Read this and many more argumentative essay samples free at WowEssays!Address us in case you need a unique piece.
Company Background
The purpose of presenting this apple company valuation is to show various business activities, such as sale price, establishing partner ownership, taxation, and even winding up processes, to ascertain the fair value of a business. Owners frequently resort to qualified professional business assessors for an unbiased assessment of the company's value. The valuation was done on January 4, 2022. However, Apple's stock percentage ownership value stands at 2.5%. The hierarchical and functional organizational structure of Apple fits this description. The company's creator and previous CEO, the late Steve Jobs, created such a structure to guarantee the focused implementation of his creative ideas and distinct commercial vision (Levy 2022). Since Tim Cook took the position of CEO in August 2011, changes have been made to the Apple organizational structure. To promote innovation and creativity at various levels, Mr. Cook supported the decentralization of decision-making. However, the system continues to be primarily hierarchical.
Balance Sheet Analysis
A firm's balance sheet displays its investments, obligations, and ownership. One of Apple's primary advantages is hinged on its strong financial position. The corporation has $62.639 billion in cash and cash equivalents. The amount of accounts receivable is $26.28 billion. By examining Apple's leverage or how much debt the business has about its equity position, shareholders may also see how wisely it handles its debt. If a company's debt-to-equity ratio is too high, that company is over-leveraged. Additionally, the corporation reports $49.527 billion in the area of property, plant, and equipment (WSJ, 2022). After deducting use-related wear and tear, this shows the worth of the company's property and equipment.
By examining Apple's leverage or how much debt the business has concerning its equity position, shareholders may also see how wisely it handles its debt. If a company's debt-to-equity ratio is too high, that company is over-leveraged. This might be a red flag since there would be less space for mistakes. With its debt-to-equity ratio rising dramatically from around 0.6 in 2017 to 1.8 in 2021, Apple's financial structure has seen a considerable transition in recent years (WSJ, 2022). This demonstrates that Apple has been increasing the money it raises, which it uses for company growth, share repurchases, and potential payout increases.
Horizontal Analysis
A company's profits, assets, and liabilities can be analyzed horizontally to find trends over several years. Each balance sheet line is compared yearly in terms of the percentage change. Employing horizontal analysis, analysts and shareholders may spot trends and developmental patterns by understanding what has been affecting a return on assets over time (Tuovila, 2022). By employing this research, strategists may assess the relative alterations in certain line items over time and forecast trends from this perspective. A time-series examination of the cash flow statement, balance sheet, and cash flow statement offers a full picture of operating performance. This research reveals what drives an organization's performance and determines if it is valuable and running efficiently. For Apple, the company's horizontal analysis shows an improvement, with an increase in the percentage of assets from 2020 to 2021 and reduced liabilities for the company from 2020 to 2021.
Income Statement and Cash Flow Analysis
The income statement is also known as the profit and loss statement, the statement of operations, and the income statement. Income statements indicate the company's viability over a specific period. A company's net income is described as the total profit or revenue for the fiscal year. The net income is indicated as the last figure on the income statement. Apple Inc.'s net income in 2017 was $78.079 billion, and by 2021 it would have reached $126.121 billion. This is a significant increase compared to the growth between 2017 and 2021. The income statement shows how rapidly the profits of Apple Inc. have grown in a short time. An organization's cash flow determines whether it is bringing in more revenue than it is spending or spending more than it is bringing in. A company's financial soundness may be specified in large part by looking at its cash flow statement.
From the record given, Apple's gross profit margin has improved over the past two years. This is the same case seen for the operating income of the company. Therefore, it seems to be showing an upward trend which is good for the business and its shareholders.
Vertical Analysis of Income Statement
Every item of information from the cash flow report is displayed as a percentage of total sales in trend analysis of the income statement, which is a proportional analysis of an income statement (Grant, 2022). In other words, it depicts the proportional importance of each line item on the income statement of the subject firm.
- Industry and Economic Analysis
General Economic Overview
Apple continues to be an inelastic corporation in terms of demand thanks to the variety of its goods and their costs. If one of their goods' prices increases, another one will undoubtedly enter the same price range while maintaining a similar level of design and quality. People will always be willing to pay more for more expensive goods, not just because of Apple's strong brand recognition and customer loyalty but also because the company consistently creates high-quality, innovative products. For example, if Apple discovers a flaw or defect, they fix it for free or replaces the product entirely. Global economic activity has become a crucial area for Apple Inc. on a local, national, and even international scale. Apple Inc. must recognize the improving economic conditions in other nations. As it turns out, Asian nations like China and India are potential markets for businesses like Apple Inc. Apple Inc. identified three key economic sectors, including "inflation, recession, and currency." For instance, the consumer's purchasing power will decline during an inflationary period in the United States, which will cause Apple Inc.'s sales to decline. Inflation causes the US dollar to fall sharply at the same time. As a result, Apple Inc. purchases foreign currency and earns money from those sources.
Industry Analysis.
Apple operates in a very competitive market with strong purchasing power. Apple considers these details while creating new goods and setting prices. They must constantly maintain pace with their rivals in terms of pricing while also staying ahead in innovation (Al Mheiri et al., 2021). Apple sets itself apart from the competition by including hardware and software in its products. Additionally, their designs try to maintain simplicity, usability, connectivity, and aesthetic appeal.
Final Valuation Calculation
Apple's marketing techniques inspire customers to want to be a member of the group since it is perceived as "cool." Apple cleverly used self-universality perceptions to offer customers the feeling that the corporation knows and understands them. Unlike some of its competitors, Apple has created a brand character and culture that is modern, amusing, and inclusive. Apple's marketing strategy includes enticing purchasers to join that community. Their market share demonstrates their success.
Based on the income approach, Apple's Services division enjoys significant margins. In Q1 FY 2022, the gross margin on a percentage of sales was 72.4%. Compared to 66.0% in FY 2020 and 63.7% in FY 2019. The annual gross margin in FY 2021 was 69.7%. In Q1 FY 2022, the gross margin as a percentage of sales for Products was 38.4%. Apple Inc.'s net income in 2017 was $78.079 billion, and by 2021 it would have reached $126.121 billion. This is a significant increase compared to the growth between 2017 and 2021. The income statement shows how rapidly the profits of Apple Inc. have grown in a short time. An organization's cash flow determines whether it is bringing in more revenue than it is spending or spending more than it is bringing in. A company's financial soundness may be specified in large part by looking at its cash flow statement.
Conclusion
Financial statement analysis is a necessary step for any company that wants to evaluate its past, present, and future financial standing and make predictions. Apple Inc. has been able to dominate the market by expanding its customer base, opening offices in additional countries with promising future growth, and acquiring companies that sell products that are similar to its own. In conclusion, it is easy to determine a particular organization's financial situation by looking at various economic measures and documents. Many financial ratios can be used to evaluate the degree of the company's financial strengths and weaknesses. Financial ratios and statements help an organization make rational decisions about the best methods to increase revenue and reduce expenses.
References
Al Mheiri, R., Al Hosani, N., Saif, E., & Nobanee, H. (2021). Ratio analysis of Apple. Available at SSRN 3895231.
Apple company market approach - Google Search. (2022). Google.com. https://www.google.com/search?q=Apple+company+merket+approach&oq=Apple+company+merket+approach&aqs=chrome..69i57j33i10i160l2.12670j1j7&sourceid=chrome&ie=UTF-8
Grant, M. (2022). Vertical Analysis: The Basics. Investopedia. https://www.investopedia.com/terms/v/vertical_analysis.asp.
Levy, S. (2022). Apple Inc. | History, Products, Headquarters, & Facts | Britannica. In Encyclopædia Britannica. https://www.britannica.com/topic/Apple-Inc
Wall Street Journal (WSJ). (2022). Apple Inc. Wsj.com. https://www.wsj.com/market-data/quotes/AAPL/financials/annual/balance-sheet.
Tuovila, A. (2022). Horizontal Analysis: What It Is vs. Vertical Analysis. Investopedia. https://www.investopedia.com/terms/h/horizontalanalysis.asp#:~:text=Horizontal%20analysis%20is%20used%20in%20the%20review%20of%20a%20company’s,spot%20trends%20and%20growth%20patterns.
