Case Study: 10k Financial Filing of Apple Inc
ACCT 201 Case Study: APPLE Inc. [pic] Based on Apples 10K for YE 9/25/2010 April 10, 2011 Constantino Anezinos 1) With our 10k final case study project we will be looking at the 10k financial filing of Apple Inc. Based on the 10k we read; we will apply the concepts learned in this class to form a thorough analysis of the financial statement. In a manner that will show we comprehend the ideas taught in this class. As referenced from Wikipedia; “Apple Inc. (NASDAQ: AAPL; NYSE: AAPL; previously Apple Computer, Inc.) is an American multinational corporation that designs and markets consumer electronics, computer software, and personal computers. The company’s best-known hardware products include the Macintosh line of computers, the iPod, the iPhone and the iPad. 2) See attached Excel Spread Sheet 3) Also attatch in Excel Spreasd Sheet, but shown below [pic] 4) Ratio Anlysis | | | | | | |ANALYSIS | | | | | | | | | | | |Working Capital | |47678-27392 | = |14,286 | | | | | | | |Current Ratio | |41,678.00 | = |1.52 | | | |27,392.00 | | | | | | | | | |Quick Ratio | |47678-1051 | = |1.48 | | | |27,392.00 | | | | | | | | | |Accts. Receivable Turnover | |65,225 | = |11.83756806 | | | |5,510 | | | | | | | | | |Number of Days Sales in Rec. | |15 | = |0.08 | | | |178 | | | | | | | | | |Inventory Turnover | |39,541 | = |37.6 | | | |1,051 | | | | | | | | | |Number of Days Sales in Inventory | |1,051 | = |9.73 | | | |108 | | | | | | | | | |Ratio of Fixed Assets to Long Term Liabilities | |4,768 |= |0.71 | | | |6670 | | | | | | | | | |Ratio of Liabilities to Stockholders Equity | |27392 |= |0.57 | | | |47791 | | | | | | | | | |Number of Times Interest Charges are Earned | |18540+0 |= |0 | | | |0 | | | | | | | | | |Ratio of Net Sales to Assets | |65,225 |= |1.31 | | | |49762 | | | | | | | | | |Rate Earned on Total Assets | |14013+0 |= |18% | | | |75183 | | | | | | | | | |Rate Earned on Stockholders Equity | |14013 |= |29% | | | |47791 | | | | | | | | | |Rate Earned on Common Stockholders Equity | |14013-0 |= |29% | | | |47791 | | | | | | | | | |Earnings per Share on Common Stock | |14013 |= |1.31 | | | |10668 | | | | | | | | | |Price Earnings Ratio | |336 |= |256.5 | | | |1.31 | | | | | | | | | |Dividends Per Share | |0 | |0 | | | | | | | |Dividend Yield | |0 | |0 | 4 con’t) Based on our analysis of the numbers many aspects of APPLE inc come into focus first and foremost we see that APPLE has a significant working capital in their possession. This can be attributed to several different factors; one is the ratio of net sales to assets, this is used to assess the effectiveness in the use of assets and given APPLES (1.31 to 1) ratio they are leverage their assets to return 31% back in. In addition they have minimized their debt and held onto their cash. The idea of retaining cash is important to apple we can see that, when we look at their dividends per share and dividends yield, which both equal zero (0). When asked why apple does not pay dividends jobs responded with; “We know if we need to acquire something — a piece of the puzzle to make something big and bold — we can write a check for it and not borrow a lot of money and put our whole company at risk.” This should put investors at ease, because although they are not receiving dividends directly; the long term potential for a company who focuses on future ventures could yield grate value. 5) Summary of Accounting Policies a- Profitability; Based on the financial documents we have reviewed we can see that apple has huge profitability; After taking the fixed costs into consideration which we saw to be shrinking as a percent of sales, Apple’s bottom line profitability has been rising slightly and more rapidly than the past 3 years. This is also based on apples diversity in the market; where the iphone is 57% of its gross profits. b- Patents; Apple as a company is more than just a phone/computer company they are also involved with patents and IP; this is an often overlooked aspect of their business. Their patents are slated to be worth in the billions of dollars; more recently they have filed to patent non-glasses 3-D televisions. With such forethought and security investors should see Apple as a safe bet for the future. c- Warranty-Expense; while Apple is still netting a very good profit its business model does have a kink in it; its warranty- which is a double edge sword. On one hand customers admire apples warranty for its products which a steel guarantee that it will work or they will fix it. But its that same guarantee that hurts potential profits. Apple’s warranty accruals had been averaging around 1% of revenue for the first three quarters of 2010, or roughly $150Mil. In the fourth quarter, warranty accruals ballooned to $457M, or 2.3% of revenue; this was based on sales of Ipads. SUMMARY 6) By looking at Apples 10k, or anyone’s 10K for that matter, we can get a “health-report” if you will of their economic health. Based on our research it seems that Apple is “fit as fiddle”, meaning they are in amazing economic health. They have large cash reserves, increased employee headcount, higher capital expenditure targets, and a decrease in its gross margin, for the second year in a row. Although the decrease is due to a higher mix of new and innovative products, which apple will release later in the upcoming years. These combined factors make apple a seemingly safe bet for investors. I also learned, by doing my own research on the company interest facts about their 10 filings; mainly how each of their products contributes to the overall revenue of the company; like: “Software contributes more now than the iPod. This is completely under everyone’s radar but Apple’s software business has been growing and with 80% gross margins (assumed) it’s a big part of the profit picture.” This case study has been a very good experience for me; since beginning this accounting class I have been enlightened on several aspects of business that I had previous little knowledge of. This is especially important to me because I am a small business owner and now can more readily comprehend and analyze the final statements my accountant/bookkeeper sends me. I am grateful for the opportunity to learn new aspects of business.