MAHATMA EDUCATION SOCIETY’S

PILLAI COLLEGE OF ARTS, COMMERCE

AND SCIENCE, NEW PANVEL
(AUTONOMOUS)
(AFFILIATED TO UMIVERSITY OF MUMBAI)

A PROJECT ON ACQUISITION OF FIRMS WITH

RESPECT TO APPLE AND INTEL FOR THE SUBJECT FINANCIAL
ACCOUNTING (FA) OF SEM – III
B.COM (ACCOUNTING & FINANCE)

NAME:

S.Y.BAF ‘A’

ROLL NO: 5031

SUBMITTED TO THE SUBJECT TEACHER: HEENA KHANCHE MA’AM.

ACADEMIC YEAR: 2020-21

SIGNATURE OF PROFESSOR:

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 ACKNOWLEDGEMENT

First and foremost, I would thank God for being able to complete this project
with success.
Secondly, I would like to express my deep and sincere gratitude to my project
supervisor, Ms. Heena Khanche, for giving me the opportunity to do project
and providing invaluable guidance throughout the project. It was a great
privilege and honor to work and study under her guidance. I am extremely
grateful for the guidance she has offered me.

I am extremely grateful to my parents for their love and

constant support for me and preparing me for my future. Also, I
express my thanks to my friends and classmates for their valuable
support.

Finally, my thanks go to all the people who have supported me

to complete the project work directly or indirectly.

-Divyanshi Kushwah

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 INDEX

SR NO. PARTICULARS PAGE NO.

1. What is Acquisition? 4
2. Motives for Acquisition 5
3. Difference between Acquisition and Merger 6
4. The Apple-Intel Acquisition 7
5. Apple Inc. 8
6. Intel Corporation 11
7. Financial Statements - Introduction 12
8. Consolidated Income Statement 13
9. Cashflow Statement 15
10. Comment on Financial Statement of Apple 19
11. Insight in Current Ratio 21
12. Conclusion 22
13. Bibliography 23

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 WH AT IS AN ACQUISITION?

Business acquisition is the process of acquiring a company to build on strengths or

weaknesses of the acquiring company. A merger is similar to an acquisition but
refers more strictly to combining all of the interests of both companies into a
stronger single company. The end result is to grow the business in a quicker and
more profitable manner than normal organic growth would allow.

HOW IT WORKS
The process begins with defining the type of business that would make a good
acquisition. Generally businesses within the same segment or a highly
complementary market segment are targeted. Once defined the target business is
approached and if interest is shown due diligence is performed to ascertain the
financial and other conditions of the business.

When the financial terms are agreed upon, and the contract is signed the merger
portion of the acquisition begins. Overlapping processes, personnel and products
are evaluated and the better-performing pieces are retained.

RISKS INVOLVED
There are many risks related to business acquisition and a number of mergers
or acquisition fail ending up inducing higher operating costs. There are
a set of criteria that are usually followed to know if a business is a good target for
acquisition such as: having operative processes, a profitable and documented
customer acquisition strategy, good profits, a good customer retention strategy, etc.

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 MOTIVES FOR ACQUISITION?
 Acquire undervalued firms:
Firms that are undervalued by financial markets can be targeted for
acquisition by those who recognize this mispricing. The acquirer can then gain
the difference between the value and the purchase price as surplus.

 Diversify to reduce risk:

By buying firms in other businesses and diversifying, acquiring firms managers
believe, they can reduce earnings volatility and risk and increase potential value.
By diversifying through acquisitions, they reduce their exposure to total risk,
though other investors (who presumably are more diversified) may not share their
enthusiasm.

 Create Operating or Financial Synergy:

Operating synergies are those synergies that allow firms to increase their operating
income, increase growth or both. It can affect margins and growth, and through
these the value of the firms involved in the merger or acquisition. With financial
synergies, the payoff can take the form of either higher cash flows or a lower cost
of capital (discount rate).

 Cater to Managerial Self Interest:

In most acquisitions, it is the managers of the acquiring firm who decide
whether to carry out the acquisition and how much to pay for it, rather than
the stockholders of the firm. Given these circumstances, the motive for some
acquisitions may not be stockholder wealth maximization, but managerial
self-interest.

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 DIFFERENCE BETWEEN ACQUISITION AND MERGER

1. Definition
A merger is the process in which two or more companies come together to join
forces towards a common goal. Acquisition, on the other hand, is the process by
which a company takes control of another and the latter ceases to exist completely.
2. Title
When a merger happens, a new name is given. It could be coined by joining the
companies’ names together or creating a new one. For acquisition, the acquiring
company’s name continues to be used.
3. Terms
Mergers are considered friendly and out of a mutual decision by each of the
merging companies while an acquisition is considered as either friendly or hostile,
voluntary or involuntary.
4. Scenarios
In the case of a merger, two or more companies considering each other on equal
basis come together and merge for a strategic decision. When an acquisition is on
the table, the acquiring company is usually larger than the acquired ones.
5. Power
For merging companies, their powers are almost nil while for an acquisition, the
acquiring company gets the ultimate powers and to dictate terms.
6. Governing Laws
A merger is surrounded by more legal formalities in comparison to an acquisition.

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 THE APPLE-INTEL ACQUISITION
Apple and Intel have signed an agreement for Apple to acquire the majority of Intel’s
smart phone modem business. Approximately 2,200 Intel employees will join Apple,
along with intellectual property, equipment and leases. The transaction, valued at $1
billion, is expected to close in the fourth quarter of 2019, subject to regulatory
approvals and other customary conditions, including works council and other relevant
consultations in certain jurisdictions.
Combining the acquired patents for current and future wireless technology with Apple’s
existing portfolio, Apple will hold over 17,000 wireless technology patents, ranging
from protocols for cellular standards to modem architecture and modem operation. Intel
will retain the ability to develop modems for non-smart phone applications, such as
PCs, internet-of-things devices and autonomous vehicles.
“This agreement enables us to focus on developing technology for the 5G network
while retaining critical intellectual property and modem technology that our team has
created,” said Intel CEO Bob Swan. “We have long respected Apple and we’re
confident they provide the right environment for this talented team and these important
assets moving forward. We’re looking forward to putting our full effort into 5G where
it most closely aligns with the needs of our global customer base, including network
operators, telecommunications equipment manufacturers and cloud service providers.”
“We’ve worked with Intel for many years and know this team shares Apple’s passion
for designing technologies that deliver the world’s best experiences for our users,” said
Johny Srouji, Apple’s senior vice president of Hardware Technologies. “Apple is
excited to have so many excellent engineers join our growing cellular technologies
group, and know they’ll thrive in Apple’s creative and dynamic environment. They,
together with our significant acquisition of innovative IP, will help expedite our
development on future products and allow Apple to further differentiate moving
forward.”

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 APPLE INC.
Apple Inc. is an American multinational technology company headquartered
in Cupertino, California, that designs, develops, and sells consumer
electronics, computer software, and online services. It is considered one of the Big
Tech technology companies, alongside Amazon, Google, Microsoft and Facebook.
The company's hardware products include the iPhone smart phone, the iPad tablet
computer, the Mac personal computer, the iPod portable media player, the Apple
Watch smartwatch, the Apple TV digital media player, the AirPods wireless ear
buds and the HomePod smart speaker. Apple's software
includes macOS, iOS, iPadOS, watchOS, and tvOS operating systems,
the iTunes media player, the Safari web browser, the Shazam music identifier, and
the iLife and iWork creativity and productivity suites, as well as professional
applications like Final Cut Pro, Logic Pro, and Xcode. Its online services include
the iTunes Store, the iOS App Store, Mac App Store, Apple Music, Apple
TV+, iMessage, and iCloud. Other services include Apple Store, Genius
Bar, AppleCare, Apple Pay, Apple Pay Cash, and Apple Card.
Apple was founded by Steve Jobs, Steve Wozniak, and Ronald Wayne in April
1976 to develop and sell Wozniak's Apple I personal computer, though Wayne sold
his share back within 12 days. It was incorporated as Apple Computer, Inc., in
January 1977, and sales of its computers, including the Apple II, grew quickly.
Within a few years, Jobs and Wozniak had hired a staff of computer designers and
had a production line. Apple went public in 1980 to instant financial success. Over
the next few years, Apple shipped new computers featuring innovative graphical
user interfaces, such as the original Macintosh in 1984, and Apple's marketing
advertisements for its products received widespread critical acclaim. However, the
high price of its products and limited application library caused problems, as did
power struggles between executives. In 1985, Wozniak departed Apple amicably

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 and remained an honorary employee, while Jobs and others resigned to
found neXT.
. It is also the world's third-largest mobile phone manufacturer
after Samsung and Huawei. In August 2018, Apple became the first publicly traded
U.S. company to be valued at over $1 trillion. The company employs 137,000 full-
time employees and maintains 510 retail stores in 25 countries as of 2020. It
operates the iTunes Store, which is the world's largest music retailer. As of
January 2020, more than 1.5 billion Apple products are actively in use
worldwide. The company also has a high level of brand loyalty and is ranked as the
world's most valuable brand. However, Apple receives significant
criticism regarding the labor practices of its contractors, its environmental practices
and unethical business practices, including anti-competitive behavior, as well as
the origins of source materials.

Apple Inc. Logo

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 INTEL CORPORATION
Intel Corporation is an American multinational corporation and technology
company headquartered in Santa Clara, California, in Silicon Valley. It is the
world's largest and highest valued semiconductor chip manufacturer based on
revenue, and is the inventor of the x86 series of microprocessors, the processors
found in most personal computers (PCs). Intel ranked No. 46 in the
2018 Fortune 500 list of the largest United States corporations by total revenue.
Intel is incorporated in Delaware.

Intel supplies microprocessors for computer system manufacturers such

as Apple, Lenovo, HP, and Dell. Intel also
manufactures motherboard chipsets, network interface controllers and integrated
circuits, flash memory, graphics chips, embedded processors and other devices
related to communications and computing.

Intel Corporation was founded on July 18, 1968, by semiconductor pioneers Robert
Noyce and Gordon Moore and is associated with the executive leadership and
vision of  Andrew Grove. The company's name was conceived as portmanteau of
the words integrated and electronics, with co-founder Noyce having been a key
inventor of the integrated circuit (the microchip). The fact that "intel" is the term
for intelligence information also made the name appropriate. Intel was an early
developer of SRAM and DRAM memory chips, which represented the majority of
its business until 1981. Although Intel created the world's first commercial
microprocessor chip in 1971, it was not until the success of the personal
computer (PC) that this became its primary business.

During the 1990s, Intel invested heavily in new microprocessor designs fostering
the rapid growth of the computer industry. During this period Intel became
the dominant supplier of microprocessors for PCs and was known for aggressive

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 and anti-competitive tactics in defense of its market position, particularly
against Advanced Micro Devices (AMD), as well as a struggle with Microsoft for
control over the direction of the PC industry.

The Open Source Technology Center at Intel hosts Power TOP and Latency TOP,

and supports other open-source projects such as Wayland, Mesa3D, Intel Array
Building Blocks, Threading Building Blocks (TBB), and  Xen.

Intel Corporation Logo

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 FINANCIAL STATEMENTS-INTRODUCTION
Financial statements (or financial reports) are formal records of the financial
activities and position of a business, person, or other entity.
Relevant financial information is presented in a structured manner and in a form
which is easy to understand. They typically include four basic financial statements
accompanied by a management discussion and analysis:
 An Income Statement
 A Balance Sheet
 A Statement of Equity
 A Cash Flow Statement
Notably, a balance sheet represents a single point in time, where the income
statement, the statement of changes in equity, and the cash flow statement each
represent activities over a stated period.

MEANING OF CONSOLIDATED FINANCIAL STATEMENTS

Consolidated financial statements are defined as "Financial statements of a group
in which the assets, liabilities, equity, income, expenses and cash flows of the
parent (company) and its subsidiaries are presented as those of a single economic
entity", according to International Accounting Standard 27 "Consolidated and
separate financial statements", and International Financial Reporting Standard 10
"Consolidated financial statements".
(For this project we will be analyzing the consolidated financial statements of
Apple Inc.)

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 CONSOLIDATED INCOME STATEMENT
An income statement or profit and loss account (also referred to as a profit and loss
statement (P&L), statement of profit or loss, revenue statement, statement of
financial performance, earnings statement, statement of earnings, operating
statement, or statement of operations) is one of the financial statements of a
company and shows the company's revenues and expenses during a particular
period.

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14
 CASHFLOW STATEMENT
The statement of cash flows, or the cash flow statement, is a financial statement
that summarizes the amount of cash and cash equivalents entering and leaving a
company.

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 BALANCE SHEET

A balance sheet is a financial statement that reports a company's assets,

liabilities and shareholders' equity.

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NOTES TO ACCOUNTS:

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 C
omments on Financial Statements of Apple inc.:

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  The balance sheet of a company breaks down into its assets, liabilities, and
shareholders’ equity. The total of its assets is equal to the sum of its
shareholders’ equity plus its liabilities. In the case of Apple, as of September
30, 2019, this consisted of $338.52 billion on the assets side, total liabilities of
$248.03 billion, and total shareholders’ equity of $90.49 billion.

 For Apple, its strong cash position is a major strength. The company holds cash
and cash equivalents of $50.5 billion and also holds $44.08 billion in marketable
securities that can easily be converted into cash.

 Accounts receivable make up $14.1 billion. This represents the amounts owed by
the companies it does business with, such as cellular network carriers, retailers and
wholesalers, and government and education customers.

 The company also reports about $37.6 billion in the property, plant, and equipment
category.

 Apple’s current liabilities are about $89.7 billion, which includes its $29.1 billion
accounts payable, or the amount it owes companies it does business with, as well
as more than $9.9 billion in commercial paper issued. The company issued
commercial paper debt to finance activities such as share buybacks it has
committed to, as well as to pay out dividends.

 The company has a total long-term debt of more than $108 billion, which includes
both fixed-rate debt, on which the interest rate is fixed, and floating-rate debt, on

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which the interest rate could move up. To manage the risk that interest rates could
move against the company, Apple has also entered into interest rate swaps. The
company’s other non-current liabilities, or those that are not due for a while,
amount to about $31.7 billion.

The Bottom Line:

A reading of Apple’s Balance Sheet certainly suggests that it is a well managed
company. As for the company’s profitability, it posted sales of $260.17 billion
with a net income of $55.25 billion in 2019 and making for a return on equity of
about 55.92%.

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 The following section summarizes insights on The Walt Disney
Company's Current Ratio:
 Apple's latest twelve months current ratio is 1.5x.
 Apple's current ratio for fiscal years ending September 2015 to 2019 averaged
1.3x.
 Apple's operated at median current ratio of 1.3x from fiscal years ending
September 2015 to 2019.
 Looking back at the last five years, Apple's current ratio peaked in September
2019 at 1.5x.
 Apple's current ratio hit its five-year low in September 2015 of 1.1x.
 Apple's current ratio decreased in 2017 (1.3x, -5.7%) and 2018 (1.1x, -11.2%)
and increased in 2015 (1.1x, +2.7%), 2016 (1.4x, +22.0%) and 2019 (1.5x,
+35.9%).

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 CONCLUSION
Apple Company is well known for the devices and services that are rendered by this company.  T
he financial ratio of this company is used to examine the company’s profitability, competence, an
d liquidity.  Results are based on Apple’s evaluations, bank investors andcreditors who choose to
lengthen or recant financing and potential stockholders may regulate thelevel of commitment for
Apple (Miah & Baca, 2014). The price-
earnings ratio is used to show that Apple is paying out dividends to their stockholders.   Apple’s
ratios utilized are for thecompany to compose informed decisions about an investment of their
products and othertangible assets. “The ratios defines the cash equivalents, marketable securities,
property, plantequipment, net commercial paper total term debt, working capital, and the cash
generated by thevarious activities” (Apple Inc.,
2015).Apple has been productive and actively increasing their sales and revenue for the past five 
years.  The company has increase in their gross margin driven by multiple factors include lower 
cost and a favorable mix in products.  Apple being amultinational company realizes all these and
have employed these methods quite extensively inthe analysis of their financial statements.

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 BIBLIOGRAPHY

 www.wikipedia.com
 www.investor.apple.com
 www.investopedia.com
 www.coursehero.com

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