MG770

F I N A N C I A L S TAT E M E N T A N A LY S I S
DR. G RAC ER YUNG
M I D T E R M P R E S E N TAT I O N ( F E B 2 7 , 2 0 1 7 )
APPLE INC - INTRODUCTION
• Founded in 1976 - Steve jobs, Steve Wozniak and Ronald Wayne Renamed as
Apple Inc in January 2007.
• Number of Employees – 115, 000
• Revenue – $46.9 billion quarterly revenue and $9 billion quarterly net income
(As of 2016)
• Headquarters – Cupertino, California.
• Worlds largest information technology company by revenue.
APPLE INC. INCOME STATEMENT – COMMON SIZE ANALYSIS
• From the income statement, we can observe that the company is successful
in maintaining sales and there is an increase in sales by 0.02% which gets
reflected in the revenue earned by the company.
• In order to keep pace with innovation, the R&D cost have increased by
$4004 millions. On the other hand, the sales in administration costs and cost
of revenue did not increase from 2014 to 2016 with greater percentage. This
means, Apple is taking all necessary steps in its cost cutting.
• We can also see an increase in basic and diluted earnings per share which
shows that shareholders are getting increased return as compared to 2014.
APPLE INC. BALANCE SHEET 2014 &16
APPLE INC. BALANCE SHEET 2014 & 16
• In the balance sheet we can see that in 2014, there were deferred taxes of
$4318 and in 2016, we do not see any deferred tax value which is a good sign
because there is no liability of the differences between the accounting and
carrying tax values.
• We can also see good liquidity position because of increase in current assets
value.
• The company has invested a considerably good amount in 2016 in short-term
investments. These investments are only possible if a company has good liquid
position. These investments are short term and hence can yield interests and
can be en-cashed within a year.
• There is also a huge increase in long term debt. This debts are utilized to carry
the business operations and Research & Development work to finance the
upcoming projects.
APPLE INC. STATEMENT OF CASH FLOW
• Cash flow is one of the strongest indicators of company’s financial condition. It
indicates the amount of cash generated from company’s services. The positive
balance in cash flows from operating section shows strong sales and efficiency.
• A negative number in cash flows from investing activities means company has
invested its funds in buying properties to help the company grow consistently in
the future or other intangible assets.
• The cash used in financing activities indicates that the company has sufficient
funds to finance its own activities rather than borrowing from outsiders.
 RATIOS

For the year 2016,

Return on Equity = Net Income / Shareholder’s equity

= 45687 / 128249
= 0.35%
Current Ratio = Current Assets / Current Liabilities
= 106869 / 79006
= 1.35%
• Return on Equity (ROE) measures how much the shareholders earned for their
investment in the company. The higher the ratio percentage, the more efficient
management is in utility its equity base and the better is to the investors.
• ROE of 0.35% means, Apple generated $0.35 for every $1 of shareholders equity
in 2016.
• A current ratio of 1.35 means the company is sufficient enough to meet its short
term liabilities and obligations from its liquid assets.
 CONCLUSION & RECOMMENDATIONS
• In the balance sheet, there are accrued liabilities accounting to $22,027 for
which the provisions are already made. More liability arises when there are
more earnings. Hence, these are correctly recognized on timely basis.
• There is also a good amount of retained earnings which acts as a protective
shield in cases of contingent liabilities or unexpected losses.
• The balance in operating cash flows from operating activities indicates that the
sound liquidity of the company.
• However, they can improve their cash flows by looking over their debt
management and other financing activities.
• They should look for better financing options because we see that interest
expense has drastically increased.
• So, the company must be aware to maintain its balances to maintain its
liquidity.