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Apple Company Analysis

Apple Company Analysis

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Published by Shahzadraees

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Published by: Shahzadraees on May 25, 2010
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Introduction:
I have decided to invest $10,000 in APPLE INC. Apple Inc. and its wholly-ownedsubsidiaries (collectively “Apple” or the “Company”). These companies design,manufacture, and market personal computers, mobile communication devices, andportable digital music and video players and sell a variety of related software,services, peripherals, and networking solutions. The Company sells its productsworldwide through its online stores, its retail stores, its direct sales force, and third-party wholesalers, resellers, and value-added resellers. In addition, the Companysells a variety of third-party Macintosh® (“Mac”), iPhone® and iPod® compatibleproducts, including application software, printers, storage devices, speakers,headphones, and various other accessories and peripherals through its online andretail stores, and digital content and applications through the iTunes Store®. TheCompany sells to consumer, small and mid-sized business (“SMB”), education,enterprise, government and creative customers.I have used financial statements of the year 2009, 2008 and 2007 for the financialanalysis and to develop an understanding about the company’s performance. Myfindings are as follows:
Initial Review:
Initial understanding about the company’s business is developed on the basis of thefollowing of the review of the auditor’s report on company performance andmanagement comments on company’s future planning:1.The auditor’s (Ernst & Young LLP) have expressed an unqualified opinion onthe financial statements of the year 2009. This means that the financial1
 
statements were prepared in their true sense and depict the true picture of the company’s financial performance.2.As per the management discussion and analysis of financial condition &results of the operations, the company is enhancing its product sale throughthe expansion and improvement of its distribution capabilities by opening itsown retail stores in the U.S. and in international markets. The Company had273 stores open as of September 26, 2009. Further, the company has alsoinvested in programs to enhance reseller sales, including the Apple SalesConsultant Program, which places Apple employees and contractors atselected third-party reseller locations, and the Apple Premium ResellerProgram, through which independently run businesses focus on the Appleplatform and provide a high level of customer service and product expertise. The company distributes iPhone in over 80 countries through its directchannel and the company has signed multi-year agreements with variouscellular network carriers authorizing them to distribute and provide cellularnetwork services for iPhones. These agreements are generally not exclusivewith a specific carrier, except in the U.S., Germany, Spain, Ireland and certainother countries.
Financial Analysis
 The financial strength and performance of the company over the last three yearsi.e. 2009, 2008 & 2007 is determined through the following ratios:2
 
Liquidity AnalysisS.No.Detail Working 200920082007
aCurrent Ratio$36,265 / $19,2821.882.292.36bQuick Ratio$36,265 - $455/ $19,2821.862.262.32cCollection period (indays)$3,361 * 365 / $36,537342725dNumber of days sales inending inventory (indays)$455 * 365 / $23,397798 The company is still higly liquid but this liquidity trend is in declinging trend ascurrent ratio 2.36 in 2007 is declined to 2.29 in 2008 and further declined to1.88 in 2009. This decling trend is mainly due to increase in collection period of the sale and decrease in number of day’s sale in ending inventory as depictedabove.
Profitability AnalysisS.No.Detail Working 2009 2008 2007
aGross profit percentage$13,140 / $36,53735.96%34.31%33.97%bOperating income $7,658 / $36,53720.9619.3218.373

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