Introduction
The Financial ratio analysis topic is critical and is incorporated in the typical corporate finance books. The topic is as well a trendy agenda item in investment club conferences. The main purpose of this topic is to summarize a company’s financial statements thus examining its financial wellbeing. Because of technology, doing financial ratio analysis via publications, like Dun & Bradstreet’s Key Business Ratios, is no longer proficient since through the internet one can get real time financial data easily. For the purpose of this assignment, focus will be put on Dun and Bradstreet's Key Business Ratio Analysis and a current financial situation analysis of Apple Inc.
1. Financial Ratio Analysis
1.1. General synopsis
The Apple Inc was founded in 1976. Steve Wozniak and the late Steve Jobs did this. It has its headquarters in Cupertino, California. The Apple Inc company has been involved in the designing, manufacturing, and selling of computers like Power Mac as well as associated software together with linked accessories worldwide for a long time. Currently, the company enjoys over 85 % market share throughout especially for its great iphones, iPods, MP3 players’ and computer products like Macintosh, which controls about 2% of the markets. The company as well offers an online music store with iTunes software availed in all the existing operating systems. This controls about 75 % of the official download sector. In summary, Apple Inc has a wide range of markets from education, business, creative professional, to government. Its sales mechanisms range from online and retail stores, direct sales, to third-party sellers
1.2. Ratio Analysis
In order to analyze the company financial standing, it will be paramount to gather all the Apple Inc’s financial data. The financial statements in the excel spreadsheet attached.
1.2.1. Profitability
i) Return on Investment (ROI)
Gross Margin OE Operating Margin FE Net Margin
On the other hand, Operating as well as Net Income Margins difference expresses Financial Efficiency (FE). It demonstrates how it managed its financial expenses well so as to create high net income related to management actions.
iii) Return on Equity
iv) Price Earnings Ratio (PE)
Looking at the per share market price as shown in table 4, Apple’s stock price has shot up by $7.99 subsequent to the split in 2005 per share. Therefore, there was no need of the company taking loans to trade its debt/equity ratio. The high Price Earnings ratio was due to the market having high anticipation on it being capable of growing more due to its research and development activities
v) Dividend Yield, Payout, and Preferred Coverage Ratio
No dividend payout has been issued since Yr2000 even though they are able to. This is because the company keeps the money for future use
Apple has a strong ratio for current assets being effortlessly transformed to cash. This is mainly because of Apple’s OE to sustain a controllable accrued expenses and accounts payable as related to the company’s current assets pieces.
Debt/Equity Ratio
The company has a very strong debt/equity ratio = 0.55. This has stressed that the corporation has been excellent in administrating its total Owners’ Equity to the disbursement of its short- as well as long-term imbursement requirements.
2. Conclusion
Apple has a healthy financial stability, in addition to its continuing to devote to research and development thus achieving sustainable expansion. The company also has tough operation teams that handle costs as well as revenue creation. In addition to its OE, Apple is at present cash as well as short-term ventures rich with amounts up to 8,261 million dollars (24 September 2011). The company has a debt to equity ratio of 0.55; therefore, it is well managed. It also has adequate retained earnings and Owners’ Equity to finance its potential expansion. The company’s liabilities are well managed.
http://www.forbes.com/lists/2006/18/06f2000_The-Forbes-2000_Rank.html
