Report on the financial performance of Apple Corporation

The return on asset (ROA) of the organization was 15.69% which has also declined over the years. If the profitability ratios of the Apple Corporation are analyzed then it can be said that the company is generating a significant amount of profit. However, the declining trend in the profitability ratios should be a matter of concern for the organization (Mulford & Comiskey, 2011).

1.1.1.      Apple’s Liquidity

Source: (Morningstar, 2020)

The Liquidity ratios show how much cash the corporation has for paying the short term obligations. The liquidity ratios shown by the Apple are clearly giving an indication that the organization is having enough cash for the payment of its short term obligations. In addition, the current ratio of the company was 1.11 in the year 1.11 which has grown up to 1.54 in the year 2019. Maintaining cash is essential for the organization so that not only it can perform its daily routine activities but it also can pay its short term loans. The quick ratio of the organization in the year 2019 was 1.38.  It is recommended to the organization to do not to keep access cash in hand. The access cash should be invested somewhere so that a significant amount of return can be earned. From the liquidity ratios, it can be said that the company has not kept access to cash in hand (Pandey, 2015).

1.1.1.      Apple’s Financial Leverage

Source: (Morningstar, 2020)

The financial leverage ratios show the capital structure of the corporation. The financial leverage ratios indicate how much resources the organization has to pay its long term obligations. The financial leverage ratios of Apple Corporation are indicating that the organization is highly leveraged. In recent years the organization has taken a significant amount of debt which can be seen from the debt to equity ratio of the company. The debt to equity ratio was 0.45 in the year 2015 which increase up to 1.01 in the year 2019. The increasing amount of debt should be a matter of concern for the corporation. The amount of equity over the years has experienced a significant decline which is visible in the financial health ratios. The organization should maintain an optimum capital structure so that the cost of capital remains lower. Raising too much debt can cause various problems for the organization. Not only the cost of capital will increase but also payment of too much debt can become quite difficult for the company (Fridson & Alvarez, 2011).

1.1.2.      Apple’s Efficiency

Source: (Morningstar, 2020)

The efficiency ratios indicate how efficient, the organization is in utilization of its current assets to generate its revenues. The efficiency ratios of Apple Corporation are indicating a declining trend which means that the organization's efficiency has decreased over the years. The asset turnover ratio was 0.89 in the year 2015 which declined up to 0.74 in the year 2019. Fixed asset turnover has also declined from 10.85 to 6.61. Overall it can be said that the organization should improve its efficiency. Currently, the organization is not utilizing its assets efficiently for generating revenue. By increasing efficiency the organization cannot increase its profit but also can increase its profitability as well (Fridson & Alvarez, 2011)

3.2. Financial strategies of the financial performance of Apple Corporation

The key financial strategy of the organization is to enhance the margin of the organization. The product which the organization provides to its customers has unique features and technology. Such features and technology are not provided by any other organization. That is why the customers pay a premium price for the products of the organization. Through charging premium price the organization becomes able to generate a significant amount of profit. When the sales of the organization increase the profit of the company also increases as a result. 

3.3. Growth Strategies of the financial performance of Apple Corporation

The organization is creating such products through which it can generate a significant amount of profit. The high profitability of the corporation allows it to expand its business in different parts of the world. if the financial statements of the corporation are analyzed then it can be said that the revenue and profitability of the company have experienced significant growth over the years. 

3.4. Company’s Capital Structure of the financial performance of Apple Corporation

Source: (Morningstar, 2020)

Source: (Morningstar, 2020)

The statement given for the financial position or statement related to Balance Sheet provides detailed information regarding the capital structure of the organization. The organization finances its assets from two ways which include equity financing and debt financing. The organization usually finance their assets from both debt and equity financing. The organization often try to maintain optimum capital structure so that its cost of capital remains lower. The optimum capital structure is considered to be 40% debt and 60% equity. Too much debt or too much equity is not considered good for the organization because not only the cost of capital increase but also payment to the investors can become a huge problem (Chandra, 2011).

If the capital structure of Apple Corporation is analyzed then it is right to say that the financing of its assets by the organization is done from both debt and equity. Moreover, the amount of debt of Apple Corporation has increased significantly over the years. The long term debt of the organization was 31.16% in the year 2015 which has increased up to 42.04% in the year 2019. The organization has raised a significant amount of debt over the years and reduced its equity financing. The total equity was 41.09% in the year 2015 which declined by up to 26.73% in the year 2019.  The rising debt of the organization should be a matter of concern for the organization.

1.      Critical Evaluation of the financial performance of Apple Corporation
1.1.            Dividend Policy of the financial performance of Apple Corporation

Source: (Morningstar, 2020)

Apple provides dividends to its shareholders. Different organizations have different dividend policies that have a significant impact on their investors. Some organizations do not pay a dividend to the investors rather reinvest the amount in the organization so that the organization can experience growth. Some organizations, on the other hand, pay a dividend to the investors so that they can earn a return from the investment in the form of a dividend. The investors invest in such corporations where they can earn a significant amount of return and prefer those organizations which provide dividend on their shares (Warren, et al., 2016).

Apple has a clear dividend policy which shows that dividend has to give to the shareholders. Over the years the profitability of the organization has increased up to a lot of extents due to which the amount of dividend also grows as a result. When the income of the company increases the company gets in the position to pay a dividend to its shareholders. In the graph below it can be seen that the dividend of the company has increased significantly over the years.

1.1.            Share price Valuation of the financial performance of Apple Corporation

Source: (Morningstar, 2020)

In the above table, the price ratios of the Apple Corporation provide. From the price ratios, it can be determined whether the stocks of the corporation are overvalued or undervalued. The price to sales ratio of the organization is experiencing growth from which it can be said that stock of the organization is overvalued. The P/E ratio of the organization is also indicating that the price of the stocks is overvalued. The investors are expecting that the corporation will experience growth in the future that is why the price of the stocks is high (Warren, et al., 2016).

2.      Conclusion of the financial performance of Apple Corporation

It is concluded that if the capital structure of Apple Corporation is analyzed then it can be said that the organization has financed its assets from both debt and equity. The amount of debt of Apple Corporation has increased in a large amount over the period of time. The long term debt of the organization was 31.16% in the year 2015 which has increased up to 42.04% in the year 2019. The organization has raised a significant amount of debt over the years and reduced its equity financing. The total equity was 41.09% in the year 2015 which declined by up to 26.73% in the year 2019.  The rising debt of the organization should be a matter of concern for the organization.

The key financial strategy of the organization is to enhance the margin of the organization. The product which the organization provides to its customers has unique features and technology. Such features and technology are not provided by any other organization. That is why the customers pay a premium price for the products of the organization. Through charging premium price the organization becomes able to generate a significant amount of profit. When the sales of the organization increase the profit of the company also increases as a result.

3.      References of the financial performance of Apple Corporation

Chandra, P., 2011. Financial Management. s.l. Tata McGraw-Hill Education.

Delen, D., Kuzey, C. & Uyar, A., 2013. Measuring firm performance using financial ratios: A decision tree approach. Expert Systems with Applications, 40(10), pp. 3970-3983.

Fridson, M. S. & Alvarez, F., 2011. Financial Statement Analysis: A Practitioner's Guide. s.l.: John Wiley & Sons.

Linares-Mustarós, S., Coenders, G. & Vives-Mestres, M., 208. Financial performance and distress profiles. From classification according to financial ratios to compositional classification. Advances in Accounting, Volume 40, pp. 1-10.

Mohana, R. P., 2011. Financial Statement Analysis and Reporting. s.l.: PHI Learning Pvt. Ltd.

Morningstar, 2020. Apple Inc. [Online]
Available at: https://www.morningstar.com/stocks/xnas/aapl/financials

Mulford, C. W. & Comiskey, E. E., 2011. The Financial Numbers Game: Detecting Creative Accounting Practices. s.l.: John Wiley & Sons.

Myšková, R. & Hajek, P., 2017. Comprehensive assessment of firm financial performance using financial ratios and linguistic analysis of annual reports. Journal of International Studies, Issue 4, pp. 96-108.

Pandey, I., 2015. Financial Management. s.l. Vikas Publishing House.

Warren, C., Reeve, J. M. & Duchac, J., 2016. Financial & Managerial Accounting. s.l. Cengage Learning.