumer electronics and online services. The hardware products of the
company include various products. This part provides the analysis of the financial
statement of Apple;

RATIO ANALYSIS
RATIOS FORMULA 2017 2018 INTERPRETATION
AND ANALYSIS
Current Ratio Current
assets /
current
liabilities
128% 112% The current ratio is
decreasing by 14 %
in the year 2018 on
comparing 2017
ratio (Apple., 2019).
Quick Ratio Quick assets/
Current
liabilities
123% 109% There is also a
decrease in this
ratio by 14% for
the year 2018.
Cash Ratio Cash/Liabilities 74% 57% There is a decrease
in the ratio by 17%
for the year 2018
(Apple., 2019).
Operating
Margin
Operating
income/Total
revenue
27% 27% The operating
margin ratio for
both years is the
same
Gross Margin (Revenue- Cost
of Goods sold)/
revenue
38% 38% The gross margin
ratios for this year
are also the same
(Apple., 2019).
Profit Margin Net income/net
sales
21% 22% There is an increase
of 4% in profit
margin ratio
After-tax ROE Return on 48% 68% There is an increase

equity-tax/Equ
ity
in this ratio by 41%
for the year 2018
(Apple., 2019).
The ratio analysis and its discussion on the basis of the above table are given below:
Quick Ratio: This is the ratio that shows the company’s capability by paying the
current liabilities by the company with its short term investment and other quick
assets. The liquidity of the company is shown with the help of this formula. The Quick
ratio of Apple for the year 2018 is 109% and for the year 2017, this ratio is 112%. It
shows that there is a decrease in this ratio. It reflects that Apple is able to transform
its quick assets into cash. But the percentage is decreasing in the year 2018.
Current Ratio: This ratio reflects that the company is able to make its current debts
payments easily. And the current ratio of Apple for the year 2018 is 112% and for the
year 2017, it is 128%. This shows that Apple is having the ability for paying its current
liabilities but this ratio is decreasing. But the company is having a food liquidity
position.
Gross margin: This is the ratio which is used to assess the financial status and health
of the business by revealing the amount of money available from the sales after
deducting the sold cost of goods. The gross profit margin for the year 2018 and 2017 is
38% (Berk and DeMarzo, 2016).
Operating margin: This ratio measures the profit made by the company on a number
of sales, after the payment of the variable production cost like raw materials and
wages after the payment of tax and interest. It has been found from the above analysis
that the operating margin for the year 2017 and 2018 is 27%. Apple is having the
ability to make the profit after all cost payments.
Cash ratio: Cash ratio is the ratio that measures the liquidity of the company
especially the ration of the total cash of the company and cash equal to their current
liabilities. It helps in calculating the ability of the company in repaying its short term
debts with cash resources. The cash ratio of Apple is 57% for the year 2018 and for
2017 it is 74%. The cash ratio of Apple is good that reflects its ability to pay their debts
(Brigham et al., 2016).

Profit margin: It is the ratio that measures the amount of net income earned with the
number of sales generated by making a comparison with net income and nets sales of
the company. The profit margin for Apple is 22% for the year 2018 while it is 21% for
the year 2017. Apple is making good net income from their sales (Robinson et al.,
2015).
ROE- it reflects the net income earned by the company after the income taxes payment
which is divided by the average amount of the stakeholder’s equity during the net
income period. This reflects the net income earned by the company after paying all
obligations for equity stakeholders. The ROE of Apple is 68% for the year 2018 while it
is 48% for the year 2017 (Williams and Dobelman, 2017).

CONCLUSION
It can be concluded that it is vital to prepare the report for their own organization to
have an understanding of own performance in the industry and the ability to pay their
debts. This report has provided the income statement of the Eymen using Marginal and
absorption costing method. It has also analyzed the financial statement of Apple with
the help of the ratio analysis that has reflected the financial position of the company.

REFERENCES
Apple., 2019. (Online available at https://www.apple.com/uk/ last accessed: July 2019)
Berk, J. and DeMarzo, P., 2016. Corporate Finance, GE. Pearson Australia Pty Limited.
Brigham, E.F., Ehrhardt, M.C., Nason, R.R. and Gessaroli, J., 2016. Financial Managment:
Theory And Practice, Canadian Edition. Nelson Education
Collis, J. and Hussey, R., 2017. Cost and management accounting. Macmillan
International Higher Education
Robinson, T.R., Henry, E., Pirie, W.L. and Broihahn, M.A., 2015. International financial
statement analysis. John Wiley & Sons
Williams, E.E. and Dobelman, J.A., 2017. Financial statement analysis. World Scientific
Book Chapters, pp.109-169