Question

 

Financial Statement Interpretation

Please take the company Apple Inc. and perform a Financial Analysis using the available data for the most recent fiscal year (i.e. 12/31/17) and compare that year to the previous fiscal year (i.e. 12/31/16).

Your analysis should include at least one analytical equation from each of the five sections of Financial Analysis listed below.

· Liquidity

· Asset Management

· Debt Management

· Profitability

· Market Value

In your analysis should include the following interpretations:

1. Has the firm improved its’ performance from the previous year?

2. Is the firm managed efficiency?

3. As a potential investor would you consider this a stock you would purchase?

Answer 1

Financial statement analysis of apple Inc:

• Industry economic analysis of apple:

The opportunities in technological industry are the need for low cost products that satisfy the consumers. Recent trends include moving to portable devices that are user friendly. With respect to technological trends there has always been requirement for innovation & apple is a company which leads the technological trend.

• Strategies of apple:

The company’s products have a differentiation strategy to have uniqueness in its products when compared to its competitors. This can be unique features, superior quality, innovation & premium price. The company has a very good brand strategy that has helped it to achieve customer loyalty & good reputation. The pricing strategy is premium pricing for its products. This helps the company to maintain a high end image for its products.

• Quality of financial statements:

The quality of financial statements is considered to be of a good standard. The statement has been divided into various parts which addresses all the information about the company. It provides financial data, management’s conclusion on that etc.

• Current income:

The net income for the period 2017 is $48,351 million. This is considered to be a very good income for the company. Similarly, the assets remaining in its balance sheet is estimated to be $375,319 million which ensures that company can meet its debt & other obligations & the company is considered to be out of risks.

The income for the period 2016 was $45,687 which when compared with 2017, shows that company’s income has increased by almost $3,000 million.

To find out the liquidity of the organization, there are many ratios used. The ratio that I have selected to assess the liquidity of the organization is quick ratio. Formula for quick ratio is:

Cash equivalents + marketable securities +accounts receivable

                                  Current liabilities

For 2017:

20,289 + 53,892 + 17,874 +17,799

                100,814

= 1.08

For 2016:

20,484 + 46,671 + 15,754 +13,545

                       79,006

= 1.22

1. With respect to liquidity, the ratio chosen is quick ratio. A ratio more than 1 implies that the company is able to meet its short term obligations. But when we compare 2016 & 2017, ratio for 2016 seems to be good because 2017 has ratio equal to 1. Hence the performance of the company would have slightly got reduced. The reasons for decreasing ratio could be reduced company sales, delay in collection of its receivables etc.
2. The firm must still manage its efficiency with respect to sales & its other activities when taking the ratio into consideration. In 2017 it is only equal to1 & ratio more than 1 is always good. Hence the company must ensure that it doesn’t further decrease in 2018.
3. Don’t think so there could be problems in purchase of company’s stock. The stock can be purchased. Bu the company seems to be in warning stage & it is high time that it can improve on its activities.