For this assignment, you will complete the Financial Overview component of your course project. To complete this assignment, use the Financial Analysis Toolkit Excel file, provided in the Resources, to complete a financial analysis of your chosen company (Apple Inc,) over the last two most recent years available in annual reports. Replace the numbers provided in the Excel file with the appropriate numbers for your firm. Then, write a 2–3 page financial analysis of your company, addressing the following elements: Identify your company, its industry, and analyze the important segments (percentage of sales or subsidiaries) of your company compared to its industry and its overall business. Perform a complete financial analysis of your chosen company's financial statements—horizontal, vertical (Percentage of Sales and Common-Size), and changes in ratios—for the last two years. Compare all ratios to industry averages. Evaluate the company's ratios against the industry averages. Explain the significance of the company's ratios when compared to industry averages. Analyze the company's cash flows. Assess the overall financial health of your company based on this financial analysis. A great way to integrate your completed calculations from your Excel sheet into your written analysis is to paste pieces of the worksheet directly into your Word document. You are also encouraged to create graphs or charts from the data that may illustrate your analyses as well. Tool Kit for Analysis of Financial Statements Financial statements are analyzed by calculating certain key ratios and then comparing them with the ratios of other firms and by examining the trends in ratios over time. We can also combine ratios to make the analysis more revealing, those indicated below are exceptionally useful for this type of analysis. RATIO ANALYSIS (Section 3.1) *NVIDIA Fiscal Years starts and ends on Jan 31, such that FY13 represents Jan 31,2012 to Jan31, 2013 Input Data: 2013 2012 Year-end common stock price $12.26 $13.86 Year-end shares outstanding (in thousands) 616,756 612,191 Tax rate 15% 12% After-tax cost of capital Lease payments (in thousands) $18,998 $21,439 Required sinking fund payments $0 $0 Balance Sheets (in thousands of dollars) Assets 2013 2012 Cash and equivalents $906,223 $767,218 * Added to cash and quivalents prepaid expense and deferred income taxes Short-term investments $2,995,097 $2,461,700 2013 2012 Accounts receivable $454,252 $336,143 69,701 49,411 prepaid expenses and other Inventories $419,686 $340,297 103,736 49,931 deferred income taxes Total current assets $4,775,258 $3,905,358 Net plant and equipment $1,636,987 $1,647,570 * In addition to equpment also includes goodwill, intangible assets, and other assets Total assets $6,412,245 $5,552,928 2013 2012 641,030 641,030 goodwill .

1. For this assignment, you will complete the Financial Overview
component of your course project. To complete this assignment,
use the Financial Analysis Toolkit Excel file, provided in the
Resources, to complete a financial analysis of your chosen
company (Apple Inc,) over the last two most recent years
available in annual reports. Replace the numbers provided in the
Excel file with the appropriate numbers for your firm. Then,
write a 2–3 page financial analysis of your company, addressing
the following elements:
Identify your company, its industry, and analyze the important
segments (percentage of sales or subsidiaries) of your company
compared to its industry and its overall business.
Perform a complete financial analysis of your chosen company's
financial statements—horizontal, vertical (Percentage of Sales
and Common-Size), and changes in ratios—for the last two
years.
Compare all ratios to industry averages. Evaluate the company's
ratios against the industry averages.
Explain the significance of the company's ratios when compared
to industry averages.
Analyze the company's cash flows.
Assess the overall financial health of your company based on
this financial analysis.
A great way to integrate your completed calculations from your
Excel sheet into your written analysis is to paste pieces of the
worksheet directly into your Word document. You are also
encouraged to create graphs or charts from the data that may
illustrate your analyses as well.

2. Tool Kit for Analysis of Financial Statements
Financial statements are analyzed by calculating certain key
ratios and then comparing them with the ratios of other firms
and by examining the trends in ratios over time.
We can also combine ratios to make the analysis more
revealing, those indicated below are exceptionally useful for
this type of analysis.

3. RATIO ANALYSIS (Section 3.1)
*NVIDIA Fiscal Years starts and ends on Jan 31, such that
FY13 represents Jan 31,2012 to Jan31, 2013
Input Data:

4. 2013
2012
Year-end common stock price
$12.26
$13.86
Year-end shares outstanding (in thousands)
616,756
612,191
Tax rate
15%
12%
After-tax cost of capital

5. Lease payments (in thousands)
$18,998
$21,439
Required sinking fund payments
$0
$0
Balance Sheets

6. (in thousands of dollars)
Assets
2013
2012
Cash and equivalents
$906,223
$767,218
* Added to cash and quivalents prepaid expense and deferred
income taxes

7. Short-term investments
$2,995,097
$2,461,700
2013
2012
Accounts receivable
$454,252
$336,143
69,701
49,411
prepaid expenses and other
Inventories
$419,686
$340,297
103,736
49,931
deferred income taxes
Total current assets
$4,775,258
$3,905,358
Net plant and equipment

8. $1,636,987
$1,647,570
* In addition to equpment also includes goodwill, intangible
assets, and other assets
Total assets
$6,412,245
$5,552,928
2013
2012
641,030
641,030
goodwill
Liabilities and equity
312,332
326,136
intangible assets
Accounts payable
$356,428
$335,072

9. 107,481
120,332
other assets
Notes payable
$0
$0
Accruals
$619,795
$594,886
Total current liabilities
$976,223
$929,958
Long-term bonds
$608,319
$477,246

10. 2013
2012
Total liabilities
$1,584,542
$1,407,204
3,193,623
2,900,896
additional paid-in capital
Preferred stock (2,00,000 shares: none issued)
$0
$0
-1,622,709
-1,496,904
treasury stock
Common stock (616,756,134 shares oustanding 2013 and
612,191,412 outstanding in 2012
$720
$700
9981
10,614
accumulated other comprehensive income
Retained earnings
$3,246,088
$2,730,418

11. Total common equity
$4,827,703
$4,145,724
* Added to Total Common equity additional paid-in capital,
treasuary stock, and accumulated other comprehensive income
Total liabilities and equity
$6,412,245
$5,552,928
Income Statements
(in thousands of dollars)

12. 2013
2012
Net sales
$4,280,159.0
$3,997,930.0
Operating costs
$3,631,920.0
$3,349,631.0
Earnings before interest, taxes, depr. & amort. (EBITDA)
$648,239.0
$648,299.0

13. Depreciation
$0.0
$0.0
Amortization
$0.0
$0.0
Depreciation and amortization
$0.0
$0.0
Earnings before interest and taxes (EBIT)
$648,239.0
$648,299.0

14. Less interest
-$13,800.0
-$15,097.0
Earnings before taxes (EBT)
$662,039.0
$663,396.0
Taxes (15.0%, 12.4%)
$99,503.0
$82,306.0
Net income before preferred dividends
$562,536.0
$581,090.0

15. Preferred dividends
$0.0
$0.0
Net income available to common stockholders
$562,536.0
$581,090.0
Common dividends
$0.0
$0.0
Addition to retained earnings
$562,536.0
$581,090.0

16. Calculated Data:
Operating Performance and Cash Flows
2013
2012
Net operating working capital (NOWC)
$803,938.0
$513,700.0
Total operating capital
$2,440,925.0

17. $2,161,270.0
Net Operating Profit After Taxes (NOPAT)
$551,003.2
$567,909.9
Net Cash Flow (Net income + Depreciation)
$562,536.0
$581,090.0
Operating Cash Flow (OCF)
$551,003.2
$567,909.9
Free Cash Flow (FCF)
$271,348.2
N/A

18. Calculated Data:
Per-share Information
2013
2012
Earnings per share (EPS)
$0.91
$0.95
Dividends per share (DPS)

19. $0.00
$0.00
Book value per share (BVPS)
$7.83
$6.77
Cash flow per share (CFPS)
$0.91
$0.95
Free cash flow per share (FCFPS)
$0.44
N/A

20. LIQUIDITY RATIOS (Section 3.2)
Industry
2013
2012
Average
Liquidity ratios
Current Ratio
4.89
4.20
2.22

21. Quick Ratio
4.46
3.83
1.3
ASSET MANAGEMENT RATIOS (Section 3.3)
Industry
2013
2012
Average

22. Asset Management ratios
Inventory Turnover
10.20
11.75
4.78
Days Sales Outstanding
38.7
30.69
25.6
*Industry leader
Fixed Asset Turnover
2.61
2.43
1.89

23. *Industry leader
Total Asset Turnover
0.67
0.72
0.63
DEBT MANAGEMENT RATIOS (Section 3.4)
Industry
2013
2012
Average

24. Debt Management ratios
Debt Ratio
24.71%
25.34%
39.30%
*Industry leader
Debt-to-Equity Ratio
0.33
0.34
0.65
*Industry leader
Market Debt Ratio
17.33%
14.23%
24.40
*Industry leader
Times Interest Earned

25. 46.97
42.94
196.79
*Incorrect for 2013 and 2012 as interest combined is income not
expense
EBITDA Coverage Ratio
128.36
105.60
N/A
PROFITABILITY RATIOS (Section 3.5)
Industry
2013
2012

26. Average
Profitability ratios
Profit Margin
13.14%
14.53%
19.96%
Basic Earning Power
10.11%
11.67%
17.63%
*Industry leader
Return on Assets
8.77%

27. 10.46%
12.56%
Return on Equity
11.65%
14.02%
19.43%
MARKET VALUE RATIOS (Section 3.6)
Industry
2013

28. 2012
Average
Market Value ratios
Price-to Earnings Ratio
13.44
14.60
25.77
*NVIDIA doesn't account for depreciation in their 10-K
statements Same P/E P/CF Ratio because there is no
depreciation
Price-to-Cash Flow Ratio
13.44
14.60
9.66
Price-to-EBITDA
11.66
13.09

29. 5.13
*Industry Leader
Market-to-Book Ratio
1.57
2.05
3.59
TREND ANALYSIS, COMMON SIZE ANALYSIS, AND
PERCENT CHANGE ANALYSIS (Section 3.7)

30. TREND ANALYSIS
Trend analysis allows you to see how a firm's results are
changing over time.
For instance, a firm's ROE may be slightly below the
benchmark, but if it has been steadily rising over the past four
years, that should be seen as a good sign.
A trend analysis and graph have been constructed on this data
regarding Nvidia's ROE over the past 5 years.
(Nvidia and indusry average data for earlier years has been
provided.)

31. ROE
NVIDIA
AMD
Intel
2009
-1.2%
-213.1%
12.93%
2010
-2.7%
107.4%
10.82%

32. 2011
8.7%
56.7%
25.16%
2012
15.9%
37.7%
27.15%
2013
11.7%
-111.2%
22.66%

33. Figure 3-1
Rate of Return on Common Equity

39. COMMON SIZE ANALYSIS

40. In common size income statements, all items for a year are
divided by the sales for that year.
Figure 3-2
Common Size Income Statements
Industry Composite
Nvidia
2013

41. 2013
2012
Net sales
100.0%
100.0%
100.0%
Operating costs
72.1%
84.9%
83.8%
Earnings before interest, taxes, depr. & amort. (EBITDA)
27.9%
15.1%
16.2%
Depreciation and amortization
0.0%
0.0%

42. 0.0%
Earnings before interest and taxes (EBIT)
27.9%
15.1%
16.2%
Less interest
0.0%
-0.3%
-0.4%
Earnings before taxes (EBT)
27.9%
15.5%
16.6%
Taxes (15.0%, 12.4%)
7.3%
2.3%
2.1%

43. Net income before preferred dividends
20.6%
13.1%
14.5%
Preferred dividends
0.0%
0.0%
0.0%
Net income available to common stockholders (profit margin)
20.6%
13.1%
14.5%

44. In common sheets, all items for a year are divided by the total
assets for that year.
Figure 3-3
Common Size Balance Sheets
Industry Composite

45. Nvidia
2013
2013
2012
Assets
Cash and equivalents
13.0%
14.1%
13.8%
Short-term investments
11.5%
46.7%
44.3%

46. Accounts receivable
7.1%
7.1%
6.1%
Inventories
5.6%
6.5%
6.1%
Total current assets
37.2%
74.5%
70.3%
Net plant and equipment
62.8%
25.5%
29.7%

47. Total assets
100.0%
100.0%
100.0%
Liabilities and equity
Accounts payable
12.6%
5.6%
6.0%

48. Notes payable
0.4%
0.0%
0.0%
Accruals
2.3%
9.7%
10.7%
Total current liabilities
15.3%
15.2%
16.7%
Long-term bonds
61.1%
9.5%
8.6%

49. Total liabilities
76.4%
24.7%
25.3%
Preferred stock
0.0%
0.0%
0.0%
Total common equity
23.6%
75.3%
74.7%
Total liabilities and equity
100.0%
100.0%
100.0%

50. PERCENT CHANGE ANALYSIS
In percent change analysis, all items are divided by the that
item's value in the beginning, or base, year.

51. Figure 3-4
Income Statement Percent Change Analysis
Base year =
2012
Percent Change in
2013

52. Net sales
7.1%
Operating costs
8.4%
Earnings before interest, taxes, depr. & amort. (EBITDA)
(0.0%)
Depreciation and amortization
0.0%

53. Earnings before interest and taxes (EBIT)
(0.0%)
Less interest
(8.6%)
Earnings before taxes (EBT)
(0.2%)
Taxes (15.0%, 12.4%)
20.9%
Net income before preferred dividends

54. (3.2%)
Preferred dividends
0.0%
Net income available to common stockholders
(3.2%)

55. Balance Sheet Percent Change Analysis (not in textbook)
Base year =
2012
Percent Change in
2013
Assets

56. Cash and equivalents
18.1%
Short-term investments
21.7%
Accounts receivable
35.1%
Inventories
23.3%

57. Total current assets
22.3%
Net plant and equipment
-0.6%
Total assets
15.5%
Liabilities and equity

58. Accounts payable
6.4%
Notes payable
0.0%
Accruals
4.2%
Total current liabilities

59. 5.0%
Long-term bonds
27.5%
Total liabilities
12.6%
Preferred stock (2,00,000 shares: none issued)
0.0%
Common stock (616,756,134 shares oustanding 2013 and
612,191,412 outstanding in 2012
2.9%

60. Retained earnings
18.9%
Total common equity
16.5%
Total liabilities and equity
15.5%

61. DU PONT ANALYSIS (Section 3.8)
ROE
=
(Profit margin)
(TA turnover)
(Equity Multiplier)
Nvidia
2013
11.65%
13.14%
0.67

62. 1.33
Nvidia
2012
14.02%
14.53%
0.72
1.34
Industry Average
20.72%
19.96%
0.63
1.65