Financial Analysis

INDIVIDUAL ASSIGNMENT
INTRODUCTION TO FINANCIAL MANAGEMENT (FIN420)

SEMESTER MARCH‐JULY 2019
FINANCIAL ANALYSIS
APPLE INC.
Prepared By :
FATINN NUR ALIAH BINTI MOHD ZAINAL
UiTM ID :
2018414262
Group :
JBM 251 2A
Prepared for :
EN. HJ KHARUDIN BIN MOHD SALI @ SALLEH
Date of Submission :
13th JUNE 2019 before 5 P.M.
1.0 RATIO COMPARISON
Current ratio
In the year 2012, the current ratio for Apple Inc is 1.50x whereas in the
year 2013 the ratio started to rise up to 1.68x hence it started to fall to
1.08x This depicts that Apple’s company ability to meet its short‐term
obligations.
Furthermore, this assumes that Apple’s current assets can be converted

to cash in a timely and orderly fashion. In the year 2013, Apple has the
higher ability to pay its short‐term obligations as higher ratio indicates
the higher ability to pay the obligations.
Quick ratio
In the year 2012, the quick ratio for Apple company is 1.48 followed by
1.64 (2013) and 1.05 (2014). Quick ratio is to measure Apple’s ability to
pay off its short‐terms obligations without having to rely the least liquid
current assets such as inventories.
In this case, higher ratio in the year 2013 which is 1.64 is more preferred
but ratio with less than 1.0 are not uncommon and it should not cause
an alarm for Apple Inc.
Net working capital
Net working capital is to measure the Apple’s liquidity and solvency as it

indicates the amount of current assets financed by equity or long‐term
debt. Hence, it provides the degree of margin of safety to short term
lenders and creditors. In 2012 and 2013, the net working capital are the
same but increases by 0.1 in 0.20. Higher ringgits are desirable as it
provides greater margin of safety.
Average Collection Period
This ratio exists is to determine the average length of time taken by

Apple to collect its debt from the credit sales. The average collection
period in 2014 is 34.39 days. Higher days is not desirable as it indicates
Apple’s lower cash cycle and high cost of capital due to high investments
in accounts receivable. In 2012, Apple only takes 25.14 days and 27.60
days in 2013 to collect its accounts receivable.
Inventory Turnover
Inventory turnover ratio depicts how Apple is actually generating sales

from its inventory. In the year 2012, Apple has the highest inventory
turnover ratio which is 197.86 followed by 96.89, 86.59 respectively.
Receivable Turnover
For receivable turnover, it shows the reciprocal of the average collection

period. In the year 2012, it has the highest receivable turnover ratio
(14.32) rather than in the year 2013 and 2014. Higher receivable
turnover ratio indicates the efficiency of the receivable management
with low average collection period. That shows that in 2012, Apple has
the funds tied‐up in receivable are released for other productive
investment.
Fixed Asset Turnover
In 2012, the fixed asset turnover ratio is 10.13 but in the year 2013,
Apple has the highest fixed asset turnover ratio. Higher ratio is desirable
as it indicates Apple’s efficiency in generating sales from the available
fixed assets and greater payoff from capital investments.
Total Asset Turnover
This is also known as total asset utilization ratio. This ratio measures
Apple’s ability to manage all of its resources invested to generate sales.
In the year 2012, Apple has the highest total asset turnover which is
0.89x followed by 0.83x and 0.79x. Higher ratio is good as it indicates
better efficiency in managing the resources or the management control
over its investment in asset.
Total Debt Ratio
This ratio measures the proportion of the firm’s total debt to its total
assets. In the year 2012, Apple’s total debt ratio is 33% followed by 40%
(2013) and 52% (2014). Basically, in the year 2014, Apple is associated
with higher risk as this ratio is for the creditors to analyze the long‐term
financial risk of the company and relative credit risks.
Debt‐Equity Ratio
Debt equity ratio measures the amount of debt being utilized relative to
the capital provided by Apple. In 2014, a ratio of greater than 1.0 (1.08)
indicates that Apple used more debt than equity in financing its activities.
Higher ratio is less desirable as it indicates greater used of debt and
financial risk.
Long‐term Debt Ratio
In this ratio, it represents Apple’s ability to meet all its financial

requirements. The percentage of long‐term debt in the year 2013 and
2014 is 0.08 and 0.13 respectively.
Times Interest Earned
For Time Interest Earned ratio, it measures the ability of Apple INC to
pay the interest charges applied on the debts used. For example, Apple
has no time interest earned.
Gross Profit Margin
Gross profit margin measures the ability of the firm to control the
variable cost of goods sold in Apple INC. In the year 2012, Apple has the
highest ratio of gross profit margin which is 44% This actually indicates
the lower cost of goods sold relative to sales.
Net Profit Margin
Furthermore, net profit margin measures the after tax profit per ringgit
of sales. This relates with the ability of Apple INC to generate the net
income from its sales after deducting all expenses including interest and
taxes. Higher ratio such as in the year 2012 (27%) indicates higher ability
of Apple to obtain profits for distribution to the equity holders and
internal source of financing to support normal growth
Return on Total Assets
This is also known as return on investment. This is to measure the Apple

INC’s ability to generate income relative to total assets employed in its
operations. It shoes the decisions on liquidity and the utilization of all
assets to generate sales and hence profits. Higher ratio is preferred as it
will be able to maintain growth and attract outside capital as in the year
2012 which are 24%.
Return on Equity
This ratio measures the common shareholders' rate of return on their

investment in Apple INC that is by looking at profitability of the Apple
relative to common equity. Higher ratio is desirable as it indicates higher
annual payoff to investors. On the year 2012 and 2014, Apple has the
highest retun on equity ratio which are 35%

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INDIVIDUAL ASSIGNMENT

INTRODUCTION TO FINANCIAL MANAGEMENT (FIN420)

Furthermore, this assumes that Apple’s current assets can be converted

Net working capital is to measure the Apple’s liquidity and solvency as it

Average Collection Period

This ratio exists is to determine the average length of time taken by

Inventory turnover ratio depicts how Apple is actually generating sales

For receivable turnover, it shows the reciprocal of the average collection

Fixed Asset Turnover

Total Asset Turnover

Long‐term Debt Ratio

In this ratio, it represents Apple’s ability to meet all its financial

Times Interest Earned

Net Profit Margin

Return on Total Assets

This is also known as return on investment. This is to measure the Apple

This ratio measures the common shareholders' rate of return on their

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