Financial Statement Analysis Report: Performance Evaluation

This report provides a detailed financial statement analysis, examining key financial ratios such as the debt-to-total capital ratio, debt-to-equity ratio, capital expenditure ratio, CFO to debt ratio, time interest earned ratio, fixed charge coverage ratio, and time interest earned (cash basis) ratio. The analysis covers financial data from 2009 to 2019, comparing trends in income, expenses, and various financial metrics. The report discusses the implications of changes in these ratios, such as the increasing risk associated with a higher debt-to-total capital ratio and debt-to-equity ratio. It also highlights the importance of ratios like the time interest earned and fixed charge coverage ratios in assessing a company's ability to meet its debt obligations. The report concludes with a discussion on the company's financial performance, including the improvement in operating and net income compared to the previous year, and emphasizes the importance of capital expenditure and cash flow management. The document uses references from Corporate Finance Institute and MyAccountingCourse to support the analysis.

FINANCIAL STATEMENT ANALYSIS 1
FINANCIAL STATEMENT
ANALYSIS

FINANCIAL STATEMENT ANALYSIS 2
Income statement analysis:
The following table shows the changes in the incomes and the expenses during the year:
Particulars 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009
Debt to total
capital ratio:
0.70
7028
51
0.64
2845
15
0.601
32240
8
0.58
9180
43
0.51
8860
07
0.40
3144
93
0.32
8596
42
0.34
1631
51
0.36
4337
68
0.33
3908
76
Debt
2,58,
578.
00
2,41,
272.
00
19343
7
1,71,
174.
00
1,20,
292.
00
83,4
51.0
0
57,8
54.0
0
39,7
56.0
0
27,3
92.0
0
15,8
61.0
0
Debt + equity
3,65,
725.
00
3,75,
319.
00
32168
6
2,90,
529.
00
2,31,
839.
00
2,07,
000.
00
1,76,
064.
00
1,16,
371.
00
75,1
83.0
0
47,5
01.0
0
Debt to
equity ratio
2.41
3301
35
1.79
9906
1.508
29246
2
1.43
4158
6
1.07
8397
45
0.67
5448
61
0.48
9417
14
0.51
8906
22
0.57
3162
31
0.50
1295
83
Debt
2,58,
578.
00
2,41,
272.
00
1,93,4
37.00
1,71,
174.
00
1,20,
292.
00
83,4
51.0
0
57,8
54.0
0
39,7
56.0
0
27,3
92.0
0
15,8
61.0
0
Equity
1,07,
147.
00
1,34,
047.
00
12824
9
1,19,
355.
00
1,11,
547.
00
1,23,
549.
00
1,18,
210.
00
76,6
15.0
0
47,7
91.0
0
31,6
40.0
0
Capital
expenditure
ratio
5.81
6420
04
5.15
8220
22
5.169
15344
7
7.22
5571
26
6.23
8951
6.57
2688
3
6.13
0922
24
8.80
9624
41
9.27
4314
21
8.88
0244
76
Cash flow
from
operations
77,4
34.0
0
64,2
25.0
0 65824
81,2
66.0
0
59,7
13.0
0
53,6
66.0
0
50,8
56.0
0
37,5
29.0
0
18,5
95.0
0
10,1
59.0
0
CAPEX
13,3
13.0
0
12,4
51.0
0 12734
11,2
47.0
0
9,57
1.00
8,16
5.00
8,29
5.00
4,26
0.00
2,00
5.00
1,14
4.00

FINANCIAL STATEMENT ANALYSIS 3
CFO to debt
ratio
0.29
9460
9
0.26
6193
34
0.340
28650
2
0.47
4756
68
0.49
6400
43
0.64
3083
97
0.87
9040
34
0.94
3983
3
0.67
8847
84
0.64
0501
86
Cash flow
from
operations
77,4
34.0
0
64,2
25.0
0
65,82
4.00
81,2
66.0
0
59,7
13.0
0
53,6
66.0
0
50,8
56.0
0
37,5
29.0
0
18,5
95.0
0
10,1
59.0
0
Business debt
2,58,
578.
00
2,41,
272.
00
19343
7
1,71,
174.
00
1,20,
292.
00
83,4
51.0
0
57,8
54.0
0
39,7
56.0
0
27,3
92.0
0
15,8
61.0
0
Time interest
earned ratio
22.8
8209
88
27.4
0723
2
42.22
52747
3
99.9
2905
87
137.
7265
63
361.
2867
65
#DI
V/0!
66.9
0558
77
60.6
1414
79
30.6
4619
16
EBIT
74,1
38.0
0
63,6
67.0
0 61480
73,2
48.0
0
52,8
87.0
0
49,1
35.0
0
55,7
63.0
0
34,7
24.0
0
18,8
51.0
0
12,4
73.0
0
Interest
expense
3,24
0.00
2,32
3.00 1456
733.
00
384.
00
136.
00 -
519.
00
311.
00
407.
00
Fixed charge
coverage
ratio
2.93
3001
52
3.04
4780
57
2.596
47675
2
3.30
3313
09
2.95
3920
37
3.21
9274
75
4.15
4906
49
3.51
4459
51
2.62
5291
14
2.34
9507
48
EBIT+fixed
charge before
taxes
90,7
50.0
0
81,7
28.0
0 62936
73,9
81.0
0
53,2
71.0
0
49,2
71.0
0
55,7
63.0
0
35,2
43.0
0
19,1
62.0
0
12,8
80.0
0
Fixed charges
before
taxes+interest
30,9
41.0
0
26,8
42.0
0
24,23
9.00
22,3
96.0
0
18,0
34.0
0
15,3
05.0
0
13,4
21.0
0
10,0
28.0
0
7,29
9.00
5,48
2.00
Time interest
earned (cash
basis) ratio
29.0
2654
32
35.4
2229
88
56.98
14560
4
137.
9536
15
192.
8906
25
492.
0588
24
#DI
V/0!
89.2
6974
95
75.3
4726
69
35.3
7346
44
Adjusted
operating
cash flow
94,0
46.0
0
82,2
86.0
0
82,96
5.00
1,01,
120.
00
74,0
70.0
0
66,9
20.0
0
64,8
86.0
0
46,3
31.0
0
23,4
33.0
0
14,3
97.0
0
Interest
expense
3,24
0.00
2,32
3.00
1,456.
00
733.
00
384.
00
136.
00 -
519.
00
311.
00
407.
00

FINANCIAL STATEMENT ANALYSIS 4
(Annual report, 2019).
The above table indicates the fact that the net sales of the company have improved when
compared with the previous year. The main reason for the same could be due to promotion or
a better advertising due to which the sales of the company may have improved when
compared with the previous year. When talking about the expenses, as there is an increase in
the amount of the net sales, there is an increase in the amount of the cost of sales too which is
very much logical since manufacture of more products would require more costs being
incurred for the manufacture of those products or the goods. The operating expenses of the
company have also increased which is again very much logical since a company like Apple
which is known for its research and developmental activities, would keep on catering to the
needs of the customers and develop new products, so that the customers are happy and they
have an access to the products that are unique in nature. The operating income and the net
income has improved when compared with the figures of the previous year of 2017. This is
good for the company.
Debt to total capital ratio:
The debt to capital ratio is the ratio of liquidity which helps in the calculation of the financial
leverage of the company. This is achieved by the way of comparing the total amount of the
obligations to the total amount of the capital. In the other words, this is used for the purposes
of measuring the proportion of the debt to the amount of the capital which has been invested
into the company. This ratio helps in the measurement of the risk and also helps in the
calculation of how well the company is able to handle its sales. This could be said since there

FINANCIAL STATEMENT ANALYSIS 5
exists a relationship between the debt and the equity financing of the company. The financial
operations of the company do carry some level of risk since the principal along with the
amount of the interest has to be paid to the person from whom the money has been borrowed.
The companies that have a higher ratio are considered to be more risky since they have to
maintain the same level of sales for the purposes of meeting the obligations of the debt
service. If the sales of the company goes down, then that could mean solvency issues for the
company (Accounting course, 2019).
In the given case, the ratio of the company has increased which means that the company is
exposed to an increased amount of risk.
Debt to equity ratio:
This is the ratio which is again a leverage ratio that is calculated using the weight of the total
amount of the debt and the total amount of the financial liabilities as against the total amount
of the shareholders equity. The debt to assets ratio uses the total amount of the assets as the
denominator whereas the debt to equity uses the total amount of equity as its denominator.
This ratio throws light on the capital structure of the company which is entitled towards the
debt and the equity financing of the company (Corporate finance institute, 2019).
In the given case, the ratio of the company has increased which means that the company is
exposed to an increased amount of risk.
Capital expenditure ratio:

FINANCIAL STATEMENT ANALYSIS 6
The capital expenditure to the operating cash ratio is the ratio which helps in the assessment
of the cash flows from operations of the company which is solely meant for the capital
expenditures. These are the investments that involve the investment in the capital intensive
projects such as the taking over new businesses, launching new products or the restructuring
of the company. This ratio who’s the financial risk to which the company is exposed and
helps the company in investing its money in the capital intensive projects. The projects that
have a positive net present value are chosen. The companies that are still growing and are
expanding will have a higher ratio which means that they are investing more in the research
and development and lower ratios companies mean that they are not growing (Corporate
finance institute, 2019).
In the given case, the ratio of the company has improved which merely means that the
company is still growing and is looking for ways to capture more market share in the
industry.
CFO to debt ratio:
This is the ratio which helps in comparing the cash flows that the company is able to generate
to its total amount of debt. This is the cash flow which uses the cash flows from operations
(Corporate finance institute, 2019).
The companies that have a higher ratio would mean better performance since more cash in
hand means liquidity stability of the company.
In the given case, the ratio has improved which means more cash available in hand to pay off
its short term debts or liabilities.
Time interest earned ratio:

FINANCIAL STATEMENT ANALYSIS 7
This is the ratio which helps in the measurement of the total amount of income which has
been earned over by the company and is able to cover the amount of the interest in the near
future.
This ratio is considered to be a solvency ratio since it helps in the measurement of the ability
of the company to make the interest and the service of the debt payments. These are mainly
long term in nature and are often treated as the fixed expenses. If the companies are not able
to meet such payments, then it could face issues in the future (Accounting course, 2019).
This ratio shows a decrease which means that the income being earned by the company that
are able to cover the fixed costs is deteriorating which is not good for it.
Fixed charge coverage ratio:
This is the ratio which helps in the measurement of the ability of the company to pay all of its
expenses before it goes for the payment of interest or the income taxes. This ratio is useful
and is much like the fixed costs like the lease payment, the payments of insurance etc
(Accounting course, 2019).
A higher ratio means that the company is able to cover its fixed charges and a higher ratio is
good for the company. This ratio has improved when compared with the previous year of
2017 which means that the ability of the company to generate income over and above its
interest expense has improved.

FINANCIAL STATEMENT ANALYSIS 8
Time interest earned (cash basis) ratio:
This is the ratio which is very similar to the one which has been calculated above. This ratio
indicates the ability of the company to make the payments of interest on timely basis. The
main difference between this ratio is the fact of the cash basis of this ratio (Corporate finance
institute, 2019).
A higher ratio means that the company is able to cover its fixed charges and a higher ratio is
good for the company. This ratio has improved when compared with the previous year of
2017 which means that the ability of the company to generate income over and above its
interest expense has improved.

FINANCIAL STATEMENT ANALYSIS 9
References:
CAPEX to Operating Cash Ratio: Definition & Example - Corporate Finance Institute.
(2019). Retrieved from
https://corporatefinanceinstitute.com/resources/knowledge/finance/capex-to-operating-
cash-ratio/
Cash Flow to Debt Ratio - How to Assess Debt Coverage Ability. (2019). Retrieved from
https://corporatefinanceinstitute.com/resources/knowledge/finance/cash-flow-to-debt-
ratio/
Debt to Capital Ratio Formula | Example | Calculation Explanation. (2019). Retrieved from
https://www.myaccountingcourse.com/financial-ratios/debt-to-capital-ratio
Debt to Equity Ratio - How to Calculate Leverage, Formula, Examples. (2019). Retrieved
from https://corporatefinanceinstitute.com/resources/knowledge/finance/debt-to-equity-
ratio-formula/
Fixed Charge Coverage Ratio | Analysis | Formula | Example. (2019). Retrieved from
https://www.myaccountingcourse.com/financial-ratios/fixed-charge-coverage-ratio
Times Interest Earned (Cash Basis): Overview - Corporate Finance Institute. (2019).
Retrieved from https://corporatefinanceinstitute.com/resources/knowledge/finance/
times-interest-earned-cash-basis/
Times Interest Earned Ratio | Analysis | Formula | Example. (2019). Retrieved from
https://www.myaccountingcourse.com/financial-ratios/times-interest-earned-ratio
Apple - Investor Relations - Financial Information. (2019). Retrieved from
https://investor.apple.com/investor-relations/financial-information/default.aspx