Apple Incorporation Financial Performance

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Introduction

Apple Incorporation is a publicly traded company which operates within the global personal computers industry. The firm was established in 1976 by Steve, Wozniak, Ronald Gerald and Steven Paul Jobs. Its headquarters are located in Cupertino, California. In its operation, the firm deals with designing, manufacturing and marketing diverse media and mobile communication devices such as portable digital music players, personal computers and related software. The firm also offers 3rd party digital content and networking solutions. Some of its products and services include professional and consumer software applications, iOS operating systems, iPad, iPhone, Apple TV, iCloud, Mac OS X Operating System, storage devices, headphones, printers and iPod (Market Watch, 2011, para.1).

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In its operation, the firm has integrated the concept of internationalization which has enabled it to venture in different markets. By September 24, 2011, Apple Incorporation had established 357 retail stores of which 112 of the stores were located in the international market while 245 were in the US. One of the ways through which it has attained this is by establishing value-added resellers, retail and wholesale stores in different markets. Some of the markets which it has ventured include the Americas, Asia-Pacific, Japan and Europe (Yahoo Finance, 2012, para. 1). The firm has managed to develop a relatively large human resource base in an effort to attain efficiency in its operation. Currently, the firm has employed 60,400 full time employees (Yahoo Finance, 2012, para. 1). The company has an effective management team which is composed of a number of executives headed by Timothy Cook as the Chief Executive Officer. The other executives include Eddy, Cue, Scott Forstall, Jonathan, Eve, Bob Mansfield, Peter Oppenheimer, Phillip W. Schiller, Bruce Sewell and Jeff, Williams. The company’s Board of Directors is composed of Arthur, Levinson, Albert Gore, Bill Campbell, Robert A. Iger, Millard Drexler, Timothy Cook, Andrea Jung and Ronald D. Sugar (Apple Incorporation, 2012, p.1).In its operation, Apple Incorporation faces intense competition from three main industry players which include Google Incorporation, Hewlett-Packard Company and Research In Motion Limited. The objective of this paper is to evaluate the performance of Apple Incorporation with regard to its financial performance. This is achieved by comparing the firm’s performance with that of Google Incorporation.

Comparison of Financial statements

Figure 1: Apple Incorporation Income statement For the year ending September 24, 2011

Amount in thousand $
Total revenue 108,249,000
Cost of revenue 64,431,000
Gross Profit 43,818,000
Operating expenses
Research and development 2,429,000
Selling and administrative cost 7,599,000
Total operating expenses 10,028,000
Operating Income or Loss 33,790,000
Income from continuing operations
Total other income /expenses net 415,000
Earnings Before Interest and Tax 34,205,000
Interest expense 0
Income before tax 34,205,000
Income tax expense 8,283,000
Minority interest
Net Income from continuing operations 25,922,000
Non-recurring Events
Discontinued Operations
Extraordinary Items
Effects of Accounting Changes
Other items
Net Income 25,922,000

Figure 2: Google Incorporation Income Statement for the year ending December 31, 2011

Amount in thousand $
Total revenue 37,905,000
Cost of revenue 13,188,000
Gross Profit 24,717,000
Operating expenses
Research and development 5,162,000
Selling and administrative cost 7,813,000
Total operating expenses 0
Operating Income or Loss 11,742,000
Income from continuing operations
Total other income /expenses net 584,000
Earnings Before Interest and Tax 12,326,000
Interest expense 0
Income before tax 12,326,000
Income tax expense 2,589,000
Minority interest 0
Net Income from continuing operations 9,737,000
Non-recurring Events 0
Discontinued Operations
Extraordinary Items 0
Effects of Accounting Changes 0
Other items 0
Net Income 9,737,000

Figure 3: Apple Incorporation Balance Sheet

Period Ending Sep 24, 2011 Sep 25, 2010 Sep 26, 2009
Assets
Current Assets
Cash And Cash Equivalents 9,815,000 11,261,000 5,263,000
Short Term Investments 16,137,000 14,359,000 18,201,000
Net Receivables 13,731,000 11,560,000 6,192,000
Inventory 776,000 1,051,000 455,000
Other Current Assets 4,529,000 3,447,000 1,444,000
Total Current Assets 44,988,000 41,678,000 31,555,000
Long Term Investments 55,618,000 25,391,000 10,528,000
Property Plant and Equipment 7,777,000 4,768,000 2,954,000
Goodwill 896,000 741,000 206,000
Intangible Assets 3,536,000 342,000 247,000
Accumulated Amortization
Other Assets 3,556,000 2,263,000 2,011,000
Deferred Long Term Asset Charges 1,727,000
Total Assets 116,371,000 75,183,000 47,501,000
Liabilities
Current Liabilities
Accounts Payable 23,879,000 17,738,000 9,453,000
Short/Current Long Term Debt
Other Current Liabilities 4,091,000 2,984,000 2,053,000
Total Current Liabilities 27,970,000 20,722,000 11,506,000
Long Term Debt
Other Liabilities 10,100,000 5,531,000 3,502,000
Deferred Long Term Liability Charges 1,686,000 1,139,000 853,000
Minority Interest
Negative Goodwill
Total Liabilities 39,756,000 27,392,000 15,861,000
Stockholders’ Equity
Misc Stocks Options Warrants
Redeemable Preferred Stock
Preferred Stock
Common Stock 13,331,000 10,668,000 8,210,000
Retained Earnings 62,841,000 37,169,000 23,353,000
Treasury Stock
Capital Surplus
Other Stockholder Equity 443,000 -46,000 77,000
Total Stockholder Equity 76,615,000 47,791,000 31,640,000
Net Tangible Assets 72,183,000 46,708,000 31,187,000

Figure 4: Google Incorporation Balance Sheet

Period Ending Dec 31, 2011 Dec 31, 2010 Dec 31, 2009
Assets
Current Assets
Cash And Cash Equivalents 9,983,000 13,630,000 10,198,000
Short Term Investments 34,643,000 21,345,000 14,287,000
Net Receivables 6,387,000 5,261,000 3,845,000
Inventory
Other Current Assets 1,745,000 1,326,000 837,000
Total Current Assets 52,758,000 41,562,000 29,167,000
Long Term Investments 790,000 523,000 129,000
Property Plant and Equipment 9,603,000 7,759,000 4,845,000
Goodwill 7,346,000 6,256,000 4,903,000
Intangible Assets 1,578,000 1,044,000 775,000
Accumulated Amortization
Other Assets 499,000 442,000 415,000
Deferred Long Term Asset Charges 265,000 263,000
Total Assets 72,574,000 57,851,000 40,497,000
Liabilities
Current Liabilities
Accounts Payable 7,148,000 6,137,000 2,462,000
Short/Current Long Term Debt 1,218,000 3,465,000
Other Current Liabilities 547,000 394,000 285,000
Total Current Liabilities 8,913,000 9,996,000 2,747,000
Long Term Debt 2,986,000
Other Liabilities 2,199,000 1,579,000 1,704,000
Deferred Long Term Liability Charges 331,000 35,000 42,000
Minority Interest
Negative Goodwill
Total Liabilities 14,429,000 11,610,000 4,493,000
Stockholders’ Equity
Misc Stocks Options Warrants
Redeemable Preferred Stock
Preferred Stock
Common Stock 20,264,000 18,235,000 15,817,000
Retained Earnings 37,605,000 27,868,000 20,082,000
Treasury Stock
Capital Surplus
Other Stockholder Equity 276,000 138,000 105,000
Total Stockholder Equity 58,145,000 46,241,000 36,004,000
Net Tangible Assets 49,221,000 38,941,000 30,326,000

Figure 5: Cash flow statement

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Apple Incorporation Amount in thousand $
Period Ending Sep 24, 2011 Sep 25, 2010 Sep 26, 2009
Net Income 25,922,000 14,013,000 8,235,000
Operating Activities, Cash Flows Provided By or Used In
Depreciation 1,814,000 1,027,000 734,000
Adjustments To Net Income 4,036,000 2,319,000 1,750,000
Changes In Accounts Receivables -1,791,000 -4,860,000 -353,000
Changes In Liabilities 8,664,000 8,302,000 452,000
Changes In Inventories 275,000 -596,000 54,000
Changes In Other Operating Activities -1,391,000 -1,610,000 -713,000
Total Cash Flow From Operating Activities 37,529,000 18,595,000 10,159,000
Investing Activities, Cash Flows Provided By or Used In
Capital Expenditures -4,260,000 -2,005,000 -1,144,000
Investments -32,464,000 -11,075,000 -16,046,000
Other Cash flows from Investing Activities -3,695,000 -774,000 -244,000
Total Cash Flows From Investing Activities -40,419,000 -13,854,000 -17,434,000
Financing Activities, Cash Flows Provided By or Used In
Dividends Paid
Sale Purchase of Stock 831,000 912,000 475,000
Net Borrowings
Other Cash Flows from Financing Activities -520,000 -406,000 -82,000
Total Cash Flows From Financing Activities 1,444,000 1,257,000 663,000
Effect Of Exchange Rate Changes
Change In Cash and Cash Equivalents -1,446,000 5,998,000 -6,612,000
Currency in USD.

Figure 6: Cash flow statement Google Incorporation

Dec 31, 2011 Dec 31, 2010 Dec 31, 2009
Net Income 9,737,000 8,505,000 6,520,000
Operating Activities, Cash Flows Provided By or Used In
Depreciation 1,851,000 1,396,000 1,524,000
Adjustments To Net Income 2,347,000 1,279,000 786,000
Changes In Accounts Receivables -1,156,000 -1,129,000 -504,000
Changes In Liabilities 2,048,000 1,444,000 728,000
Changes In Inventories
Changes In Other Operating Activities -262,000 -414,000 262,000
Total Cash Flow From Operating Activities 14,565,000 11,081,000 9,316,000
Investing Activities, Cash Flows Provided By or Used In
Capital Expenditures -3,438,000 -4,018,000 -810,000
Investments -13,349,000 -7,956,000 -7,101,000
Other Cash flows from Investing Activities -2,254,000 1,294,000 -108,000
Total Cash Flows From Investing Activities -19,041,000 -10,680,000 -8,019,000
Financing Activities, Cash Flows Provided By or Used In
Dividends Paid
Sale Purchase of Stock -801,000
Net Borrowings 726,000 3,463,000
Other Cash Flows from Financing Activities -5,000 294,000 143,000
Total Cash Flows From Financing Activities 807,000 3,050,000 233,000
Effect Of Exchange Rate Changes 22,000 -19,000 11,000
Change In Cash and Cash Equivalents -3,647,000 3,432,000 1,541,000
Currency in USD.

From figure 1, Apple Incorporation’s total revenue during its 2011 fiscal year amounted to $108.249 billion while its cost of revenue amounted to $64.431 billion. As a result, the firm earned a gross profit of $ 43.818 billion. The firm’s operating income amounted to $ 33.79 billion which was obtained after subtracting operating expenses which amounted to $10.028 billion. After subtracting the income tax expense, the firm’s net income amounted to $ 25.922 billion.

On the other hand, figure 2 shows that Google’s total revenue amounted to $ 37.905 billion while its cost of revenue amounted to $13.188 billion giving a gross profit of $ 24.717 billion. The gross profit was further reduced to $ 11.742 billion as the operating income after subtracting operating expenses amounting to $12.975 billion. After subtracting interest and taxes from earnings before interest and tax, Google’s net income amounted to $ 9.737 billion.

From figure 3, it is evident that Apple Incorporation experienced an increment in the size of its total assets from $ 75.183 billion in 2010 to $ 116.371 billion in 2011. This represents a growth with a margin of 54.78%. The firm’s total liabilities increased from $ 27.392 billion to $ 39.756 billion during the same period which represents a 31.1% growth. Similarly, total stockholders’ equity increased with a margin of 60.3% from $47.791 billion in 2010 to $ 76.615 billion in 2011. Google’s total assets increased from $57.851 billion in 2010 to $72.574 billion in 2011 as illustrated figure 4. This represents a 25.4% growth. Its total liabilities increased from $ 11.61billion in 2010 to $14.429 billion in 2011 which represents a 24.3% growth. Google’s total stockholders’ equity amounted to $ 58.145 billion in 2011 up from $ 46.241 in 2010 which represents a 25.7% growth.

During their 2011 fiscal year, both Apple and Google experienced negative cash flows as illustrated by the cash flow statements in figure 5 and 6. This is evidenced by the change in their cash and cash equivalent for the year. Apple Incorporation’s change in cash and cash equivalent amounted to $(1.446) billion while that of Google Incorporation amounted to $(3.647). This means that the rate of earning to spending by the two companies was low. However, Apple Incorporations rate of earning to spending was relatively high compared to that of Google.

Financial ratios

Ratio Company 2009 2010 2011
Liquidity ratio(Dollars are in billions)
Cash ratio (Cash+ Cash equivalent) ÷Current Liabilities Apple $5.263÷$11.506
=0.46
$11.261/$ 20.722
=0.54
$9.81÷$27.970
=0.35
Google $10.198/$2.747
=3.71
$13.63/$9.996 =1.36 $9.983/$8.913
=1.12
Current ratio Current Asset÷(Current Liabilities) Apple $31.555/$47.501
= 0.66
$41.678/$20.722
=2.01
$44.988/$27.97
=1.61
Google $29.167/$2.747
=10.62
$41.562/$9.996
=4.16
$52.758/$ 8.913=
5.92
Quick ratio (Cash and equivalents +short term investment+ account receivable)/Current Liabilities Apple $29.656/$11.506= 2.6 $37.18/$20.722=1.8 $39.683/$27.97=1.4
Google $28.33/$2.747=10 $40.236/$9.996=4 $51.013/$8.913= 5.7
Profitability ratio
Return on Asset (Net income +Interest expense )÷Total assets Apple $8.235/$47.501
=0.17
$14.013/$75.183
0.19
$25.922/$116.371
=0.22
Google $6.52/$40.4497=0.16 $8.505/$57.851=0.15 $9.737/$72.574=0.13
Return on equity Net Income /Shareholder’s equity Apple Inc. $8.235/$31.64=0.26 $14.013/$47.791=0.29 $25.922/$76.615=0.34
Google $6.52/$36.004=0.18 $8.505/$46.241=0.18 $9.737/$58.145=0.17
Profit margin Net income/Sales Apple $8.235/$42.905
=0.19
$14.013/$65.225
=0.21
$25.922/$108.249
=0.24
Google $6.52/$23.651=0.28 $8.505/$29.321=0.29 $9.737/$37.905=0.26
Debt Ratio
Debt to equity Total liabilities/Share-holders’ equity Apple $15.861/$31.64=
0.12
$27.392/$47.791=0.57 $37.756/$76.615=0.49
Google $4.493/$36.004=0.12 $11.61/$46.241=0.25 $14.429/$58.145=0.25
Debt ratio Total assets/Total debts Apple 3 2.5 4
Google 2 1.4 3
Asset utilization
Inventory turnover Cost of goods sold/Current period inventory Apple $25.683/$455
=0.06
$ 39.541/$1,051=0.04 $64.431/$776
=0.08
Google
Accounts receivable turnover Net credit sales /Average accounts receivables

Comparison of Five year averages

Google Incorporation Apple Incorporation
Return on equity 17.3% 29.5%
Return on assets 14.6% 18.6%
Gross profit margin 68.7% 40.5%
Total Debt to equity ratio 0.02 0.00
Post profit tax margin 25.7% 20.7%

By comparing the five year averages of the two companies, it is evident that Apple Incorporations’ performance over the past five years has been very effective. Apple Incorporation has a beta value of 0.92 compared to that of Google Incorporation which is 0.97. This means that the Apple Incorporation’s shares have a relatively low degree of market risk compared to that of Google.

Additionally, the price of Apple Incorporation’s share has been increasing over the past few years as illustrated in appendix 1. Currently, Apple’s share price has been on an upward trend as illustrated by the chart below. The graph below shows that the price of Apple’s shares has been on an upward trend during the first few months of 2012.

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Apple’s shares

Conclusion

Analysis of the two company’s financial statements shows that Apple’s financial performance is better than that of Google Incorporation. This is further enhanced by analysis of the financial ratios. For example, Apple Incorporation’s rate of return on equity is relatively high compared to that of Google Incorporation. This means that Apple Incorporation is more effective in utilizing the shareholder’s equity thus translating to a higher profitability compared to Google. Apple’s return on assets is relatively high compared to that of Google. This shows that the management team of Apple Incorporation is effective in ensuring that the firm’s assets are effectively utilized in order to generate high returns. Analysis’ of the companies’ liquidity ratios shows that the two companies can be able to meet their current financial obligations more effectively. Additionally, an analysis of the historical share price indicates that the price of Apple Incorporation share has been increasing over the years as illustrated by appendix 1.

Recommendations

From the analysis of Apple Incorporation financial performance, I would advise investors to consider purchasing Apple Incorporation’s shares. This arises from the fact that there is a high probability of the shares continuing to experience positive performance considering the firm’s current financial performance. As a result, investors will be able to maximize their wealth.

Reference List

Market Watch. (2011). Annual financial for Apple Incorporation. Web. 

Yahoo Finance. (2012). Google Incorporation. Web.

Yahoo Finance. (2012). Apple Incorporation. Web.

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BusinessEssay. 2022. "Apple Incorporation Financial Performance." November 26, 2022. https://business-essay.com/apple-incorporation-financial-performance/.

1. BusinessEssay. "Apple Incorporation Financial Performance." November 26, 2022. https://business-essay.com/apple-incorporation-financial-performance/.


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BusinessEssay. "Apple Incorporation Financial Performance." November 26, 2022. https://business-essay.com/apple-incorporation-financial-performance/.