Question

Discuss Finance/Accounting for Apple's company (Provide information about at least three financial ratios to describe strengths and weaknesses)?

Answer 1

To assess the financial position and working of Apple.inc, we'll be considering the Liquidity ratios to measure the company's ability to meet its short term liabilities and obligation.

1. Current Ratio: Current Ratio is defined the liquidity ratio which is calculated by taking the current assets divided by the current liabilities. This would tell us the fairly average image if the company has the net current assets which can be used to meet the current liabilities. Analysing thr financial data of Apple, I have came to this point that Apple's position have been degraded from 2017 to 2018 but then has improved from 2018 to 2019 where the current liabilities would mark now around $105,718 in million and current assets are around $162,819 million at the end of Sept, 2019.

Taking the figure we have Current Assets / Current Liabilities which gives us the 162,819 / 105,718 = 1.54 of Current Ratio. This ratio is considered ideal and good determining that the company is having a good amount of current assets to meet its short term obligations.

2. Quick Ratio: Quick ratio again one ofthe liquidity ratios which are calculated as quick assets which can be easily converted into cash like the cash plus the marketable investments and the recievables amount divided by the current liabilities. Again, from 2017 to 2018, the picture of the same ratio wasn't good but the speed and recovery has taken place from 2018 to 2019 because of the launch of a new iphone 11 which made Apple a stronger company and increasing its financial stability. Around Sept 2019, the Current liabilities were estimated to be $105,718 million where as the quick assets (cash and cash equivalents, short term marketable securities, account recievables net and vendor non trade recievables) amounting to $146,361 million.

Calculating the same quick ratio which is quick assets / current liabilities gives us 146,361 / 105,718 as 1.38. This figure also shows that the company has enough quick assets to meet the current obligations making a good financial working for its operational needs.

3. Cash ratio: At last, cash ratio would simply gives us the rough estimate about the cash and cash equivalents the company is readily having and the ability of the firm to meet the current obligations with that cash amount. It shows if at the times of emergency and crises like thie corona virus, how reliable is the company having readily cash available with it. Calculated as dividing the Cash Amount Available with the Current Liabilities. Considering the cash availability on Sept, 2019 for Apple we have average of $100,557 as Cash amounts and Liabilities as $105,718. Dividing the same would give us 100,557 / 105,718 = 0.95. This figure is considerably fine not very good for a big company like Apple. Although, the ideal is prefered from 0.5 to 1, but I believe that a company like Apple should have cash ratio of atleast 1 attaining with itself.