Analysis Report Basic Accounting (FNBE 0145)

Lim Zhen Wei (0313830)

Thean Hai Xu (0313489)

CONTENT PAGES

1.Company Background and Recent Development

2.Ratio Calculation Profitability Financial Stability Price/ Earnings Ratio

3.Interpretation on the Ratio Results Profitability Financial Stability Price/ Earnings Ratio

4.Investment Recommendation

5.Company Financial P&L Statement Balance Sheet Cash Flow Statement Revenue & Earning Per Share

6.References

1.Company Background

Apple Inc. is an American multinational corporation. This company was founded as a

partnership on April 1, 1976, headquartered in Cupertino, California. Steve Jobs,

Steve Wozniak and Ronald Waynethat are the great founders of this company.

Apple designed and introduced innovations in mobile phones, personal computer

and portable music players and achieved widespread success with its product for

example iPhone, iPod Touch and iPad.

On January 3, 1977, Apple was incorporated January, without Ronald Wayne, who

sold his share of the company back to Steve Jobs and Steve Wozniak for $800.

Multi-millionaire Mike Markkula provided essential business expertise and funding of

$250,000 during the incorporation of Apple.

In addition, Apple Inc. is the world's third-largest mobile phone maker after Samsung

and Nokia. Fortune magazine had noted Apple is the most admired company in the

United States in 2008, and in the world from 2008 to 2012. On September 30, 2013,

Apple surpassed Coca-Cola to become the world's most valuable brand in the

Omnicom Group's "Best Global Brands" report. However, the company has received

many criticisms for its contractors' labour practices, and for Apple's own

environmental and business practices.

As of May 2013, Apple maintains around four hundred retail stores in fourteen

countries as well as the online Apple Store and iTunes Store, the world's largest

music retailer. Apple is the largest publicly traded corporation in the world by market

capitalization, with an estimated value of US$415 billion as of March 2013. As of

Sept 29 2012, the company had 72,800 permanent full-time employees and 3,300

temporary full-time employees worldwide.

Recent Development

On September 17, 2013, Apple Inc. announced that iPhone 5s and iPhone 5c will be

available to customers on September 20 at Apple retail stores and Apple Online

Store (www.apple.com). iPhone 5s and iPhone 5c will be available in the US,

Australia, Canada, China, France, Germany, Hong Kong, Japan, Puerto Rico,

Singapore and the UK. It will be released in 25 additional countries on October 25,

2013, and in 12 countries on November 1, 2013.

On September 24, 2013, Apple Inc. updated its iMac product lines with fourth

generation Intel quad-core processors, new graphics, next generation Wi-Fi and

faster PCIe flash storage options.

On October 22, 2013, Apple introduced the iPad Air (5th generation) and a new iPad Mini

with Retina Display. Both devices will go on sale on November 1, 2013, for $499 and $399

respectively. It also introduced the new line of Macbook products and the newly redesigned

Mac Pro.

RATIO CALCULATION

2.Profitability Ratios

2012 2013ROE = Net Profit

x 100%= Net Profit

x 100%Return on Equity Average of O/E Average of O/E

= 41733000

x100%= 37037000

x100%(76615000+118210000) 2

(118210000+123549000) 2

= 42.8% = 30.6%

NPM = Net Profitx100%

= Net Profitx100%

Net Profit Margin Net Sales Net Sales

= 41733000x100%

= 37037000 x100%

156508000 170910000

= 26.7% = 21.7%

GPM = Gross Profitx100%

= Gross Profitx100%

Gross Profit Margin Net Sales Net Sales

= 68662000x100%

= 64304000

156508000 170910000 x100%

= 43.9% = 37.6%

SER = Total Selling Exp.x100%

= Total Selling Exp.x100%

Selling Exp.Ratio Net Sales Net Sales

= 910000x100%

= 1291000

156508000 170910000 x100%

= 0.58% = 0.76%

GER = Total General Exp.x100%

= Total General Exp.x100%

General Exp. Ratio Net Sales Net Sales

= 9130000x100%

= 9539000

156508000 170910000 x100%

= 5.8% = 5.6%

FER = Total Financial Exp.x100%

= Total Financial Exp.x100%

Financial Exp. Ratio Net Sales Net Sales

= 0 0 x100%

= 0 0

156508000 170910000 x100%

= 0% = 0%

Financial Stability Ratios

2012 2013

Working Capital = Total Current Asset = Total Current Asset

Total Current liabilities Total Current liabilities

= 57653000 = 73286000

38542000 43658000

= 1.50 : 1 = 1.68:1

Total Debt = Total liabilitiesx100%

= Total liabilitiesx100%

Total Assets Total Assets

= 57854000x100%

= 83451000x100%

176064000 207000000

= 32.9% = 40.3%

IT = 365 days = 365 days

Stock Turnover (COGS/Average Inventory) (COGS/Average Inventory)

= 365 days = 365 days

(87846000/783500) (106606000/1277500)

= 3.3days = 4.4days

DT = 365 days = 365 days

Debtor Turnover (Credit sales/ Average Debtors) (Credit sales/ Average Debtors)

= 365 days = 365 days

(156508000/17503000)(170910000/22684500)

= 40.8days = 48.5days

IC = Interest Expense + Net Profit = Interest Expense + Net Profit

Interest Coverage Interest Expense Interest Expense

= 0+41733000 = 0+37037000

0 0

= 0 times = 0 times

P/E Ratio:

*Price/Earnings Ratio = Current Share Price/ Earnings per Share

2013 November 20

Price/Earnings Ratio = 518.629/39.75= 13.05 times

INTERPRETION OF RATIO RESULTS

3. Interpretation on Profitability Ratios

Return on Equity (ROE)

During the 2012-2013 periods, the ROE has decreased from 42.8% to 30.6%.

This means that the owner is getting less return on his capital.

Net Profit Margin (NPM)

During the 2012-2013 periods, the NPM has decreased from 26.7% to 21.7%.

This means that the owner is getting less profit from the sales.

Gross Profit Margin (GPM)

During the 2012-2013 periods, the GPM has decreased from 43.9% to 37.6 %.

This means that the ability of the business to control its cost of goods sold is

getting worse.

Selling Expense Ratio (SER)

During the 2012-2013 periods, the SER has increased from 0.58% to 0.76%.

This means that the business is getting worse at controlling its selling expenses.

General Expense Ratio (GER)

During the 2012-2013 periods, the GER has decreased from 5.8% to 5.6%. This

means that the business is getting better at controlling its general expenses.

Financial Expense Ratio (FER)

During the 2012-2013 periods, the FER has remained unchanged from 0% to

0%. This means that the business is doing very well at controlling financial

expense.

Interpretation on Financial Stability Ratios

Working Capital

During the 2012-2013 periods, the working capital has increased from 1.50:1 to

1.68:1. This means that the business ability to pay the current asset is getting

better. In addition, it does not have the minimum 2:1 ratio so it will experience

difficulty in repaying its current liabilities.

Total Debt

During the 201-2013 periods, the total debt has increased from 32.9% to 40.3%.

This means that the business has more debt on its balance sheet. In addition, it

is still below the maximum 50% limit.

Stock Turnover

During the 2012-2013 periods, the stock turnover has increased from 3.3 days to

4.4 days. This mean the business sell the inventory slower so that it can

generate more cash to pay off its liabilities.

Debtor Turnover

During the 2012-2013 periods, the debtor turnover has increased from 40.8 days

to 48.5 days. This means the debtors are taking a longer time to pay off the debt.

Interest Coverage

During the 2012-2013 periods, the interest coverage has remained unchanged

from 0 times to 0 times. This means the business does not have any interest

expenses. In addition, it now satisfied the minimum ratio of 5 times so it is less

likely to bankrupt.

Interpretation on Price/Earnings Ratio

Price/Earnings Ratio

The company’s price/earnings ratio is 13.05. P/E of 13.05 means that an investor

will need to wait for 13 years to recoup his investment and claim back his original

principal.

INVESTMENT RECOMODATION

4. Investment Recommendation

Apple Inc. demonstrated good profitability and strong financial stability, and its

shares are available at a cheap price – P/E of 13.05 – to warrant an investment.

In our opinion, we think that Apple Inc.at 2013 is not that profitable and stable

as compared to the year 2012. Some of the factors contributed to this may be due to

problems of selling or controlling expenses, or maybe some unwanted accidents

happened that made the company not so profitable at the year. However, we still

think that it would be a wise choice to invest in the company.

According to the ratio calculations above, in terms of the profitability ratios, the

company is better at controlling its general expenses in the year 2013 compared to

last year. In terms of financial expenses, the financial expense remained no change.

The company is doing extremely well at controlling its financial expenses.

Another factor that Apple Inc. is recommended to be invested is because of

the company’s strong financial stability. The total debt for the company is still below

the recommended 50%. The company also satisfy the minimum ratio of 5 times for

interest coverage. It is less likely for the company to bankrupt.

COMPANY FINANCIAL

(2012-2013)

P&L Statement

Get Quarterly Data

Period Ending: Trend 9/28/2013 9/29/2012

Total Revenue $170,910,000 $156,508,000

Cost of Revenue $106,606,000 $87,846,000

Gross Profit $64,304,000 $68,662,000

Operating Expenses

Research and Development $4,475,000 $3,381,000

Sales, General and Admin. $10,830,000 $10,040,000

Non-Recurring Items $0 $0

Other Operating Items $0 $0

Operating Income $48,999,000 $55,241,000

Add'l income/expense items $1,156,000 $522,000

Earnings Before Interest and Tax $50,155,000 $55,763,000

Interest Expense $0 $0

Earnings Before Tax $50,155,000 $55,763,000

Income Tax $13,118,000 $14,030,000

Minority Interest $0 $0

Equity Earnings/Loss Unconsolidated Subsidiary $0 $0

Net Income-Cont. Operations $37,037,000 $41,733,000

Net Income $37,037,000 $41,733,000

Net Income Applicable to Common Shareholders $37,037,000 $41,733,000

Balance Sheet al Income Statement (values in 000's)

Period Ending: Trend 9/28/2013 9/29/2012

Current AssetsCash and Cash Equivalents $14,259,000 $10,746,000

Short-Term Investments $26,287,000 $18,383,000Net Receivables $24,094,000 $21,275,000Inventory $1,764,000 $791,000Other Current Assets $6,882,000 $6,458,000

Total Current Assets $73,286,000 $57,653,000Long-Term Assets

Long-Term Investments $106,215,000 $92,122,000Fixed Assets $16,597,000 $15,452,000Goodwill $1,577,000 $1,135,000Intangible Assets $4,179,000 $4,224,000Other Assets $5,146,000 $5,478,000Deferred Asset Charges $0 $0

Total Assets $207,000,000 $176,064,000

Current LiabilitiesAccounts Payable $36,223,000 $32,589,000Short-Term Debt / Current Portion of Long-Term Debt

$0 $0

Other Current Liabilities $7,435,000 $5,953,000

Total Current Liabilities $43,658,000 $38,542,000

Long-Term Debt $16,960,000 $0Other Liabilities $20,208,000 $16,664,000Deferred Liability Charges $2,625,000 $2,648,000Misc. Stocks $0 $0Minority Interest $0 $0

Total Liabilities $83,451,000 $57,854,000Stock Holders Equity

Common Stocks $19,764,000 $16,422,000Capital Surplus $0 $0Retained Earnings $104,256,000 $101,289,000Treasury Stock $0 $0Other Equity ($471,000) $499,000

Total Equity $123,549,000 $118,210,000

Total Liabilities & Equity $207,000,000 $176,064,000

Period Ending: Trend 9/28/2013 9/29/2012 9/24/2011 9/25/2010

Net Income $37,037,000 $41,733,000 $25,922,000 $14,013,000

Cash Flows-

Operating

Activities

Depreciation $6,757,000 $3,277,000 $1,814,000 $1,027,000

Net Income Adjustments $3,394,000 $6,145,000 $4,036,000 $2,319,000

Changes in

Operating

Activities

Accounts Receivable ($1,949,000) ($6,965,000) ($1,791,000) ($4,860,000)

Changes in Inventories ($973,000) ($15,000) $275,000 ($596,000)

Other Operating

Activities

$1,080,000 ($3,162,000) ($1,391,000) ($1,610,000)

Liabilities $8,320,000 $9,843,000 $8,664,000 $8,302,000

Net Cash Flow-

Operating

$53,666,000 $50,856,000 $37,529,000 $18,595,000

Cash Flows-

Investing

Activities

Capital Expenditures ($8,165,000) ($8,295,000) ($4,260,000) ($2,005,000)

Investments ($24,042,000) ($38,427,000) ($32,464,000) ($11,075,000)

Other Investing

Activities

($1,567,000) ($1,505,000) ($3,695,000) ($774,000)

Net Cash Flows-

Investing

($33,774,000) ($48,227,000) ($40,419,000) ($13,854,000)

Cash Flows-

Financing

Activities

Sale and Purchase of

Stock

($22,330,000) $665,000 $831,000 $912,000

Net Borrowings $16,896,000 $0 $0 $0

Other Financing

Activities

($1,082,000) ($1,226,000) ($520,000) ($406,000)

Net Cash Flows-

Financing

($16,379,000) ($1,698,000) $1,444,000 $1,257,000

Effect of Exchange Rate $0 $0 $0 $0

Net Cash Flow $3,513,000 $931,000 ($1,446,000) $5,998,000

 Fiscal Quarter2013

(Fiscal Year)2012

(Fiscal Year)2011

(Fiscal Year)

December   Revenue $54,512(m) $46,333(m) $26,741(m)   EPS 13.81 (12/29/2012) 13.87 (12/31/2011) 6.43 (12/25/2010)   Dividends 2.65 N/A N/A

March   Revenue $43,603(m) $39,186(m) $24,667(m)   EPS 10.09 (3/30/2013) 12.3 (3/31/2012) 6.4 (3/26/2011)   Dividends 3.05 N/A N/A

June   Revenue $35,323(m) $35,023(m) $28,571(m)   EPS 7.54 (6/29/2013) 9.31 (6/30/2012) 7.8 (6/25/2011)   Dividends 3.05 2.65 N/A

September  (FYE)   Revenue $37,472(m) $35,966(m) $28,270(m)   EPS 8.31 (9/28/2013) 8.67 (9/29/2012) 7.05 (9/24/2011)   Dividends 3.05 2.65 N/A

Totals   Revenue $170,910(m) $156,508(m) $108,249(m)   EPS 39.75 44.15 27.68   Dividends 11.8 5.3 N/A

REFERENCES

REFERENCE LIST:

Elliot.S, ( 2013 ). "Apple Passes Coca-Cola as Most Valuable Brand". The New York Times. Retrieved 21 October 2013.

Michelle.J, ( 2013 ). Samsung thinks the retrial over damages it will pay to Apple Inc.(AAPL) should be halted pending the outcome of a decision from the USPTO.

Apple Inc. (AAPL) vs. Samsung: Another Delay Requested. Retrieved 19th

November 2013 from http://www.valuewalk.com/2013/11/apple-inc-aapl-vs- samsung-another-delay-requested/

Unknown, ( 2013 ) "The World's Most Admired Companies".Fortune 165 (4): 139 –140. March 19, 2012.

Unknown, ( 2013 ). AAPL Company Financials. Retrieved 20th November 2013 from

http://www.nasdaq.com/symbol/aapl/financials

Unknown, How to find your local Apple retail store. GuideAlert. Retrieved 19th

November 2013 from http://guidealert.com/www-apple-com-retail/