Evaluating Financial Health 1Evaluating Financial HealthApple Inc. (AAPL)Axia College of University of PhoenixEvaluating Financial Health 2Apple Inc. (AAPL)Apple is one of the strong market participants of computer industry. It also involve in manufacturing of telecom devices, software and other peripherals. It enjoys full advantage of USA as home country, as it has a strong retail network of 273 physical stores whose majority is in USA, beside the E-retail outlet around the globe. The diversified product portfolio empowers the apple to strive in tough competition against Dell, HP & Compaq (Electronista, 2010). Amongst its competitor Apple’s outclass profitability is witnessed of its effective diversification efficient reach of product to customer and state of an art Research and Development.Management‘s StrategyIt is clear from the financial and the strategic analysis of the Apple Inc. that the management of the company believes in continued research, innovation and product development. It may be the sole reason that why the firm avoids the cash dividend and rely over the stock options. Besides the hardware business of computer the apple is also focus on developing application software operating system, and all such software application which addedthe value of its product. The management is of the view that R&D, integrated marketing channels and its product diversification is the source of competitive edge against rivals of its industry. Management is aware of the need of the investment in the promotion and advertisementactivities; it increases the brand equity, brand loyalty and awareness about the products. Management also considers focusing on the retail store as it is the source to remain in contact with customer and a way to market the product directly; it is also a way to cross sell the market to customer.Evaluating Financial Health 3Financial returns in Comparison to IndustryAn investor is always keen to know about the profitability. Hence we start with the assessment of profitability. Apple Inc. has shown a tremendous improvement in net sales and profitability since 2005 to 2009. In 2008 the net income increases 75.07% and in 2009 increases 34.58% shown that Apple cop. is continuously enhancing its profit. Company earning P\S is also at increasing trend. In 2009 basic EPS is 9.22 from 6.94 last year, and it was 4.04 in 2007. It should be noted that no cash dividend is announced since 2005, although stock base benefit and compensation is given. An increase in return on asset has been observed in 2009 i.e.26.96% against 19.33% last year while industries average is 19.8. Hence Apple is leading the Industry from this angle. Return on equity is 18.92% into 2009 lower than 33.40% of industry benchmark,meaning apple is at lower leverage with a roe increase of 4.03% this year (Hardware Marketplace, 2010).Financial Risk and IndustryAt this stage of our analysis we extend our findings to assessment of risk associated with the investment opportunities in APPLE Inc. Analyzing the liquidity we observed that Apple has a sound ability to meet its short term obligation. It is revealed by the healthy current ratio of 2.74for the year 2009; it is improved from 2.46 of the last year 2008. If we had a glace on the industry it reflects a standard of 2.5. In the computer equipment industry a very low inventory has been observed. That is why the acid test ratio fall lightly below the current ratio i.e. acid test ratio is 2.70 for the year 209 in comparison to 2008, which were 2.43. If we compare the acid test of 2009 i.e. 2.70 with industry average, which is 2.5 (msn.com, 2010). On the liquidityEvaluating Financial Health 4situation it is stated that the risk avoider will be glad to look at the satisfactory liquidityposition. As far as the solvency risk is concern in the long run the debt equity ratio is 0.11 for the year 2009, which is increased from 0.08 of 2008. Here it is important to refer to the industry average of 0.07 (OnlyHardwareBlog, 2010). Hence it is apparent that though the APPLE Inc. is more risky in the long run, but it does not sound like the alarm.Cash Flow AnalysisDue to the increase in sale the operation of the firm expanded, and hence besides other assets, the requirement of the cash also increases in 2009. $1.11 billion is generated from operations, which is 5.87% higher than the last year. The deferred tax expense in 2009 is v1040 million this noon cash expense last year it was 39 million and 78 million in 2007 (Electronista, 2010).The company actively invests in marketable securities that not only improve its liquidity, but rather give a room to meet hazardous need of raw inventory at any point of time. Investing activities gives negative balance $ 17.434 billion. It is also clear from the cash flow that firm does not announce any dividend in cash, rather it takes a tax benefit form stock base benefit; secondly, firm keeps healthy cash in hand.Apple and its Main Competitor When comparing the Apple with its major competitor like Dell & HP, Apple marks higher price earning ratio of 19.10 times that is greater than Dell and HP, which is 16 times andEvaluating Financial Health 518.3 times respectively. We analyze the share price to book value it is 5.71 times; again higher than 4.1 times of Dell and 1.38 times of HP. Cause of higher market price is the retention of profit and stock base benefits. Apple also has high capitalization; the date is $ 250.0 billion (Electronista, 2010).Apple’s Performance and EconomyGlobal economic recession is on the way to recovery, although Europe and America needs some more time to normalize. However, reasonable growth is observed in emerging market like Brazil, Malaysia, India and China. Triad block recorded a poor growth. What is going to be with the world economic outlook is the global economy is going to revive with the “V” shape pattern or its recovery would be like expanded “U” as some economist say growth will be slow. I am of the view that Apple Inc. should more focus on the emerging market like India, China, South Pacific region countries. So Apple needs to exploit more and more opportunities outside the USA. I am optimistic that the idea of direct marketing will work out side the USA as well. Hence Apple needs to introduce maximum retail store outside the USA.It is important to look at trend analysis and industry comparisons as a means of determining if it is the best time to expand or stay put and to see how
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