Evaluating Financial Health 1 Evaluating Financial Health Apple Inc AAPL Axia College of University of Phoenix Evaluating Financial Health 2 Apple 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 Strategy It 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 added the 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 advertisement activities 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 Financial returns in Comparison to Industry Evaluating Financial Health 3 An 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 Industry At 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 74 for 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 liquidity Evaluating Financial Health 4 situation it is stated that the risk avoider will be glad to look at the satisfactory liquidity 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 Analysis Due 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 position 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 and Evaluating Financial Health 5 18 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 Economy Global 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 its future products will be accepted by the public Evaluating Financial Health 6 References Electronista 2010 Apple only US
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