LIQUIDITY RATIOS :

1. Current Ratio: The current ratio is the ratio of current assets to the current liabilities .It is
calculated by dividing current assets by current liabilities.

Current Ratio = Current Assets / Current Liabilities

YEAR CURRENT ASSETS CURRENT LIABILITIES RATIO

1. 2016 106,869 79,006 1.35
2. 2017 128,645 100,814 1.28
3. 2018 131,339 116,866 1.12
4. 2019 162,819 105,718 1.54

180,000

160,000

140,000

120,000

100,000
CURRENT ASSETS
80,000 CURRENT LIABILITIES

60,000

40,000

20,000

0
2016 2017 2018 2019

INTERPRETATION:

As a conventional rule , the current ratio of 2:1 or more is considered satisfactory.

The current ratio of Apple inc. for the year 2016 is 1.35 and for the year 2017 , the current ratio
has gone down to 1.28 . And from year 2018 the current ratio went further down to 1.12. On the
other hand , in the year 2019, the current year went up to 1.54. Current ratio was the highest in
the year 2019 which means that the company has more than adequate funds to pay off its
liabilities. The current ratio was the lowest in the year 2018, which means that compared to the
other years Apple did not have adequate funds to pay off its debts in the year 2018.
2) Quick Ratio:- It is the ratio between quick or liquid assets & liquid
liabilities. It is a measurement of a company‘s ability to pay off its current liabilities

Quick Ratio = Liquid Assets / Liquid Liabilities

Liquid Assets = Current Assets – Stock & Prepaid Expenses

Liquid Liabilities = Current Liabilities – Bank Overdraft

YEAR LIQUID ASSETS LIQUID LIABILITIES RATIO

1. 2016 1,04,737 79,006 1.33
2. 2017 123790 100,814 1.23
3. 2018 127383 116,866 1.09
4. 2019 158713 105,718 1.50

180000

160000

140000

120000

100000
LIQUID ASSETS
80000 LIQUID LIABILITIES

60000

40000

20000

0
2016 2017 2018 2019

INTERPRETATION:

It is the general rule that a quick ratio of 1:1 is considered to represent a satisfactory
Current financial condition of the company. The quick ratio of the company has fluctuated
through the 4 years. In the year 2016, the quick ratio was 1.33, from which it has gone down to
1.23 in the year 2017.And in the year 2018 the ratio has gone further down to 1.09 which is the
lowest it has been in the four years. The quick ratio for Apple inc was the highest in the year
2019 which means that the company’s liquidity and overall financial health was the strongest in
the year 2019. In comparison the liquidity was the lowest in 2018 and it is more likely that the
company struggled with paying off its debts in that particular year
ACTIVITY RATIOS

1. Inventory Turnover Ratio: This ratio is used for measuring the profitability. It is computed
by dividing the Net sales by average inventory. This ratio is a measure of working capital
efficiency.

Inventory Turnover Ratio = Cost of goods sold / Average inventory

Cost of goods sold = O/S + Purchases + Direct Exp – C/S

Avg. Inventory = Opening Stock + Closing Stock

2

YEAR COST OF GOODS SOLD AVERAGE INVENTORY RATIOS

1. 2016 131,376 2241 58.62
2. 2017 141,048 3494 40.36
3. 2018 163,756 4406 37.17
4. 2019 161,782 4031 40.13

180,000

160,000

140,000

120,000

100,000
COST OF GOODS SOLD
80,000 AVERAGE INVENTORY

60,000

40,000

20,000

0
2016 2017 2018 2019

INTERPRETATION:

The inventory turnover ratio was 58.62 in the year 2016. Apple inc experienced a major
drop in its inventory turnover ratio in the year 2017 and a further decline to 37.17 in the year
2018. In the year 2019 the inventory turnover ratio gradually increased to 40.13. This implies
that sales was the highest in the year 2016 and in the years after that apple inc experiences a
major decline in sales. This could be due to the onset of new competitors or new improved
versions of products in the market.

2. Net Assets Turnover Ratio:- Net assets is also called capital employed. It is calculated by
dividing net assets divide by net sales

Net Assets Turnover Ratio = Net Sales / average total assets

YEAR NET SALES AVG. TOTAL ASSETS RATIO

1. 2016 215,639 306,016 0.70
2. 2017 229,234 348,503 0.70
3. 2018 265,595 370,522 0.70
4. 2019 260,174 352121 0.74

400,000

350,000

300,000

250,000

200,000 NET SALES

AVG. TOTAL ASSETS
150,000

100,000

50,000

0
2016 2017 2018 2019

INTERPRETATION:

The asset turnover ratio indicates how well the company uses all of its assets in order to
generate revenues. In the case of apple inc , its asset turnover ratio has been consistent through
all the four years. A high turnover ratio is usually preferred.
3. Working Capital Turnover Ratio:- It may computed working turnover by dividing net sales
by the net working capital.

Working Capital Turnover Ratio = Net Sales / Net working Capital

Net Sales = Sales – Sales Return

Net Working Capital = Current Assets – Current Liabilities

YEAR NET SALES NET WORKING CAPITAL RATIO

1. 2016 215,639 27863 7.73
2. 2017 229,234 27831 8.23
3. 2018 265,595 14473 18.35
4. 2019 260,174 57101 4.6

300,000

250,000

200,000

150,000 NET SALES

NET WORKING CAPITAL

100,000

50,000

0
2016 2017 2018 2019

INTERPRETATION:

The net working capital ratio was below 10 in the first two years and had a major jump in
the year 2018 to 18.35 . This means that in the year 2018 , the company in question was
operating smoothly and there was no requirement for additional funds. But in the year 2019, the
working capital turnover ratio had a major drop to 4.6 which could mean that company in that
year was very much dependent on many accounts receivable and inventory in order to support
their sales. This could lead to excessive debts or bad debts or obsolete inventory.
SOLVENCY RATIOS

1. Debt to equity ratio: A ratio that measures the level of the debt relative to the book value of
common equity plus the absolute value of treasury stock.

YEAR TOTAL DEBT EQUITY RATIO

1. 2016 87032 128,249 0.68
2. 2017 115,680 134,047 0.86
3. 2018 114,483 107,147 1.07
4 2019 108,047 90,488 1.20

160000

140000

120000

100000

80000 TOTAL DEBT

EQUITY
60000

40000

20000

0
2016 2017 2018 2019

INTERPRETATION:

The debt to equity ratio for the year 2016 was 0.68 which is less than 1 and indicates that in that
year there was a lower level of financing through debts in comparison to funding through equity.
After 2016 the ratio continuously rose to 1.20 in the year 2019. This indicates that in the ;sat
three years the company was financed heavily by debts in comparison to equity.

2. Total Debt Ratio: The ratio represents contribution of the outside fund in the total assets of a
company.

Total Debt Ratio = Total Debt / Total Assets *100

Total debt = Long term debt

Total Assets = Fixed Assets + Current Assets

 YEAR TOTAL DEBT TOTAL ASSETS RATIO
1. 2016 87032 321,686 0.27
2. 2017 115,680 375,319 0.31
3. 2018 114,483 365,725 0.31
4 2019 108,047 338,516 0.32

400000

350000

300000

250000

200000 TOTAL DEBT

TOTAL ASSETS
150000

100000

50000

0
2016 2017 2018 2019

INTERPRETATION:

It is a general rule that a lower debt ratio is better than a high debt ratio. A low debt ratio
means that the company has a greater credit worthiness and it also indicates low risk. Whereas a
high debt ratio indicates that the company is highly dependent on debts . A debt ratio below 0.5
indicates that the company is financed through equity and not debt. According to the above
table, all the dour years show a debt ratio of below 0.5 which means that in all the four years the
company was financed by equity and not debt.

3. Proprietary Ratio:- The Ratio indicates the relationship between proprietary funds & total
assets.

Proprietary Ratio = Proprietor’s fund / Total Assets

Proprietor’s fund = Share Capital + Reserves & Surplus.

Total Assets = Current assets + Fixed Assets

YEAR Proprietors fund Total assets RATIO

1. 2016 128,249 321,686 0.40
2. 2017 134,047 375,319 0.36
3. 2018 130,743 365,725 0.36
4. 2019 90488 338,516 0.27

400,000

350,000

300,000

250,000

200,000 Proprietors fund

Total assets
150,000

100,000

50,000

0
2016 2017 2018 2019

INTERPRETATION:

A high proprietors ratio indicates that the company is a good financial position and therefore
have greater security to creditors. A low proprietors ratio indicates that the company is heavily
dependent on debts and not equity. In the case of Apple inc , the proprietors ratio is less in all the
four years meaning that the company is heavily dependent on debts.

4. Interest coverage Ratio:- This Ratio measures the debt-servicing capacity of a firm in so for
as fixed interest on long term loan is concerned.
Interest Coverage Ratio = EBIT / Interest

YEAR GROSS PROFIT NET SALES RATIO

1. 2016 84263 215639 39.1%
2. 2017 88186 229234 38.4%
3. 2018 101839 265595 38.34%
4 2019 98392 260174 37.81%

INTERPRETATION:

Interest coverage ratio is measuring of solvency of the firm in paying the interest. The
interest coverage ratio has been fluctuating every year. In the year 2016, the interest coverage
ratio was 4.12. This ratio then went down to 2.63 in the following year which is 2017. In the year
2018 , the interest coverage ratio went further down to 2.20 and the next year ,2019 the ratio
went further down to 1.78. A low interest coverage ratio means that it will become difficult for
the company to service the debt , meaning that the company will go into bankruptcy soon. On the
other hand, when the interest coverage ratio is high like in the year 2016, it indicates that there is
sufficient profits to service the company's debts and it could also mean that the said company is
not utilizing its debts properly.

4)PROFITABILITY RATIOS:

1. Gross profit ratio: Gross profit margin is a ratio that indicates the performance of a company's
sales and the company’s production. This ratio is prepared by accounting for the cost of goods
sold and the total revenue.

Gross Profit Ratio = Gross profit / Net Sales *100

Net Sales = Sales – Sales Return

YEAR GROSS NET SALES RATIO

PROFIT
1. 2016 84263 215639 39.1%
2. 2017 88186 229234 38.4%
3. 2018 101839 265595 38.34%
4 2019 98392 260174 37.81%
 300000

250000

200000

150000 GROSS PROFIT

NET SALES

100000

50000

0
2016 2017 2018 2019

INTERPRETATION:

A gross profit is a good indicator of the financial health of a company. A high gross
profit ratio indicates that the company can make reasonable profit on sales provided it keeps it
overhead costs under control. In the year 2016 , the gross profit ratio was 39.1% which went
down to 38.4% in the year 2017. The gross profit ratio gradually decreased in the year 2018 and
the year 2019 to 38.34% and 37.81% respectively.

2. OPERATING PROFIT RATIO: This ratio shows the relationship between operating profit
and sales. It is calculated by dividing operating profit by the revenue of the company.

Operating Profit Ratio= Operating Profit / Net Sales *100

Net Sales = Sales – Sales Return

Operating profit = Gross profit - Operating Expenses

OR

Operating profit = Net sales - Operating cost

 YEAR OPERATING NET SALES RATIO
PROFIT
1. 2016 60024 215639 28%
2. 2017 61344 229234 26.76%
3. 2018 70898 265595 26.6%
4 2019 63930 260174 24.5%

300000

250000

200000

150000 OPERATING PROFIT

NET SALES

100000

50000

0
2016 2017 2018 2019

INTERPRETATION:

When a company's operating profit is high , it indicates that the company is being well
managed. On the other hand , a low operating profit margin indicates that there might be
operational flaws or resources may be managed improperly. The operating profit ratio for Apple
Inc have been consistently going down from the year 2016 to the year 2019 which indicates that
the company has not been managing resources very efficiently.

3)Net profit margin:

Net profit margin the ratio of net profits to revenue of a company. The net profit margin shows
how much of each dollar in revenue collected by a company translates into profit.

Net Profit Margin = Net Profit / Net sales *100

Net profit = profit after tax

Net Sales = Sales – Sales Return

YEAR NET PROFIT NET SALES RATIO

1. 2016 61,372 215639 28.46
2. 2017 64,089 229234 27.95
3. 2018 72,903 265595 27.44
4 2019 65,737 260174 25.26

300,000

250,000

200,000

150,000 NET PROFIT

NET SALES

100,000

50,000

0
2016 2017 2018 2019

INTERPRETATION:

It can be inferred that the net profit ratio shows a declining trend. No trend can be
observed in both the net sales and the net profit. Therefore projection based on the above data
may not represent the actual sales and profit scenario.

4)Return on capital employed:

It is the indicator of relationship between operating profit & capital employed

Return on Capital Employed= Operating Profit / Capital Employed *100

Operating profit = Net sales – Operating Expenses

Capital Employed = Net Working Capital + Fixed Assets

YEAR OPERATING CAPITAL RATIO

PROFIT EMPLOYED
1. 2016 60024 128249 0.47
2. 2017 61344 134047 0.46
3. 2018 70898 107147 0.66
4 2019 63930 90488 0.71

160000

140000

120000

100000

80000 OPERATING PROFIT

CAPITAL EMPLOYED
60000

40000

20000

0
2016 2017 2018 2019

INTERPRETATION:

As can be seen, the capital employed has yielded better results as the years progress
implying better employment of capital. In the year 2018, it can be observed that even though the
capital employed has decreased, the proportion of increase in operating profits is higher.

5) Return in shareholder's Equity:

In this ratio profitability measures by dividing the net profit after taxes by the shareholders fund.

Return on Shareholder Equity = Net Profit / Shareholders fund *100

Net Profit = Profit after tax

Shareholder fund = Share capital

YEAR OPERATING CAPITAL RATIO

PROFIT EMPLOYED
1. 2016 60024 128249 47
2. 2017 61344 134047 46
3. 2018 70898 107147 66
4 2019 63930 90488 71

INTERPRETATION:

A low return on shareholder's equity ratio indicates that the company could be
mismanaged and could be reinvesting earnings into very unproductive assets which could lead a
loss for the company. On the other hand , a high return on shareholder's equity indicates that the
management believes that there are adequate and enough opportunities for investing in order to
generate a solid return to shareholders. The return in shareholder's equity was 47% in the year
2016 which went down to 46% in the next year and then in the year 2018 the return on
shareholders' equity increased to 66% and the went to an all time high in the year 2019 at 71%.
 SUMMARY OF THE RATIOS:

Particulars 2016-17 2017-18 2018-19 2019-20

1.Liquidity Ratios

Current Ratio 1.35 1.28 1.12 1.54

Quick Ratio 1.33 1.23 1.09 1.50

2.Leverage Ratios

Total Debt ratio 0.27 0.31 0.31 0.32

Debt – Equity Ratio 0.68 0.86 1.07 1.20

Proprietary Ratio 0.40 0.36 0.36 0.27

Interest coverage ratio 4.12 2.63 2.20 1.78

3.Turnover ratios

Inventory turnover ratio 58.62 40.36 37.17 40.13

Net assets turnover ratio 0.70 0.70 0.70 0.74

Working capital turnover ratio 7.73 8.23 18.35 4.6

Profitability ratios

Gross profit ratio 39.1 38.4 38.34 37.81

Operating profit ratio 28 26.76 26.6 24.5

Net profit ratio 28.46 27.95 27.44 25.26

Return on capital employed 0.47 0.46 0.66 0.71

Return on shareholders' equity

FINDINGS:

1) The current ratio of Apple inc. for the year 2016 is 1.35 and for the year 2017 , the current
ratio has gone down to 1.28 . And from year 2018 the current ratio went further down to 1.12.
On the other hand , in the year 2019, the current year went up to 1.54. Current ratio was the
highest in the year 2019 which means that the company has more than adequate funds to pay off
its liabilities. The current ratio was the lowest in the year 2018, which means that compared to
the other years Apple did not have adequate funds to pay off its debts in the year 2018.

2) The quick ratio of the company has fluctuated through the 4 years. In the year 2016, the quick
ratio was 1.33, from which it has gone down to 1.23 in the year 2017.And in the year 2018 the
ratio has gone further down to 1.09 which is the lowest it has been in the four years. The quick
ratio for Apple inc was the highest in the year 2019 which means that the company’s liquidity
and overall financial health was the strongest in the year 2019. In comparison the liquidity was
the lowest in 2018 and it is more likely that the company struggled with paying off its debts in
that particular year

3) The inventory turnover ratio was 58.62 in the year 2016. Apple inc experienced a major drop
in its inventory turnover ratio in the year 2017 and a further decline to 37.17 in the year 2018. In
the year 2019 the inventory turnover ratio gradually increased to 40.13. This implies that sales
was the highest in the year 2016 and in the years after that apple inc experiences a major decline
in sales. This could be due to the onset of new competitors or new improved versions of products
in the market.

4) The debt to equity ratio for the year 2016 was 0.68 which is less than 1 and indicates that in
that year there was a lower level of financing through debts in comparison to funding through
equity. After 2016 the ratio continuously rose to 1.20 in the year 2019. This indicates that in the
last three years the company was financed heavily by debts in comparison to equity.

5) , all the four years show a debt ratio of below 0.5 which means that in all the four years the
company was financed by equity and not debt.

6) . In the year 2016 , the gross profit ratio was 39.1% which went down to 38.4% in the year
2017. The gross profit ratio gradually decreased in the year 2018 and the year 2019 to 38.34%
and 37.81% respectively

7) The operating profit ratio for Apple Inc have been consistently going down from the year 2016
to the year 2019 which indicates that the company has not been managing resources very
efficiently.

8) , the capital employed has yielded better results as the years progress implying better
employment of capital. In the year 2018, it can be observed that even though the capital
employed has decreased, the proportion of increase in operating profits is higher.
 SUGGESTIONS
From the study, it is found that the management must improve the current ratio by
lowering the current liabilities. The gross profit ratios and net profit ratios calculated shows the
profit margin earned on its manufacturing and trading activities. The lowering net profit ratio
indicates to leave a margin of reasonable compensation to the owners for providing their capital
at risk. The company should avoid using an ineffective cost structure in order to avoid net profit
margin going down consistently. The debtor’s turnover ratio is satisfactory. It means that the
company is efficient in collecting receivables and most likely has a high percentage of customers
who pay off their debts quickly and effectively. Over the past four years the ratio has gradually
increased. Therefore, Apple Inc., should further improve the ratio by collecting deferred dues
well in time by satisfying the customer in terms of performance of the sets supplied by Apple
Inc. The debt to equity ratio is unsatisfactory as it has continuously increased for all for years,
this indicates that that a company has been aggressive in financing its growth with debt. The
gross profit ratio has also not been very satisfactory since it has constantly been fluctuating. To
rectify this the company could reduce the cost of goods sold without changing its selling price, or
it could find lower priced suppliers and raw materials. Apple Inc., also has an unsatisfactory
operating profit ratio. The company could rectify this by reviewing the current pricing strategy.

Finally, after analyzing all ratios of Apple Inc., it is clear that the decrease in profits for
the company is due to the decreasing profitability during the period of four years. Increasing
costs and decreasing sales have resulted in the decline of gross profits and the net profits for
these years. Therefore, the company should try to increase the sales volume by reducing the costs
to increase the profits and improve the profitability position.
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