1. Apple, Inc
MEMORANDUM
To: All investors in America
From: Tam Mai Thanh Cao
Subject: Financial Analysis and Investments from Apple
Date: December 20, 2016
I am an investor. I currently own 250,000 shares from Apple Incorporation in Cupertino, California.
I am trying to decide if I should hold, sell, buy?
My memorandum will illustrate my opinion how to decide whether to invest in Apple.
Firstly, Apple is the multinational corporation that is one of the most reputable companies in the
world. To illustrate that point, Apple’s business organization is geographic basis. It means that this
Company has many Apple stores around the world such as Japan, Brazil, China, Europe and other
countries.
Secondly, Apple has technology research and development to build the best models for Apple’s
products and distributes their goods in high variety based on customer’s demand. They sells and
distributes the different types of products (High variety) and services such iPhone, iPad , Mac,
watchOS, iTunes Store , Mac App Store , TV App Store, iBooks Store, and others so that the
customers have a lot of choices to choose and buy the products based on their interests.
Furthermore, the company also uses different channels to delivery and sells: wholesales, retails,
third-party, online sales (Ex: Amazon) in order to easily purchase the products. That is reason why
customer loyalty is higher than other competitors in the market area.
Thirdly, in marketing sector, with the high competition from global market, Apple tries to introduce
new type goods (Ex: Iphone 6 in 2014 and Iphone 7 in 2016) or other products in the short-term
(within one year) to encourage the buyers to purchase Apple’s products and increase customer
loyalty before competitors tries to make better Apple.
After mentioning three important points, we can clearly conclude that the Apple depend highly on
the net income from foreign countries (Evidence: “During 2016, the Company’s domestic and
international net sales accounted for 35% and 65%”). Therefore, they have high risk on foreign
currency exchange rate to get US Dollar. Consequently, net income is the most important part in the
company.

2. Next, we would like to discuss about the comparison some financial analysis factors to illustrate
which way is the best choice for the investment decision.
Component Percentages for Apple, Inc
COMPONENT PERCENTAGE
September 24, 2016 September 26, 2015 September 27, 2014
Income Statement (Fiscal 2016) (Fiscal 2015) (Fiscal 2014)
Net sales 100% 100% 100%
Cost of Sales 60.92 59.94 61.41
Gross profit 39.08 40.06 38.59
Operating Expenses:
Research and development 4.66 3.45 3.3
Selling, general and administrative 6.58 6.13 6.56
Total Operating Expenses 11.24 9.58 9.86
Operating Income 27.84 30.48 28.73
Interest and Other (Income) Expense:
Interest and Dividend Income (1.85) (1.25) (0.98)
Interest Expense 0.68 0.31 0.21
Other Expense, net 0.55 0.39 0.24
Total other Expense (Income), net (0.62) (0.55) (0.53)
Earnings, before Provision for Income Tax 28.46 31.03 29.26
Provision for Income Tax 7.27 8.18 7.64
Net Earnings 21.19 22.85 21.62
Thus, the net income has fluctuated within 21% - 23% so that it is not significantly changed during
the Apple releases and sells their new products during seasonal days or holidays (Mostly releasing
on September of the year). However, there is a gradual fall in net income and gross profit from
2015 to 2016 due to the strength of US Dollar and Foreign Currency Risk (Evidence: “the effect of
weakness in most foreign currencies relative to the U.S. dollar, partially offset by an increase
in Services” ). With the reduction of net income, earnings per share will be affected. We can
demonstrate by the ratio below.
Earnings per share (EPS) =
Net Income
Weighted Average Number of Shares Outstanding
Earnings per share (2016) =
45,687,000
5,500,281
= $8.35 per share

3. Earnings per share (2015) =
53,394,000
5,793,069
= $9.28 per share
Earnings per share is the most crucial for investor who chooses a steady source of income.
According to the ratio, the decline from EPS in 2015 ($9.28 per share) to EPS in 2016 ($8.35 per
share) is that the Apple is in trouble, which can lead to a decline in the stock price.
On the other hand, investors also considers ROE (Return on Equity) and Earnings Quality.
ROE (Return on Equity) =
Net Income
Total Stockholders′Equity
ROE (Return on Equity) in 2016 =
45,687,000
128,249,000
= 35.62%
ROE (Return on Equity) in 2015 =
53,394,000
119,355,000
= 44.74%
In this ratio, we can clearly see that ROE in 2016 is lower than ROE in 2015 so that we can get the
money back in 2016 will be lesser than in 2015. That is not a great choice to investment because
last year we would get back nearly 45 cents in every one dollar for investment but now, we will get
back only approximately 36 cents in each invested dollar.
Earning quality =
Cash Flows from Operating Activities
Net Income
Earning quality in 2016 =
65,824,000
45,687,000
= 1.44
Earning quality in 2015 =
81,266,000
53,394,000
= 1.52
Earning quality in 2014 =
59,713,000
39,510,000
= 1.51
High earnings quality is so important to know about the performance in the company about
operating cash flow, valuation models and the judgments in the investment. As we can see, earnings

4. quality in 2016 is lower than in 2015 or 2014. It means that the future cash flow will negatively
affect. Therefore, that is not good news in this company.
To sum up, after identifying all the evidences and the computations about the Apple, I would like to
say that investors should sell the stock because the net income is reduced due to foreign currency
risk. Another the fact is that Donald Trump won this the Election Day and many foreign investors
came and invested in America. It led to strengthen US Dollar and weaken foreign currency.
Therefore, investors in the Apple should consider this fact.
If you have any questions, comments, suggestions or any other information/feedback of use, please
let me know. We will discuss further about this. Thank you for your consideration.
Tam Mai Thanh Cao
CPA