Question

In your case study, discuss the following aspects of the real company in the world which must have offering bonds. you can chose any company which you like. 1. Provide a brief introduction of the company, including its name, headquarters, products/services offered, and approximate net worth. 2. Explain how the company is doing with respect to the ratios. Consider debt-to-equity, return on equity, current and quick ratio, working capital ratio, price earnings ratio, and the earnings per share. (chap 2) 3. What are the key features of one of the bonds issued by your chosen company? Discuss how the bond’s terms and collateral can affect the bond’s interest rate. 4. How would a potential investor determine the value and risk of the bond? 5. Explain the concept of the time value of money (TVM) as it applies to the company’s bond offerings.

Answer 1

1. Chosen company is Apple.

Apple is one of the top four company of consumer electronics. It is a multinational company connecting consumers with pocket friendly phone. Its headquarter is situated in Cupertino, California, US. The products and services offered by apple are famous and known to all due to their strong marketing and advertising policies. The products include apple phones, iPads, watches, iMac, Macbook, Apple TV and many more. The approximate net worth of the company presently (2019) is $945 billion.

2. Financial ratios of the company:

* Debt-Equity Ratio: The debt-equity ratio is approximately 0.88, which is a good ratio. Lesser the ratio, more sound the firm is.

*Return on Equity Ratio: The return on equity is 52.7%. It tells the profitability of the company with the relation to the company's equity.

*Current Ratio: The current ratio of apple is 1.50 as on June 2019. Higher the ratio, better the operation of the firm. It indicates sound and good financial strength of the company.

*Liquid Ratio: The liquid ratio does not include current assets like prepaid expenses and stock. It should also be higher. The present liquid/quick ratio of the company is 1.09 which is satisfactory.

*Working Capital Ratio: Working capital is the amount received for the daily operations of the company. It is calculated by subtracting current liabilities from current assets. The ratio for the company is 1.5

*Price Earning Ratio: The PE ratio of the company presently is 18.99. It states the current price of the share in relation with the earning per share.

*Earning Per Share: The Earning Per Share of apple in quarter 3 of 2019 is $2.18. Company is providing the shareholder with the EPS of $2.18 which has declined over a period of time. It is decreased by 6.84%.

3. Coupon bonds are the bonds which are issued by the company. Their form of issue is registered documentary bonds.

Issuance of bonds is good for the company as it provides the company with the tax benefit. On the other hand, excess issuance of bond can be dangerous for the company as it will lead to huge liability for the firm and high payment of interest.

4. The value and risk of the bond can be determined by analyzing the company's growth. The detail analysis of the company should be done by the investor which can be done by studying the liquidity, turnover, solvency ratios accurately. The investor should invest after proper calculation and appropriate analysis.