Financial Analysis Assignment Help For this financial analysis assignment help, we have taken the Apple Inc. Among several US publically traded companies Apple Inc. is selected for the purpose of investment. This paper includes financial analysis of the company in terms of its overview, company’s vulnerability to current financial threats such as a recession, higher interest rates, and global competition, financial performance and stock price analysis.
Company Overview Apple Inc. designs, manufactures and sales mobile communications and media devices, a variety of related software, services, peripherals, networking solutions, portable digital music players and third-party digital content and applications (Annual Report, 2011). Through retail stores, direct sales force and online stores as well as through third-party cellular network carriers, wholesalers, retailers, and value-added resellers, company sells its product worldwide (Sander, 2011). In the year 2011, the company had approximately 60,400 and 2,900 full-time equivalent employees and full-time equivalent temporary employees and contractors respectively.
Company’s customers include small and mid-sized businesses, education, enterprise, government and final consumers. The company’s primary products include iPhone, iPad, Mac hardware products, iPod, iTunes, Mac app store, iClude, software products and computer technologies, operating system software including iOS and Mac OS X, application software such as iLife and iWork, Apple TV and displays & peripheral products (Annual Report, 2011). Primarily company manages its business on a geographic basis. In this concern, company has determined its reportable operating segments, which are based on the nature and location of its customers (Schneiders, 2010). It includes Europe, America, Japan, Asia-Pacific and Retail segment. The results of retail segment are not included in the results of Americas, Europe, Japan and Asia-Pacific reportable segments (Annual Report, 2011). Both North and South America are included in Americas segment and the Europe segment includes European countries, as well as the Middle East and Africa. Similarly, Australia and Asian countries are included in the Asia-Pacific segment.
The Retail segment controls the company retail stores worldwide. Similar hardware and software products and similar services are provided by each reportable operating segment. People at Apple believe to provide innovative hardware, software, peripherals, and services to their customers, so that they can bring best user experience for them. The company’s business strategy enables it to design and produce its own hardware, application software and services that further help Apple to provide new innovative products and solutions to its customers (Annual Report, 2011). The company regularly invests in research and development and marketing and advertising activities that enable it to develop and sale innovative producta and services to customers.
Vulnerability to Current Financial Threats: Current business environment is associated with different financial threats such as higher interest rates, global competition and higher interest rates. Following is the evaluation of company’s vulnerability to current financial threats:
Recession: Recession is one of the current financial threats that can negatively impact on the business of Apple. Due to recession, Apple can report loss in its business because recession can adversely impact on the consumers’ demand for Apple’s products and services in the market. It can also cause in the reduction of availability of consumers credit that further can also cause to decrease their discretionary spending (Curwen & Whalley, 2011). In addition to this, unexpected devaluations of currencies in emerging markets can also adversely affect the financial position of company in the market. Similarly, due to recession, poor financial condition of major segments can also affect the financial condition of the company. Apple has strong international brand image and financial position that will help it to reduce the negative impact of recession on business.
Higher Interest Rates: Higher interest rates can adversely impact on the financial position of any company. In this concern, the company has a competitive advantage over its competitors. It is because company has not used any long-term debt since last several years (Annual Report, 2011). Avoiding use of long-term debt will help the company to maintain a strong financial position during the period of increasing interest rate. In addition to this, Apple’s investment policy and strategy support the liquidity requirements of the company as well as preservation of capital (Graham & Smart, 2011). Derivatives are also used by the company in order to manage foreign currency exchange risk. Company may also use foreign currency forward and option contracts with financial institutions in order to manage foreign exchange risk. At the same time, it may also select not to hedge certain foreign exchange exposures in order to avoid economic cost of hedging particular exposures and accounting considerations.
Global Competition: The markets for Apple’s product and services are highly competitive and the company is facing aggressive competition in all areas of its business. Rapid technological advancement and frequent product introductions are some characteristics that are associated with the market. In such situation, Apple’s competitors are selling their products and services at lower prices in order to attain sufficient market share (Annual Report, 2011). All these can adversely impact on the financial condition of the company. The company has gain competitive advantage in the market through different factors including product features, quality and reliability, marketing and distribution capability, a strong third-party software and peripherals ecosystem,design innovation, strong international brand image and effective service and support (Hitt, Ireland & Hoskisson, 2012). All these competitive factors help the company to face the global competition in an effective manner. Under digital content services, company offers innovative and integrated solutions including hardware, software, distribution of digital content and applications. In order to compete with all these offerings, competitors are able to provide all these products and services at lower profit margins (Annual Report, 2011). Thus, it is necessary that company continuously design and offer innovative products and services in order to maintain its current financial condition and market share.
Financial Performance: Net income in the year 2007 was $3,495 and it reached to $25,922 in the year 2011 (See Exhibit 1). It shows that net income has increased over the years in the company. On the basis of rising trend in the net income, it can be predicated that net income in coming years will also grow. The main reason of increases in net income is the rising trends in the sales. The company has increased its investment in R&D, distribution and marketing activities that contributes to the rising sales of its products and services. Company has invested $1,333, $1,782 and $2,429 million in its R&D activities that show the rising trend in such expenditure (See Exhibit 1). By considering rising trends in sales and R&D trend, it can also be assumed that sales for company’s products and services will also increase in the coming years. It is because investment in R&D will enable the company to produce innovative products and services in the market. Further, it will also help the company to increase its profitability and its market shares. As stated in annual report (2011), Apple did not have any long-term debt during the five year ended September 24, 2011.
It shows that the company generally issue stock rather than debt in order to raise capital. In the last five fiscal years, company has no debt/equity ratio that reflects company’s ability to raise additional funds without any adverse effect on the financial position. In future periods, company can use some amount of long-term debt in order to enhance capital. It will help the company to lower the overall cost of capital and enhance shareholders’ return. At the same time, company has also not paid any dividend to its shareholders but it retains all earnings for use in the operation of its business. Retention of dividend in the business enables the company to reduce dependence on external financial sources. Further, it helps the company to maintain a strong financial position in the market. Company retains all its earnings and it is the reason that trends in reserves to capital ratio of the company will also help in predicting the future financial position of the company. This ratio can be calculated with the use of following formula: Reserve to capital ratio = Reserves or Retained Earnings/Equity share capital (Stolowy & Lebas, 2006).
| Ratio | 2011 | 2010 |
| Retained Earnings | 62,841 | 37,169 |
| Equity share capital | 13,331 | 10,668 |
| Reserve to capital ratio | 4.71 | 3.48 |
(Source: Annual report)
Above table shows that reserve to capital ratio of the company increases in the year 2011 from the year 2010. It reveals the sound financial position of the company and the capacity of the company to absorb future losses. Company will also maintain this ratio high in the future because it will retain all earnings in the future for using it in the business Similarly, earning per share (EPS) of the company is $41.04 that is higher than Google $33 and Hewlett-Packard Company $2.57 (its competitors) (Yahoo finance, 2011). Higher EPS of the company shows its ability to raise additional capital without any difficulty. According to this trend, it can be predicted that in future, Apple can easily raise additional capital without any difficulty. At the same time, current ratio of the company is 2.01 and 1.60 in the year 2010 and 2011 respectively. It is good for the company from both management and creditors’ point of view. Trends in current ratio show that this ratio will be approx between 2 and 2.5 for the company in coming years. It is because in order to maintain the faith of creditors in the company, management will try to maintain this ratio within this range. Further, it will be beneficial for the company to maintain its short-term solvency.
Stock Price Analysis Following table shows price range for per common share for the year 2011 and 2010:
| Year | Fourth Quarter | Third Quarter | Second Quarter | First Quarter |
| 2011 | $ 422.86 – $327.25 | $ 355.13 – $310.50 | $ 364.90 – $321.31 | $ 325.72 – $275.00 |
| 2010 | $ 293.53 – $235.56 | $ 279.01 – $199.25 | $ 231.95 – $190.25 | $ 209.35 – $180.70 |
(Source: Annual Report, 2011).
On the basis of above table, it can be stated that there is rising trend in the price range for per common share. On the basis of this performance, it can be stated that price of company’s stock will also increase in coming years. At the same time, company has also not declared any cash dividend in both the year 2011 and 2010. Company retains all earnings for use in the operation of its business. Earnings per share in financial statement also show rising trends for both basic and diluted common share. It has increased to $28.05 in the year 2011 from $9.22 EPS in the year 2009. On the basis of this trend, it can be assumed that market price for the company’s share will also increase in the future.
It will also be helpful for the company in raising additional capital without any difficulty in coming years. Long-term investors will be more interested to invest in company’s stock. It is because company not distributes its earnings to shareholders rather than it believes in retaining all earnings in the business. On the other side, short-term investors will not be interested to invest in company’s stock because they are more interested in receiving dividend each year. In order to improve stock performance, management can build some effective strategies considering market share, sales revenue and net profits (Sander, 2011). Managers should also adopt some strategies that will be beneficial to strengthen the international brand image. Further, it will also help in improving stock performance in the market.
Conclusion: From the above discussion by financial analysis assignment help experts, it can be calculated that Apple Inc. is one of the largest company in the personal computer industry. It has built strong international brand image in the market by providing innovative products and services to its customers. It provides several products such as mobile, personal computers, operating system software and application software to its customers. By offering innovative products and services with adequate quality and reliability the company has gain competitive advantage over its competitors. Further, it will help the company to face different current financial threats such as recession, higher interest rates and global competition in an effective manner. Different financial trends such as sales revenue, net profit, reserve to capital ratio and current ratio show that in future periods, financial performance of company will be affected positively through these trends. At the same time, previous stock performance also reflects that stock price will also perform in a positive manner in the future.
Get complete Financial Analysis Assignment Help and Financial statement Assignment Help from assignmenthelpexperts.com We assure you that you will get A++ assignment writing help services from our experts. You can e-mail your assignment at info@www.assignmenthelpexperts.com References Annual Report (2011). Retrieved from http://investor.apple.com/secfiling.cfm?filingID=1193125-11-282113&CIK=320193 Curwen, P. & Whalley, J. (2011). Mobile Telecommunications in a High-Speed World: Industry Structure, Strategic Behaviour and Socio-Economic Impact. UK: Gower Publishing, Ltd. Graham, J. & Smart, S. B. (2011). Introduction to Corporate Finance and Economic Coursemate: + Access Card + Thomson One Business Access Card. USA: Cengage Learning. Hitt, M. A., Ireland, R. D. & Hoskisson, R. E. (2012). Strategic Management: Concepts and Cases: Competitiveness and Globalization. USA: Cengage Learning. Sander, P. (2011). The 100 Best Stocks You Can Buy 2012. USA: Adams Media. Schneiders, S. (2010). Business Deconstructed – Apple Inc. Germany: GRIN Verlag. Stolowy, H. & Lebas, M. (2006). Financial Accounting and Reporting: A Global Perspective. USA: Cengage Learning EMEA. Yahoo Finance (2011). Retrieved from http://in.finance.yahoo.com/q/ks?s=AAPL