Financial management analysis of apple's financial statements from 2019 to 2022

In addition to providing investors with non-financial information, the essential measures of profitability, efficiency, liquidity, financial gearing, and investment are used.. FINANCIAL

HO CHI MINH CITY UNIVERSITY OF FOREIGN LANGUAGES

- INFORMATION TECHNOLOGY

FINANCIAL MANAGEMENT

Analysis of Apple's financial statements from 2019 to

2022

Course: 2023 - 2034

Group’s members: Nguyén Minh Tan — 21DH123561

Tran Thanh Thi — 21DH123570 Nguyễn Ngọc Quyên — 21DH123551

DangNgoc Phu — 21DH123541 Nguyên Cao Thùy Dương — 21DH120309

HCMC, <November>/<2023>

Table of contents

TNTRODUCTION

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SCOPE OF STUDY

LIMITATION OF STUDY

COMPANY PROFILE AND BUSINESS MODEL

FINANCIAL HIGHLIGHS AND NON-FINANCIAL HIGHLIGHTS FINANCIAL REPORT

5.1 Profitability Ratio

5.2 Liquidity Rado

5.3 Gearing Ratio Analysis

5.4, Investment Ratio Analysis

5.5 Efficiency Ratio Analysis

INTRODUCTION

Financial analysis is one of the key components that investors use nowadays to understand the firm Apple Inc is a shining example of innovation, resilience, and financial performance in the competitive and constantly changing global technology business Apple has constantly shown that it can overcome obstacles and seize opportunities as a leader in consumer electronics, software, and digital services In addition to providing investors with non-financial information, the essential measures of profitability, efficiency, liquidity, financial gearing, and investment are used The information was derived from Apple Inc.'s annual report for the most recent two years (2019 & 2022) Additionally, this research analyzes ratios with Apple's competitors The choice of a business with a US market share comparable to Apple and typical industry ratios is challenging, though Thus, by comparing this report with other global firms like Samsung, Xiaomi, Lenovo, and Huawei throughout, it assists investors in getting a general sense of business activity as well as pertinent information regarding Apple All users will find this to be very useful when making decisions about, among other things, pricing, working capital management, planning, financial structure, profitability, and dividend policy Investors have the option to purchase Apple's stock there

1 SCOPE OF STUDY

Nowadays, Apple Inc is progressing strongly in terms of technology Apple is seen as the contemporary face of America, representing the country in technological competition with other nations This research examines Apple Inc.'s financial management, including

a range of facets of the business's financial operations The research opens with an introduction part that provides background information on Apple and explains why it is crucial to carefully examine its financial management procedures The assessment of Apple's financial performance over the years forms the basis of this research This comprises a thorough assessment of important financial measures related to elements like

profitability, liquidity, and solvency The goal of the study is to identify patterns and alterations in the company's financial performance throughout this time

Furthermore, The report also discusses Apple's capital allocation and investment plans This involves a review of its investment choices, particularly about spending on research and development Additionally, it evaluates the company's capital allocation strategy, including elements like dividends and share buybacks and their effects on shareholder value and overall business expansion The report also discusses Apple's money allocation and investment plans This involves a review of its investment choices, particularly about spending on research and development Additionally, it evaluates the company's capital allocation strategy, mcluding elements like dividends and share buybacks and their effects on shareholder value and overall business expansion The study also addresses Apple's finance management's corporate governance and transparency It gives a summary of Apple's corporate governance structure and assesses the degree of openness with which the company communicates with its shareholders and reports its financial performance It is also investigated whether Apple's financial management complies with ideal corporate governance standards

2 LIMITATION OF STUDY

In this review, The report on Apple's financial management encounters several limitations, including challenges related to data availability and reliability, given the complexities of financial reporting and potential discrepancies in accounting standards Economic and market volatility can hinder the study's ability to predict or control for external events, such as global economic crises, which can significantly impact Apple's financial strategies Industry-specific dynamics, like rapid technological advancements, regulatory changes, and consumer shifts, may not be fully considered The specific business model of Apple may limit generalizability to other businesses or sectors Furthermore, the long-term effects of financial decisions might not be immediately apparent, necessitating a cautious interpretation of the results during the span of the

research Given these constraints, assessing the efficiency of Apple's financial management processes calls for caution

3 COMPANY PROFILE AND BUSINESS MODEL

Apple is a multinational technology firm based in Cupertino, California, that specializes

in the design, development, and marketing of consumer devices, computer software, and online services Along with Amazon, Google, Microsoft, and Meta, it is regarded as one

of the top five businesses in the United States' information technology industry Apple products include: iPhone mobile phones, iPad tablets, Macbook laptops, Mac personal computers, iPod portable music players, Apple Watch smart watches, and multimedia players Apple is the world's most valuable firm and the world's largest technology company by revenue After Samsung and Huawei, this is the world's third-largest mobile phone manufacturer As of 2020, Apple employs 147,000 full-time employees and operates 510 retail shops in 25 countries The company also has high levels of brand loyalty and is ranked as the world's most valuable brand Apple had success with mobile devices between 2007 and 2011 The smartphone was dubbed an "industry game changer" after the business sold 270,000 iPhones in the first 30 hours of sales

4 FINANCIAL HIGHLIGHS AND NON-FINANCIAL HIGHLIGHTS Apple introduced the App Store in July 2008 to offer third-party software for the iPhone and iPod Touch Within a month, the business had sold 60 million subscriptions and earned $1 each day on average By August 2008, Jobs predicted that Apple's App Store would become a billion-dollar industry Apple's iPhone, iPod Touch, and iPad products would attain worldwide success, introducing improvements in mobile phones, portable music players, and personal computers, respectively For fiscal year 2020, Apple's total annual revenue worldwide hit $274.5 billion In August 2018, Apple became the first publicly traded US corporation to be valued at more than $1 trillion, and two years later,

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in August 2020, it became the first company to be valued at $2 trillion More than 1.5 billion Apple products were in active use worldwide as of January 2020 Apple's soaring stock price pushed the company's market value to a then-record $624 billion on August

20, 2012 This surpassed Microsoft's previous non-inflation-adjusted market value record set in 1999 Fortune published the Fortune 500, a list of companies ranked by revenue creation, on June 6, 2016 Apple was named the leading technology company in the previous fiscal year (2015) With $233 billion in revenue, Apple ranked third overall Apple unveiled the iPhone 12, iPhone 12 Mini, iPhone 12 Pro, and iPhone 12 Pro Max on October 13, 2020 The new iPhones have the largest change since the iPhone X, with a new design that incorporates bezels and is sleek and pointed, evoking the style of the iPhone 4 and iPhone 5S

5 FINANCIAL REPORT

Apple's profitability ratios and liquidity ratios are both strong, indicating that the company is financially healthy and well-positioned to continue growing in the future Apple expects to generate net sales between $123 billion and $127 billion in the first quarter of fiscal 2023 The company also expects gross profit margin to be between 38% and 38.5%.Overall, Apple's financial performance in 2022 was strong The company generated record net sales and earnings, and its profitability and liquidity ratios are both healthy Apple is well-positioned to continue growing in the future, driven by strong demand for its products and services

5.1 Profitability Ratio

Profitability ratios measure how efficiently a company is using its resources to generate profits Here are three key profitability ratios for Apple in 2022:

¢ Gross profit margin: This ratio measures the percentage of sales revenue that remains after deducting the cost of goods sold In 2022, Apple's gross profit margin was 38.1% This means that for every $1 of sales revenue, Apple generated

$0.38 in gross profit.

Operating profit margin: This ratio measures the percentage of sales revenue that remains after deducting the cost of goods sold and operating expenses In

2022, Apple's operating profit margin was 30.3% This means that for every $1 of sales revenue, Apple generated $0.30 in operating profit

Net profit margin: This ratio measures the percentage of sales revenue that remains after deducting all expenses, including taxes In 2022, Apple's net profit margin was 23.0% This means that for every $1 of sales revenue, Apple generated

$0.23 in net profit

5.2 Liquidity Ratio

Liquidity ratios measure a company's ability to meet its short-term financial obligations Here are three key liquidity ratios for Apple in 2022:

Current ratio: This ratio compares a company's current assets to its current

liabilities In 2022, Apple's current ratio was 1.74 This means that Apple has

$1.74 in current assets for every $1 of current liabilities This is a healthy current ratio, indicating that Apple has good short-term liquidity

Quick ratio: This ratio is similar to the current ratio, but it excludes inventory from current assets In 2022, Apple's quick ratio was 1.28 This is also a healthy quick ratio, indicating that Apple has good short-term liquidity even if it is unable

to sell its inventory quickly

Cash ratio: This ratio compares a company's cash and cash equivalents to its current liabilities In 2022, Apple's cash ratio was 0.75 This means that Apple has

$0.75 in cash and cash equivalents for every $1 of current liabilities This is a very healthy cash ratio, indicating that Apple has excellent short-term liquidity 5.3 Gearing Ratio Analysis

Different formulas can be used to compute gearing ratio, however one of the most used ones is the debt to equity ratio It gauges how much debt or equity is being used to fund a company's activities Apple's gearing ratio indicates that the company is depending more heavily on debt funding, which makes it hazardous because it may be challenging for the

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company to satisfy its debt obligations if the economic climate changes Apple's debt ratio, on the other hand, gives investors comfort that the company 1s effectively controlling its debt levels, which may allow them to financially finance future growth projects

Additionally, Apple's bond issuances, which were intended to finance capital expenditures including research and development, acquisitions, and expansion plans, can

be blamed for the increase in gearing ratio from the previous year Although Apple has a sizable cash reserve that can meet its short-term debt obligations, the level of long-term debt may need to be kept in check to reduce risks brought on by changes in market

interest rates

5.4 Investment Ratio Analysis

Investment ratios assess a company’s ability to create returns on capital invested in its activities Return on investment (ROJ) is an important investment statistic since it shows how much profit a company makes for every dollar invested Apple's ROI is excellent since it has consistently provided considerable returns to its investors throughout the years In December 2022, Apple's ROI was approximately 25.07%, implying that the

business received $0.25 for every $1 invested by investors

Apple's high-profit margins, coupled with its large revenue streams, enable the company

to maintain its competitive edge and appeal to potential investors Additionally, Apple's status as a leader in the technology industry is remforced by its price-to-earnings (P/E) ratio, as it suggests that investors place a high premium on the company's earnings compared to other industry players This highlights the company's potential to continue growing even as it contends with other dominant players in the technology and electronics industries

5.5 Efficiency Ratio Analysis

Efficiency ratios measure the efficiency of a company's operations, and this information

is essential to both investors and management One of the primary efficiency ratios is the asset turnover ratio, which measures the sales generated by a company conceming its

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assets In December 2022, Apple's asset turnover ratio was around 0.76, indicating that the company generated approximately $0.76 in sales for every $1 worth of assets available

Due to its effective asset management approach, which has allowed it to keep its position

as the market leader in the technology industry, Apple has a high asset turnover ratio Due to the company's efficient operations, notably in areas like supply chain management, it is able to create a sizable amount of money from its little assets Apple's manufacturing processes and procurement strategies ensure that the company maximizes earings while keeping expenses in check, creating a positive feedback loop of financial success High profit margins are the result of this Given that investors frequently view a healthy asset turnover ratio as evidence of a company's effectiveness in its operations, Apple is a fantastic investment potential

6 RECOMMENDATION

Throughout the analysis ratios, and also from the non-financial information, Apple is one of the good companies to invest in the stock market The Group’s domestic operations had continued to

be the main driver of its revenues and profits, and garments, shoes, fashion accessories made up

the bulk of the products offered for sale However, in the global market will face strongly competition from other global giants like Samsung, Xiaomi, Lenovo, Huawei

Apple announced financial results for its fiscal 2022 fourth quarter ended September 24, 2022 The Company posted a September quarter record revenue of $90.1 billion, up 8 percent year over year, and quarterly earnings per diluted share of $1.29, up 4 percent year over year Annual revenue was $394.3 billion, up 8 percent year over year, and annual earnings per diluted share

were $6.11, up 9 percent year over year

After the ratios analysis, Apple was doing good at converting sales revenue into both net profit and gross profit but there was a concern in term of improvement, their percentage drop a little bit compare with 2019 (About profitability ratio, you can see that all ratios in this group had a slight decrease in 2022, the main reason is decrease of net profit.) Apple should improve it to get better result in the coming years In addition, company also can improve its profitability by reducing days in receivables, days in inventories and length of cash cycle

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In addition, liquidity ratios of Apple is good (in this period always higher than 1- it reflect can pay debt fast) However, if compare current ratio and quick ratio we have a little bit worry about inventory which occupy a large part of statement financial Company should find out the best way to minimize the amount of inventory In contract, Standing under the banks view will easily accept credits and standing perspective business partners will accept the contracts with the company because of repayment of short-term reputation of the company is very high Furthermore, Apple should reduce the short-term debt and use long-term debt to raise fund because they have more time to generate By reducing the short-term debt, they can improve liquidity ratios

Moreover, they need to reduce days of holding inventories because holding inventories has cost For the apparel industry, the customers prefer to the latest fashion trend Therefore, if the company holes inventories for a long period, they will face difficulties to sell because their products might be out of fashion Those recommendations also help to reduce inventories turn over period and period for trade receivable ratios for Apple in the future

On the other hand, their gearing was quite low, approximately 6% in 2021 so it was a very good condition, and Apple holdings even can borrow more in order to widen their activities It was a very high rate and brought a good prospect for investors Last but not least, Apple also had problems about their trade payable and a few problem about collecting money from receivable but they were changing and we can see the trends that Apple would make these period better in

the next few years

Therefore, Apple should develop their advertisings in catalogs, brochures, and magazines and offer more promotions to attract customers Moreover, in order to increase the sales, Apple can open more franchise stores, retail stores and consignment counters in the domestic market CONCLUSION

In conclusion, throughout the analysis ratios, and also from the non-financial information, Apple

is one of the good companies to invest in the stock market The group’s domestic operations had

continued to be the main driver of its revenues and profits, and garments, shoes, fashion

accessories made up the bulk of the products offered for sale The ratio of Apple is quite stable; especially, the P/E of Apple is increasing year by year and also can control debt well However,

so far, it’s better if we just invest in Apple in the short term; because long-term the investment

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