Trident FIN 501 Module 4 SLP and Case

Due tomorrow morning and here is my Module??1 assignment to use for module 4 SLP.

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Apple Financial Analysis

Trident University

Adeyemi Olatunji

Module 1 SLP

FIN 501

Dr. Michael Aubry

May 21, 2017

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Apple Financial Analysis

?????????????????????? Apple Inc. is a premier company that deals with the design, production and marketing of computers, mobile phones and third party applications, and software. The company???s products include the iPhone, pad, and mac. The company???s operating system software include as is, OS X, watches, and those (“Apple – Annual Report”, 2015). Other products include; the Apple TV, iPod and the Apple Watch. Apple???s target market includes the government, midsized businesses and other enterprises. Apple is one the best performing companies in the tech industry as shown by its financial ratios that indicate the financial health of the company.

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Recent Financial Performance

?????????????????????? To efficiently evaluate Apples financial condition I analyzed its financial statements and used the values in the statements to calculate the financial ratios for the last three years. After performing an incisive analysis of the company???s financial statements by calculating various measures and comparing them to the industry benchmarks such as the S&P index it is evident that the company is financially strong and performing better than its peers in the industry.

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Current financial Health

?????????????????????? There are various ratios and techniques that can be used to analyze Apple???s current financial health. These measures can be categorized into liquidity, profitability, asset management and debt ratios. The ratios measure the performance, rate of growth, efficiency and the financial condition of the company as discussed below

Liquidity ratios

?????????????????????? The current ratio measures the solvency and liquidity of an entity. It is calculated as current assets divided by current liabilities (Khan, & Jain, 2007). Apple Inc.’s current ratio increased from 2014 to 2015 and from 2015 to 2016. The quick ratio is also another liquidity ratio that measures the ability of a company to meet its most current obligations. The steady increase in the liquidity ratio indicates that Apple has improved it is ability to meet its obligations.

LIQUIDITY RATIOS

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2014

2015

2016

Quick ratio

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0.67

0.72

1.04

current ratio

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1.08

1.1

1.35

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Financial Value

The price to earnings ratio is used to calculate the financial value of a company. The Price to earnings ratio?? ??can be interpreted as the length of time in years a company takes to recover the price paid for the stock. It values the company by measuring the current share price in relation to the earnings per share. The price to earnings ratio is calculated as; Market Value per Share / Earnings per Share. Apple???s Price to earnings ratio has been on the rise for the last couple of years but reduced slightly in the last fiscal year. The price to cash flow is also other ratio used in valuation of a company. According to the table below the ratios reduced from 2014 to 2015 then rose again. The ratios indicate that Apple is a highly valuable company. The ratios are small implying that it takes less time to recover the money paid for the company???s stocks.

MARKET VALUE RATIOS

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2014

2015

2016

Price to earnings

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17.1

11.4

13.9

Price to cash flow

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11.3

7.5

9.7

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Profitability ratios

The measures used to determine Apples Inc. level of profitability include the return on equity, return on assets and basic earnings power. The rate on return on equity measures the percentage of earnings gained from equity financing while the return on assets measures the level of income from the assets investment. Basic earnings power is calculated as a ratio of the EBIT to total assets. As shown in the table, the profitability increased from 2014 to 2015 then dropped in 2016.This could be as a result of a drop in revenues in 2016.

PROFITABILITY RATIO

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2014

2015

2016

Return on equity

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33.61

46.25

36.9

return on total assets

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0.83

0.89

0.7

basic earnings power

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0.24

0.23

0.19

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Asset management ratios

These ratios measure the efficiency of the company???s assets and inventory. From the ratios in the table below it is evident that the company is efficient in its performance.

ASSET MANAGEMENT RATIOS

2014

2015

2016

Inventory turnover

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53.31

60.56

61.68

Total assets turn over

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0.89

0.41

0.35

Fixed assets turn over

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9.82

10.85

8.71

days sales outstanding

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34.86

26.31

26.66

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Debt ratios

Debt ratios measure the proportion of the company???s assets financed by debt. I calculated the EBITDA coverage which measures the company???s ability to service debt, time interest earned and the ratio of the total debt to total assets. Apple has low debt ratios which indicate that the company is in a position to meet its debt obligations.

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DEBT RATIOS

2014

2015

2016

EBITDA coverage

1.39

0.99

0.42

Time interest earned

1.38

0.98

0.42

total debt to total assets

0.15

0.22

0.27

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??From the analysis above, I would definitely buy apples stocks if I were an investor. This is because the company is profitable and has a high rate of earnings per share, The company???s bonds are also a sure thing to invest in .This is because apple is rated by the S&P INDEX as AA+ which implies that the company has a high rate of credit rating which means that the probability of default by the company is low. The bonds have a low rate of interest which is expected to remain low in the future hence low risk. The returns expected from the bonds are a high making them a feasible investment venture.

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Conclusion

??In conclusion apple???s performance and current financial health and its well financial value reduce slightly in the last fiscal year .However, the company ????performs better in the industry than its peers ??therefore it is a ??viable investment ??venture. When compared to the industry???s benchmarks and indices the company exhibits a strong financial position.

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References

Apple – Annual Report. (2015).??Investor.apple.com. Retrieved 18 May s2017, from http://investor.apple.com/secfiling.cfm?filingid=1193125-15-356351

Khan, M., & Jain, P. (2007).??Financial management??(1st ed.). New Delhi: Tata McGraw-Hill.

Quote, A. (2017).??Apple stock quote, NASDAQ:AAPL summary.??Amigobulls.com. Retrieved 18 May 2017, from https://amigobulls.com/stocks/AAPL

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