Cash Flow Statement Analysis

Report

Supervised by
Dr. Harit SATT
Advanced Financial and Managerial Accounting (ACC530201), Spring 2023

Hsnaoui Aya, Mohammed Sebti, Mohamed Raghine, Yassine Jaaoune

a
School of Business Administration, Al Akhawayn University in Ifrane, Avenue Hassan II,
P.O. Box 104, 53000 Ifrane, Morocco

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 I. Company overview
Apple is An American multinational
technology firm that creates, produces, and
distributes computer software, consumer
devices, and internet services. The business is
based in Cupertino, California, and was
established by Steve Jobs, Steve Wozniak,
and Ronald Wayne in April 1976.
The iPhone, iPad, Mac, Apple Watch, and
breakthrough software like iOS, macOS, and iTunes are among Apple's best-known products.
The corporation also provides a number of internet services, such as Apple Pay, iCloud, the
App Store, and Apple Music.
Apple is renowned for its user-friendly interface, clean, minimalist design, and strong brand
identification. The business is one of the most valued in the world and has a devoted customer
base. With a market value of nearly $2 trillion as of September 2021, Apple was the most
valuable publicly traded corporation in the entire world.
Apple has recently concentrated on sustainability initiatives, using renewable energy sources
and lowering its carbon footprint, among other things.
Overall, Apple is a leader in the technology sector when it comes to innovation, consistently
pushing the envelope with its cutting-edge goods and services.

Apple compiles its consolidated results in

accordance with US GAAP, but it also prepares and

submits local entity statutory financial statements in

a number of countries worldwide. Many of these

local statutory filings are compliant with IFRS.

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 II. Cash flow analysis
Operating Activities:
In 2022, the operating activities for Apple are equal to $122.151 (In millions) which is greater
than in 2021 ($104.038). Having this growth in one year can give a great indicator to show the
good performance of the company.
Apple’s annual net income for 2022 was $99.803B, a 5.41% increase from 2021
Positive (and growing) cash flow from operating activities indicates that the company's core
business activities are thriving. It serves as an additional measure/indicator of a company's
profitability potential, in addition to traditional ones such as net income or EBITDA.
The following bullets represent the percentage that each account represents from the subtotal
of the whole category:
 Net Income represents (99803/122151) * 100% = 81.7% of Cash Flow from
Operating Activities.
 Total Depreciation and Amortization – Cash Flow represents (11104/122151) *
100% = 9.1% of Cash Flow from Operating Activities.
 Other Non-Cash Items represents (10044/122151) * 100% = 8.2% of Cash Flow
from Operating Activities.
 Total Non-Cash Items represents (21148/122151) * 100% = 17.3% of Cash Flow
from Operating Activities.
 Change in Accounts Receivable represents (-1823/122151) * 100% = -1.5% of Cash
Flow from Operating Activities.
 Change in Inventories represents (1484/122151) * 100% = 1.2% of Cash Flow from
Operating Activities.
 Change in Account Payable represents (9448/122151) * 100% = 7.7% of Cash Flow
from Operating Activities.
 Change in Assets/Liabilities represents (-7909/122151) * 100% = -6.5% of Cash
Flow from Operating Activities.
 Total Change in Assets/Liabilities represents (1200/122151) * 100% = 1.0% of Cash
Flow from Operating Activities.

Investing Activities

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1. Property and equipment represent 47.9% of the net cash outflow from investing activities.
2. Acquisitions of companies and divestitures represent 1.37% of the net cash outflow from
investing activities.
3. Purchases on short-term and long-term investments both represent 42.8%of the Net cash
outflow from investing activities.
4. Other investing activities represent 7.96% of Net cash Inflow from investing activities.
The following bullets represent the percentage that each account represents from the subtotal
of the whole category:
 Net Change in Property, Plant, And Equipment = $ (10708)
Percentage = (Net Change in Property, Plant, And Equipment / Cash Flow from Investing
Activities) x 100
Percentage = (10708 / 22354) x 100
Percentage = 47.92%
 Net Change in Intangible Assets: Percentage = 0%
 Net Acquisitions/Divestitures = $ (306)

Percentage = (Net Acquisitions/Divestitures / Cash Flow from Investing Activities) x 100

Percentage = (306 / 22354) x 100
Percentage = 1.37%
 Net Change in Short-term Investments = $ (9560)
Percentage = (Net Change in Short-term Investments / Cash Flow from Investing Activities) x
100
Percentage = (9560 / 22354) x 100
Percentage = 42.81%
 Net Change in Long-term Investments : Percentage = 0%
 Net Change in Investment – Total = $ (9560)

Percentage = (Net Change in Investment – Total / Cash Flow from Investing Activities) x 100
Percentage = (9560 / 22354) x 100
Percentage = 42.81%
 Investing Activities – Other = $ (1780)
Percentage = (Investing Activities – Other / Cash Flow from Investing Activities) x 100
Percentage = (1780 / 22354) x 100

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Percentage = 7.96%
Financing Activities

The financing activities illustrate the cash flows used to fund the company Apple and its
capital to repay investors. The following bullets represent the percentage that each account
represents from the subtotal of the whole category:

 Net Long-term Debt percentage = (4078 / 110749) x 100% ≈ -3.68%

 Net Current Debt percentage = (3955 / 110749) x 100% ≈ 3.57%
 Debt Issuance/Retirement Net – Total percentage = (123 / 110749) x 100% ≈ -
0.11%
 Net Common Equity Issued/Repurchased percentage = (89402 / 110749) x 100% ≈
-80.74%
 Net Total Equity Issued/Repurchased percentage = (89402 / 110749) x 100% ≈ -
80.74%
 Total Common and Preferred Stock Dividends Paid percentage = (14841 /
110749) x 100% ≈ -13.41%
 Financial Activities – Other percentage = (6383 / 110749) x 100% ≈ -5.77%

Note that the percentages for the debt and equity accounts are negative because these accounts
represent a reduction in cash flow, while the percentages for the dividends and financial
activities accounts are also negative because these accounts represent cash outflows.

Percentages of each type of the categories

1. Percentage of Cash Flow from Operating Activities:

Cash Flow from Operating Activities / Net Income

= 122151 / 99803
= 1.224
2. Percentage of Cash Flow from Investing Activities:
Cash Flow from Investing Activities / Net Income
= -22354 / 99803
= -0.224

3. Percentage of Cash Flow from Financing Activities:

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Cash Flow from Financing Activities / Net Income
= -110749 / 99803
= -1.109
 To get the average percentage of all three categories, we add up the three percentages
and divide by three:
Average Percentage = (1.224 - 0.224 - 1.109) / 3= -0.036
Therefore, the average percentage of all three categories and our benchmark is - 0.036 or
-3.6%.
Comparing the percentages:
To compare the percentage that each account from each category represents to our benchmark
(-3.6%), we would need to calculate the percentage difference between the benchmark and
each category's percentage. A positive percentage difference indicates that the account's
percentage is higher than the benchmark, while a negative percentage difference indicates that
the account's percentage is lower than the benchmark. Here are the calculations:
1. Cash Flow from Operating Activities:
Percentage difference = (1.224 - (-3.6%)) / abs(-3.6%)
= 134.44% Result: >

2. Cash Flow from Investing Activities:

Percentage difference = (-0.224 - (-3.6%)) / abs(-3.6%)
= 93.78% Result: >

3. Cash Flow from Financing Activities:

Percentage difference = (-1.109 - (-3.6%)) / abs(-3.6%)
= 69.17% Result: >
Based on these calculations, all three categories have percentages that are higher than the
benchmark of -3.6%. This indicates that the company has a strong cash flow position relative
to the benchmark, particularly in its operating and investing activities.

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Benchmark of the company
For Apple.inc benchmark, we’ll use the internal method which consists of comparing the old
data to the latest.
 Cash flow percentage for 2021: 17,1284 %
 Cash flow percentage for 2022: 19,856 %
In 2021, the cash flow was reported at 17,1284%; whereas in 2022, it rose to 19,856%. This is
a good trend for our business because it shows that during the past year, we were able to
manage our cash flow better. This can be linked to the adoption of efficient company
practices and financial strategies, which enhance income and improve expense control.
To make sure we stay on the path of development and success, we will continue to track and
evaluate our financial performance using internal benchmarking.

Future perspective:

Apple is faced with a variety of risks and uncertainties that might affect its operations and
financial results, including the following:

Long development cycles, delays, and testing challenges can all occur while developing new
products and technology. Product delays or problems in creating new products may have an
adverse effect on our bottom line.

Cyberattacks and security breaches might lead to lower earnings, more costs, and harm to
Apple's reputation and competitiveness. To avoid such complex and elaborate attacks, the
organization's security measures must be constantly updated.

As a result of competitive constraints, such as antitrust actions, intellectual property problems,

or privacy concerns, Apple may face legal and regulatory challenges.

These actions might result in financial penalties, legal expenses, and restrictions on Apple's
ability to operate.

The organization's ability to attract and retain exceptional employees, as well as maintain
strong relationships with suppliers and other business partners, is vital to its success. Any
disruptions to these connections might harm Apple's operations and financial performance.

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Appendix A

Cash Flow statement

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Dividend history

FY2021: Issued $14 billion in bonds with

maturities ranging from 5 to 40 years.
FY2020: Issued $8.5 billion in bonds with
maturities ranging from 5 to 40 years.
FY2019: Issued $7 billion in bonds with
maturities ranging from 3 to 30 years.
FY2018: Issued $7 billion in bonds with
maturities ranging from 3 to 30 years

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References:
www.macrotrends.net
www.apple.com
www.marketwatch.com
www.investing.com

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