Question

Calculate the required financial ratios related to Apple Inc.; this will be based on the past three years Apple's balance sheets and income statements. Choose one or two ratios from each of the groups: liquidity, asset management, debt management, profitability, and market value over three years. Develop a trend on how the company is doing based on your ratio analyses. Submit a few sentences of what the three years of ratios mean

Answer 1

A.liquidity ratio:

current ratio : current assets /current liabilities

2017 2016 2015

128.65/100.81 106.87/ 79.01 89.38/80.61

=1.27 1.35 1.11

the current ratio has been improving over the years. indicating better liquidity and more current assets to pay off the current liabilities. a current ratio of 2 or more is considers the best ratio. the higher the ratio, the better it is.

asset management ratio:

B. asset turnover ratio : sales/ total assets

2017 2016 2015

228.57/375.32 214.23/321.69 231.28/290.48

= 60.90% 66.59 % 79.62%

the asset turnover ratio has been declining over the years. which is an indication that the effciiency with which the assets have been used, to generate higher revenues have been falling .

C. debt management ratio :

debt / equity ratio = total debt / total equity

2017 2016 2015

241.27/134.05 193.44/128.25 171.12/119.36

1.79 1.51 1.43

the debt/equity ratio has been increasing year by year. which means there is more debt in comparison to equity, which can be hazardous to the financial health of the company. taking too much debt may lead to the riak of bankruptcy. a high debt equity ratio is bad.

profitability ratio:

net profit margin

net income/ sales

2017 2016 2015

48.35/228.57 45.69/214.23 55.39/231.28

21.15% 21.33 23.95

the net profit margin has been low, consistently in all three years, falling slightly in comparison to the year 2017. a higher net profit margin indicates greater profitability in the company.

market value : price per share * no. of shares outstanding

2017 2016 2015

9.27*5.22 8.35 * 5.47 9.27* 5.22

48.39B 45.67B 53.24B

the market value has been falling over the last three years.