(Tutor’s Name)
(Assignment)
While analyzing the financial performance of Apple in 2015 in comparison to 2014 fiscal period, it seems that the company has improved its overall financial position. According to the Annual Report 2015, in 2015 fiscal year, the organization achieved revenue of US$233.715 billion and operating income of US$71.230 billion. The company also attained a net income of US$53.394 million in the same financial period (Apple Annual Report 2015). In 2015, Apple’s current ratio is more than 1 (1.11) and it indicates that the organization’s current assets are adequate to pay off its short-term liabilities. However, the company’s quick ratio during the period is slightly below 1 (0.89), and therefore, Apple’s most liquid current assets may not be enough to meet its short-term liabilities in full. . The most liquid current assets generally represent all current assets excluding inventories. When it comes to debt-to-equity ratio, Apple’s ratio in 2015 is 0.45, which is below 1 and indicates that the firm’s majority of the assets are financed through equity. In other words, the organization does not depend increasingly on debt financing to meet its operational needs or relies more on equity to finance majority of its assets. In addition, it appears that Apple achieved an accounts receivable turnover ratio of 10.45 in 2015, and this favorable ratio points that the organization has an improved debt collection policy. To be more precise, this strong accounts receivable turnover ratio indicates that the organization has a greater ability with regard to extension of credit on an account and collection of debt relating to that particular credit. Referring to this financial indicator, one can say that that Apple uses its assets effectively. Similarly, the firm’s accounts payable turnover ratio for the fiscal year 2015 is 12.22 and it simply indicates that the Apple takes only a short time to pay off its suppliers, and the firm holds a low average accounts payable at any point of time. A favorable accounts payable turnover ratio also indicates that the organization keeps a good business relationship with its creditors and enjoys great bargaining power over its suppliers. It is important to note that the company’s shareholder equity ratio dropped from 48.11 in 2014 to 41.09 in 2015 (Morningstar, Apple Inc). This decrease in shareholder equity ratio indicates that the amount of assets on which Apple’s shareholders have a residual claim has been reduced. It appears that the financial leverage ratio of Apple has increased over the last few years, and this rise in financial leverage ratio indicates that the company is choosing to depend more on debt financing. Although debt financing is not such a big problem for a corporate giant like Apple, excessive reliance on debt may cause the company lose its competencies as well as its market dominance. Hence, organizational management has to maintain an effective tie between debt financing and profitability so as to achieve greater level financial stability. This strategy can benefit the company to make sure that it does not rely excessively on debt financing to support its corporate endeavors. An interesting aspect about the financial performance of Apple is that the company’s earnings per share reached US$9.22 in 2015 whereas it was only 2.16 back in 2010 (Apple Inc). It is clear that the value of share is the primary aspect of any business that is assessed by investors initially. In other words, share price of a company is the most potential financial indicator that provides stakeholders, particularly shareholders, with some meaningful information about the current financial status of the organization. Obviously, Apple has been improving its share price notably over the last years, and therefore, the stable share price would assist the company to gain investor confidence and to attract potential investors. In total, the company has notably improved its overall financial performance over the last years and thereby added significantly to investor confidence. It is reasonable to think that the current favorable financial position of the company would back its efforts to achieve further growth. In total, Apple maintains a strong financial status as of December 2015.
Suggestions for keeping competitive advantages
Apple is prominent in the hardware/software industry for its innovative capabilities and a large group of insanely loyal customers constitutes a major strength of the organization. With the death of its founder and great innovator Steve Jobs, many Apple customers doubt Apple could continue its groundbreaking innovations consistently. In this context, it is recommendable for the company to pay particular focus to it innovation spectrum and to maintain its industry dominance in terms of innovation. For this, the company has to invest heavily in R&D and to hire highly-talented tech professionals. The company does not need to consider huge costs associated with hiring brilliant personnel as long as it receives potential workforce outcomes that are capable of bringing a change in the industry. In addition, a strong social media influence is another competitive advantage of the company and this strength has been benefiting the organization to strengthen its presence in the virtual world too. It is recommendable for the company to filter its contents or manage its number of social media postings properly and pay specific attention to user interactions and result-related outputs. The firm’s social media staff has to find enough time to respond to important customers queries/suggestions because this approach is vital to convince customers that the company is always responsive to their feedbacks. In addition, it is recommendable for the organization to emphasize more on YouTube-based promotion because YouTube has grown to be a potential video sharing social network. A good video can communicate marketing message to the target audience more strongly than a Facebook post or Tweet. Furthermore, the company has to be well-informed of the recent developments occurring in the marketplace so as to be ahead of its competitors in terms of strategic planning and execution.
Works Cited
Apple Annual Report 2015. US Securities and Exchange Commission . Web. http://files.shareholder.com/downloads/AAPL/2097457040x0x861262/2601797E-6590-4CAA-86C9-962348440FFC/2015_Form_10-K_As-filed_.pdf [accessed 20 May 2016].
Morningstar. Apple Inc. Web. http://financials.morningstar.com/ratios/r.html?t=AAPL [accessed 20 May 2016].
