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1. Apple, one of the most renowned
companies in the world, is
headquartered in California. It is a
multinational company that deals in
various products like cell phones,
laptops, personal computers,
computer software and so on.
CHARLOTTE ALEXANDER
Apple Company
Profile Assignment

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Introduction
Apple, one of the most renowned companies in the world, is
headquartered in California. It is a multinational company that
deals in various products like cell phones, laptops, personal
computers, computer software and so on. Apple is highly
renowned for its innovation and Information technology.Apple
Inc has launched many iPhones, iPods, TVs etc. It has made huge
sales in the last quarter of about 70 millionby its new launched
iPhones. The company is listed on stock exchanges worldwide.
The company has a tremendous increase in sales volume from last
decade i.e. from $ 65,225 billion in 2010 to $1, 82,795 billion by
2014.
FINANCIAL POSITION OF APPLE INC.
Company’s financial position can be analyzed by its assets and
liabilities. By analyzing current ratio a company’s quickness to
meet its current obligation can be known. Moreover company’s
liquidity position and solvency position is also important factor to
be analyzed.

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The company’s total assets showedan upward growth, it became
231839 Million in 2014 as compared to 75183 Million in 2010. It
indicates that the total assets has became 3.08 times in 5 years.
Total liabilities of the company have become 120292 Million in
2014 as compared to 27392 Million. It indicates that total
liabilities has became 4.39 times in 5 years. Net worth of the
company has become 2.33 times in 2014 as compared to 2010. It
indicates decent growth in net worth of the company but the
growth in net worth is lower than the growth in total liabilities.
However, the total liabilities in 2014 is only 107.84% of net worth,
it indicates that even though total liabilities have grown with
higher rate as compared to net worth but still the proportion of
total liabilities as compared to net worth is reasonably well.
Hence, it indicates better solvency of the company.
The company’s current ratio has decreased to 1.08 times in 2014
as compared to 2.01 times in 2010. Quick ratio of the company

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has decreased from 1.96 times in 2010 to 1.05 times. This
indicates the fall in liquidity position of the company. But, still the
decrease in the current ratio and quick ratio is in control and has
no much effect on the liquidity position of the company as the
current assets and quick assets are still higher than the current
liabilities.
We can see in the above graph that current ratio and quick ratio of
the company is falling constantly, however, still the current ratio
and quick ratio is more than 1. It indicates that the company is
capable to meet its current liabilities from its current assets.

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Looking into the liabilities and equity, Company’s total liabilities
in 2014 is 52% and 48% is total equity. The long term debt to
equity ratio of the company is 0.26 times in 2014. The long-term
debt to equity ratio of Apple has shown growth in 2014 as
compared to 2010, however still
the long-term debt ratio of the company is at lower levels. It
indicates Apple’s sound solvency position in the market. Overall
apple’s financials are strong enough in current scenario; however
they were more lucrative in past as compared to present.
FINANCIAL PERFORMANCEOF
APPLE INC.
Apple has shown growth of 280.25% growth in net sales, 274.63%
growth in gross margin and 281.95% growth in net income in last
5 years. Hence, it indicates significant increase in the profitability
of the company.
Profitability ratios are the one which indicate the amount of
return that the company earns taking into account the company’s
profit aspect. It includes return on equity, return on assets, net
profit margin and gross profit margin.

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Overall the company is performing in a profitable manner. We can
see that profitability ratios were showing rising positive trend till
2012, but they are showing some fall in 2013 and 2014. However,
still the ROE of the company has increased in the year 2014 then
as compared to 2013. The profitability ratios of the company are
higher than its peers in the industry. Apple is providing good
amount of returns to its shareholders.
FINANCIAL LEVERAGE
We have calculated the degree of financial leverage and Interest
coverage ratio of Apple Inc. for last 5 years, the calculation is as
below:

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We can see that the degree of financial leverage of Apple is very
low. Hence, the company has capability to increase the financial
leverage for increasing profitability. Interest Coverage ratio
indicates the ability of the company to pay its fixed interest
charges. The interest coverage ratio of the company shows that
the company has strong financial capability to cover its interest
expenses. We can see that the interest coverage ratio has
remained consistently more than 100 and even more than 300
and 500 in some years. This indicates that the earnings of the
company can easily meet the interest expenses. Hence, there is a
scope that Apple can use more debt capital without endangering
its financial solvency.

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Below is the long-term debt to equity ratio of Apple:
We can see that long-term debt to equity ratio of Apple was at
very low level in 2010 to 2012, however in last 2 years there is
some increase in long-term debt of the company, still the long-
term debt to equity ratio is at lower level. This indicates that the
company relies more on equity capital, which is good for solvency

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of the company. However, the company can increase the long-
term debt component for generating higher profitability.
See more about : Business Establishment Assignment Help
We can see that in the year 2013 and 2014, there is some increase
in long-term debt to equity ratio and some decrease in interest
coverage ratio. This indicates that Apple is attempting to use more
long-term debt capital in its capital structure to increase its
profitability. However, still the use of debt capital is relatively
smaller.
COST OF CAPITAL
We have calculated the cost of debt capital, cost of equity capital
and the weighted average cost of capital of Apple. The calculations
are as below:

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We can see that the cost of equity of Apple Inc. is increasing with
more use of debt component in its capital structure. Cost of debt
of the company is relatively lower, but it is showing increasing
trend as the company is increasing the debt component in its
capital structure.
CAPITAL STRUCTURE
We have calculated the debt-equity mix in the capital structure of
Apple in last 5 years, the calculations are as below:

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We can see that in the capital structure of Apple, the component
of debt is increasing. Hence, the company is trying to raise more
debt capital. However, still the proportion of long-term debt is at
very low level as compared to equity of the company. Apple can
raise more long-term debt without endangering its solvency for
increasing its profitability. As we know that debt capital is cheaper
than equity capital, the company can increase its profitability by
raising debt capital for funding its expansion projects.
CONCLUSION
If we look into past figures of Apple Inc. and compare it with
present, then it indicates that profitability ratios are less than it
was before 5 years. The profitability ratios of Apple were at peak
in the year 2012. Long term debt equity ratio was lower in past
than as compared to present, but still the long term debt to equity
ratio is at lower level. Hence, we can infer than the financial
position and profitability of Apple has fallen as compared to its
own profitability and financial position in past. However, still the
financial position and profitability of Apple is better than the
industry average.

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Apple Inc. is avery well-known globally established company.
Considering the above facts and figure and after analyzing
Balance sheets and Income statement of last five years of Apple
Inc., it can be inferred that Apple is a good company, from the
investment point of view.
The company’s sales have drastically increased over last few years.
The company’s financial position is capable enough to provide a
good return to the investors. Thus it is advised to invest in the
shares of Apple Inc to avail higher returns in the long term