Founded in 1st April 1976, Apple Inc is the designing and manufacturing company for computer software, hardware, and different types of electronic goods for the customers. Various products and services that the company deals with are the iPhone, Mac OS, iCloud, iOS, support offerings, accessories and wide range of other product and services.
Financial statement analysis of Apple Inc
Apple’s financial statement analysis includes general comparison for the major financial factors and the ratio analysis that can provide the in-depth analysis of the financial performance and its impacts on company (Brochet, Jagolinzer & Riedl, 2013). The major influencing factors of the financial statement are the operating profit, revenues, cost of sales, earnings per share and net profit (Gallagher, 2013). The financial statement of Apple Inc includes consolidated statements of operations, consolidated statements of comprehensive income, consolidated balance sheet and consolidated statements of the shareholders equity. Looking at the financial performance of Apple Inc. it can be recognized that the the financial results of the company are quite strong as the net income of the company for all the 3 years that is 2015, 2016 and 2017 are positive and have increased from $ 45,687 in 2016 to $ 48, 351 in 2017 (Weygandt, Kimmel & Kieso, 2015).
Further, if the ratio of the company are analysed based on the financial statements, it reveals the following –
|
Ratio
|
Formula
|
2016
|
2017
|
|
Price earnings ratio
|
Share price/Earnings per share
|
115.59/8.57
= 13.49
|
172.50/9.42
= 18.32
|
|
Net profit margin
|
Net income/Net sales*100
|
45687/215639*100
=21.19%
|
48351/229234*100
=21.09%
|
|
Current ratio
|
Current assets/current liabilities
|
106869/79006
=1.35
|
128645/100814
=1.28
|
|
Debt equity ratio
|
Total liabilities/ shareholder’s equity
|
193437/128249
=1.51
|
241272/134047
=1.80
|
It can be analysed from the above table that the price earnings ratio of the company for both the year is positive and the P/E ratio has been increased from 13.49 in 2016 to 18.32 in 2017. Therefore, it can be said that the investors are getting more interested and ready to pay more dollar for each share of the company. Further, the net profit margin that reveals the profit earning ability of the company is stating that the company is stable with regard to earning the profit and maintaining the the net margin level at slight more than 21%. Current ratio represents the ability of the company to pay off the the short term obligations with the available current assets. It can be identified that the current ratio of the company for the year 2016 is 1.35 whereas the current ratio for 2017 is 1.28. Therefore, it is recognized that the liquidity position of the company is strong enough to pay off the short term obligations (Brigham & Ehrhardt, 2013). However, the debt equity ratio of the company representing that the company is highly leveraged as the debt equity ratio of the company for 2016 is 1.51 and it further increased to 1.81 in 2017.
Issued faced by Apple Inc.
Shipping - Great artists ship used to be the favourite line for the late co-founder of Apple, Steve Jobs and the management of supply chain and logistics are taken to the legendary levels by the CEO of Apple, Tim Cook. However, for the last few times the company is plaguing with the issues associated with the supply management. The reason behind this is that the company sometimes wrongly forecasts the demand or the component constraints become higher or the yields are lower than the expectation. Further, it happens due to last minute issues regarding the changes in the material or process of manufacturing. Sometimes it also takes place due to issues in priorities and resources (Palepu, Healy & Peek, 2013).
Horn effect – generally Apple earn more monies from the sales of iPhones as compared to the sales of Mac. Further, it sells more Mac notebooks as compared to the Mac desktops. However, the demand has been now shifted to more and more mobiles from the company. However, once the customers start getting the substitute things from a company other than Apple, it is easier for them to get next product from other company. Therefore, as per the horn effect, it can start breaking apart various hard-won gains that has been earned by the company over the last decades.
Service experience – maximum things from 2016 wasted just worrying regarding the apple being in the behind of machine learning and artificial intelligence. However, the company was doing both for few years and while the company was falling down, it fell just because of the service experience (Etzioni, 2016). Therefore, it required to adopt few cultures for the traditional hardware and software for coping up with the problem that includes public facing and high profile VP who have service experience and whose job is to assure everything starting from Siri to Maps to music that will be delightful to the customers (Gonzalez-Padron, 2016).
Ethical issues faced by Apple Inc and responses
- Employees related issues
Apple Inc during 2011, accused for treating the employees inhumanly and similar to machines. For cost cutting and increasing the profits, they hired 500,000 employees and then started manufacturing the products at two factories of South China (Weiss, 2014). While investigating, the truth revealed much worse situation and multiple unethical behaviour and terrible things were found from apple. They violated the individualism theory, Kantianism theory and finally the virtue theory (Ferrell & Fraedrich, 2015)
Therefore, the company requires understanding that the employees are people and not machines. They must have more consideration for the employees who actually made this company big company and provide them a safe and comfortable working environment.
- Privacy issues
Privacy is a major concern for the company as during 2011 the company disclosed that specific features on the mobile phone sold by the company collect the data in the phone’s location. Government and consumers found this as infringement with regard to user’s privacy (Carroll & Buchholtz, 2014). However, later the company announced that the users have option to disable the features in phone. The government is in the process of passing the legislation regarding mobile privacy that may have big impact on the company as some of the phones still collect the data even after disabling the option (Clarke & Boersma, 2017).
References
Brigham, E. F., & Ehrhardt, M. C. (2013). Financial management: Theory & practice. Cengage Learning.
Brochet, F., Jagolinzer, A. D., & Riedl, E. J. (2013). Mandatory IFRS adoption and financial statement comparability. Contemporary Accounting Research, 30(4), 1373-1400.
Carroll, A., & Buchholtz, A. (2014). Business and society: Ethics, sustainability, and stakeholder management. Nelson Education.
Clarke, T., & Boersma, M. (2017). The governance of global value chains: Unresolved human rights, environmental and ethical dilemmas in the apple supply chain. Journal of Business Ethics, 143(1), 111-131.
Etzioni, A. (2016). Apple: Good Business, Poor Citizen?. Journal of Business Ethics, 1-11.
Ferrell, O. C., & Fraedrich, J. (2015). Business ethics: Ethical decision making & cases. Nelson Education.
Gallagher, T. M. (2013). Pragmatics of language: Clinical practice issues. Springer.
Gonzalez-Padron, T. L. (2016). Ethics in the Supply Chain: Follow-up processes to audit results. Journal of Marketing Channels, 23(1-2), 22-33.
Palepu, K. G., Healy, P. M., & Peek, E. (2013). Business analysis and valuation: IFRS edition. Cengage Learning.
Weiss, J. W. (2014). Business ethics: A stakeholder and issues management approach. Berrett-Koehler Publishers.
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2015). Financial & Managerial Accounting. John Wiley & Sons.
