In partial fulfillment of the requirements in AEC 106

Partnership and Corporation

APPLE INC.

Submitted by:

Jafarien Balindong

Emelyn Hanna Charis B. Eliron

Emmanuel Neri

Mohammad Aslam Sidic

John Yana

Submitted to:

Lucas Lara III

August 30, 2019

A. Brief Background of the Corporation

. Apple Inc., formerly Apple Computer, Inc., is an American manufacturer of

personal computers, computer peripherals, and computer software. It was the first
successful personal computer company and the popularizer of the graphical user
interface whose headquarters is located in Cupertino, California. The company is
committed to bringing the best user experience to its customers through its innovative
hardware, software and services. Apple’s business strategy leverages its unique ability
to design and develop its own operating systems, hardware, application software and
services to provide its customers products and solutions with innovative design, superior
ease-of-use and seamless integration.
Apple Computers, Inc. was founded on April 1, 1976, by Steve Jobs and Steve
Wozniak, who brought to the new company a vision of changing the way people viewed
computers. Jobs and Wozniak wanted to make computers small enough for people to
have them in their homes or offices. Jobs and Wozniak started out building the Apple I in
Jobs' garage and sold them without a monitor, keyboard, or casing (which they decided
to add on in 1977). The Apple II revolutionized the computer industry with the introduction
of the first-ever color graphics.1 Sales jumped from $7.8 million in 1978 to $117 million in
1980, the year Apple went public.
Apple is one of the most successful companies in history. Even during periods in
which the company struggled, it was known for being innovative. In the late 1990s and
early 2000s, Apple began its rise to dominance in a range of technology areas and
established itself as the trendsetter in mobile devices. Almost inseparable from the image
of Apple the company is its founder, Steve Jobs. Jobs became synonymous with the
brand and as famous as the brand itself. He expanded the company into new areas,
including the music industry, and ultimately helped define the modern mobile category.
Today, Apple Inc. has established itself as one of the leaders in the hardware and
software and consumer electronics devices industry and is considered as one of the most
publicly traded companies in the world.
 Below are the company’s Consolidated Balance Sheets and Consolidated
Statement of Shareholders’ Equity which will be the subjects of discussion of this paper.

APPLE INC.

Consolidated Balance Sheets

(In millions, except number of shares which are reflected in thousands and par value)

September 29, September 30,

2018 2017
ASSETS:
Current assets:
Cash and cash equivalents $ 25,913 $ 20,289
Marketable securities 40,388 53,892
Accounts receivable, net 23,186 17,874
Inventories 3,956 4,855
Vendor non-trade receivables 25,809 17,799
Other current assets 12,087 13,936
Total current assets 131,339 128,645

Non-current assets:
Marketable securities 170,799 194,714
Property, plant and equipment, net 41,304 33,783
Other non-current assets 22,283 18,177
Total non-current assets 234,386 246,674
Total assets $ 365,725 $ 375,319

LIABILITIES AND SHAREHODERS’ EQUITY

Current liabilities:
Accounts payable $ 55,888 $ 44,242
Other current liabilities 32,687 30,551
Deferred revenue 7,543 7,548
Commercial paper 11,964 11,977
Term debt 8,784 6,496
Total current liabilities 116,866 100,814

Non-current liabilities:
Deferred revenue 2,797 2,836
Term debt 93,735 97,207
Other non-current liabilities 45,180 40,415
Total non-current liabilities 141,712 140,458
Total liabilities 258,578 241,272

Commitments and contingencies

Shareholders’ equity:
Common stock and additional paid-in capital, $0.00001
par value: 12,600,000 shares authorized; 4,754,986
and 5,126,201 shares issued and outstanding,
respectively 40,201 35,867
Retained earnings 70,400 98,330
Accumulate other comprehensive income/(loss) (3,454) (150)
Total shareholders’ equity 107,147 134,047
Total liabilities and shareholders’ equity $ 365,725 $ 375,319
 APPLE INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In millions, except number of shares which are reflected in thousands and per share
amounts)

Common stock and Accumulated

Additional Paid-in Other Total
Capital Retained Comprehensive Shareholder
Shares Amount Earnings Income/(Loss) s’ Equity
Balances as of Sept. 26, 2015 5,578,753 $ 27,416 $ 92,284 $ (345) $ 119,355
Net income --- --- 45,687 --- 45,687
Other comprehensive
Income/(loss) --- --- --- 979 979
Dividends and dividends
equivalents declared at $2.18
per share or RSU --- --- (12,188) --- (12,188)
Repurchase of common stock (279,609) --- (29,000) --- (29,000)
Share-based compensation --- 4,262 --- --- 4,262
Common stock issued, net of
Shares withheld for
Employees taxes 37,022 (806) (419) --- (1,225)
Tax benefit from equity awards,
Including transfer pricing
adjustments --- 379 --- --- 379
Balances as of Sept. 24, 2016 5,336,166 $ 31,251 $ 96,364 $ 634 $ 128,249
Net income --- --- 48,351 --- 48,351
Other comprehensive
Income/(loss) --- --- --- (784) (784)
Dividends and dividends
equivalents declared at $2.18
per share or RSU --- --- (12,803) --- (12,803)
Repurchase of common stock (246,496) --- (33,001) --- (33,001)
Share-based compensation --- 4,909 --- --- 4,909
Common stock issued, net of
Shares withheld for employees
taxes ,36,531 (913) (581) --- (1,494)
Tax benefit from equity awards,
Including transfer pricing
adjustments --- 620 --- --- 620
Balances as of Sept. 30, 2017 5,126,201 $ 35,867 $ 98,330 $ (150) $ 134,047
Cumulative effect of change in
accounting principle --- --- 278 (278) ---
Net income --- --- 59,531 --- 59,531
Other comprehensive
Income/(loss) --- --- --- (3,026) (3,026)
Dividends and dividends
equivalents declared at $2.18
per share or RSU --- --- (13,735) --- (13,735)
Repurchase of common stock (405,549) --- (73,056) --- (73,056)
Share-based compensation --- 5,443 --- --- 5,443
Common stock issued, net of
Shares withheld for employees
taxes 34,334 (1,109) (948) --- (2,057)
Balances as of Sept. 29, 2018 4,754,986 $ 40,201 $ 70,400 $ (3,454) $ 107,147
B. Discussion on Shareholders’ Equity in the Statement of Financial Position

Shareholders’ equity:
Common stock and additional paid-in capital, $0.00001
par value: 12,600,000 shares authorized; 4,754,986
and 5,126,201 shares issued and outstanding,
respectively 40,201 35,867
Retained earnings 70,400 98,330
Accumulated other comprehensive income/(loss) (3,454) (150)
Total shareholders’ equity 107,147 134,047
Total liabilities and shareholders’ equity $ 365,725 $ 375,319

The table below shows the composition of the share capital of Apple Inc.

Composition of Share Capital

Authorized shares 12,600,000

Shares issued 4,754,986
Outstanding shares 5,126,201

Authorized Share Capital

Authorized share capital is the number of stock units (shares) that a company can
issue as stated in its articles of incorporation. It is usually not fully used by management
to leave room for future issuance of additional stock in case the company needs to raise
capital quickly. As shown in the table above, Apple Inc. has 12,600,000 authorized share
capital as of September 29, 2018.

Issued Share Capital

Issued share capital is the amount of authorized share capital that the company
has issued to its shareholders in order to raise capital. As of September 29, 2018, Apple
Inc. has 4,754,986 shares issued which is clearly stated in its balance sheet.

Outstanding Shares

Outstanding shares refer to a company’s stock currently held by all its

shareholders. In other words, it is the amount of stock on the open market, including
shares held by institutional investors and restricted shares held by insiders and company
officers. Apple Inc. which is considered one of the most publicly traded companies in the
world has 5,126,201 outstanding shares.

Aside from share capital, other line items found in the company’s shareholders’
equity are retained earnings and accumulated other comprehensive income/(loss).
Retained Earnings

Retained earnings is the amount of net income left over for the business after it
has paid out dividends to its shareholders. Apple has $ 98,330 (in millions) retained
earnings last September 30, 2017 which recently decreased to $ 70,400 (in millions) last
September 29, 2018. The decreased in Apple’s retained earnings is caused by the
repurchase of its common stock amounting to $ 73,056 (in millions), shares withheld for
employee taxes $ 948 (in millions) and dividends declared of $ 13,735 (in millions).

Accumulated other comprehensive income/(loss)

Accumulated other comprehensive income/(loss) is used to accumulate unrealized

gains and unrealized losses on those line items in the income statement that are classified
within the other comprehensive income category. The accumulated other comprehensive
income/(loss) of Apple Inc. in 2017 is $ (150) and its loss increased to $ (3,454) in 2018.
This loss is mostly caused by the change in the fair value of Apple’s marketable securities
which is seen in the company’s consolidated statement of comprehensive income.

C. Discussion on Statement of Changes in Equity

Accumulated
Common stock and Other Total
Additional Paid-in Comprehensive Shareholder
Capital Retained Income/(Loss) s’ Equity
Shares Amount
Balances as of Sept. 24, 2016 5,336,166 $ 31,251 $ 96,364 $ 634 $ 128,249
Net income --- --- 48,351 --- 48,351
Other comprehensive
Income/(loss) --- --- --- (784) (784)
Dividends and dividends
equivalents declared at $2.18
per share or RSU --- --- (12,803) --- (12,803)
Repurchase of common stock (246,496) --- (33,001) --- (33,001)
Share-based compensation --- 4,909 --- --- 4,909
Common stock issued, net of
Shares withheld for employees
taxes ,36,531 (913) (581) --- (1,494)
Tax benefit from equity awards,
Including transfer pricing
adjustments --- 620 --- --- 620
Balances as of Sept. 30, 2017 5,126,201 $ 35,867 $ 98,330 $ (150) $ 134,047
Cumulative effect of change in
accounting principle --- --- 278 (278) ---
Net income --- --- 59,531 --- 59,531
Other comprehensive
Income/(loss) --- --- --- (3,026) (3,026)
Dividends and dividends
equivalents declared at $2.18
per share or RSU --- --- (13,735) --- (13,735)
Repurchase of common stock (405,549) --- (73,056) --- (73,056)
Share-based compensation --- 5,443 --- --- 5,443
Common stock issued, net of
Shares withheld for employees
taxes 34,334 (1,109) (948) --- (2,057)
Balances as of Sept. 29, 2018 4,754,986 $ 40,201 $ 70,400 $ (3,454) $ 107,147

Numbers are expressed in millions except for shares which are express in
thousands.
 The net income of Apple Inc. as of September 29, 2018 increased from $ 48,351
in 2017 to $59,531. This shows that the strategy of the company which leverages on the
company’s capability in delivering innovative products to its consumers have succeed.
Especially with the launching of its Iphone X series in 2018 which is very in trend in the
market. The company’s declared dividend in 2018 is $13,735 compared to 2017 declared
dividends of $12,803 resulting in a $932 increase.

In 2018, the company’s line item for changes in shareholders’ equity included a
decrease in accumulated other comprehensive income/(loss) of $278 from the cumulative
effect of change in accounting principle which was balanced out by an increase in retained
earnings by the same amount. The share-based compensation of the company increased
by $534 in 2018 and the net of shares withheld for employees taxes which is deducted
from its retained earnings is increased by $367.

One of the factors that affected the decrease in the retained earnings is the
repurchase of common stock. During 2018, the Company repurchased 405.5 million
shares of its common stock for $73.1 billion in connection with two separate share
repurchase programs. Of the $73.1 billion, $44.0 billion was repurchased under the
Company’s previous share repurchase program of up to $210 billion, thereby completing
that program. On May 1, 2018, the Company announced the Board of Directors had
authorized a new program to repurchase up to $100 billion of the Company’s common
stock. The remaining $29.0 billion repurchased during 2018 was in connection with the
new share repurchase program.

D. Assessment and Recommendation

Are they lacking in terms of capital requirements?

Are they violating any laws on the use and level of their items in the equity?

Are their plans on capital in line with the current level as shown in the
statements?

Capital requirements According to the data found in the financial statements of

the company, it does not in any way, lacking in terms of capital requirement.
E. References

Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the fiscal year ended September 29, 2018. Retrieved from
http://www.annualreports.com/HostedData/AnnualReports/PDF/NASDAQ_AAPL
_2018.pdf