Question

Refer to APPLE INC and assess the financial statements using the ratio tools. Select at least one profitability, liquidity, solvency, and market valuation ratio and evaluate the results. Based on your findings, post an initial response to the following:

• What do the metrics tell you about the company’s performance? Support your answer by explaining the results from your assessment.
• If you were considering investing in the company, what other questions would you ask to gain further insight into the performance?

Your Discussion should be a minimum of 250 words in length and not more than 450 words.

Answer 1

1) Profitability ratio

Ne profit margin = Net profit/Total revenue x 100

=59,531,000/ 265,959,000

= 22.38%

2) Liquidity ratio

Current Ratio = Current Asset/ Current liability

=131,339,000/116,866,000

=1.12

3) Solvency ratio

Solvency ratio = Net profit after tax + Depreciation/ Total debt of company

59,531,000 + 7806000 / 93735000

=71.84%

4) Market Valuation ratio

PE ratio = Market price per share/ Earnings per share

=291.52/12.01

=24.27

By calculations ratio, company looks attractive as company is making good profit margin , moreover current ratio is more than 1 which is a good sign. Further it is available at PE of 24.27 which seems cheap

If I were to invest in this company than apart from ratios, I would see company's business in which it is engaged, Apple is engaged in business of selling mobile phone. First thing is to see that apple is getting premium for it's product that is good sign as company can sell it's product at higher price and can earn good profit

Secondly I would see management's commentary to find out future plans of the company. Learning future plans helps us to estimate growth of the company

Thirdly I would do peer analysis. i.e comparing ratios of the apple with that of it's peers to find out whether it is performing well than it's peer or not

I would see whether company is giving growth in profit or not and if not than whether dividend payout is good or not.

Thus after performing above I would invest in company is it meets all the criteria