Apple Inc.

is an American multinational corporation headquartered in Cupertino, California, that

designs, develops, and sells consumer electronics, computer software, online services, and
personal computers. It was established on Apr 1, 1976 by Steve Jobs, Steve Wozniak and Ronald
Wayne. Its best-known hardware products are the Mac line of computers, the iPod media player,
the iPhone smartphone, and the iPad tablet computer. Its online services include iCloud, iTunes
Store, and App Store. Apple's consumer software includes the OS X and iOS operating systems.
Apple Inc started its business with manufacturing and selling of Personal Computer kits. Apples
entire computer strategy was based on exclusion. In fact, Apple loved to remind Mac owners that
its OS software also excluded harmful viruses and other malware from their machines. This
strategy then became the major cause to companys first downfall and therefore Apple moved to
the decision of making gadgets. The period of 1981 to 1989 was proved to be golden period of
Apple. Low-cost-computer- project Macintosh got great success. Companys fortune also
changed with the introduction of laser printer, page-maker and desktop publishing packages.
From year 1990 to 1999, Apple experimented with number of failed electronic products like
digital camera, CD players, Speakers, Video consoles and TV appliances. During the same
period, company faced stiff competition in computing by other giants like IBM and Motorola. It
was the period when Apple got declined at lowest. But again it surged with the introduction of
itune music retail store, iphone and ipod and till 2010, it reached the peak of success. It was the
period when Apple stock fetched an annual return of more than 200% in 2004. However, there
were always up and downs in annual returns but year 2010 onwards, it has continue been
decreasing. In last year 2013, the annual return was 5.4% only. Here we analyze the Apple
financial management over past five years and would make an estimate its performance in future.
For that purpose, ratio analysis has been conducted and its detail are as follows:

Revenue has been increased year over year but with diminishing growth rate. The growth rate in
revenue was 52% in year 2010 but afterwards, it has been decreasing and in 2013 it was around
9% while in 2014 it was merely 7%. The lower growth rate shows either the maturity of business
or stiff competition by other dominant market players. Consequently, the net income growth rate
has been decreased from 70% to 6.7% from 2010 to 2014. EPS growth rate has been reduced to
13.6% from 67% in last five years.
If we look at the profitability of business in last five years, there are several measures which can
be observed. The net income margin has been maintaining at 22% over last five years, a
consistence earnings. Asset turnover ratio has been reduced to 0.83 in 2014 which was above 1.0
in year 2010, 2011 and 2012. It shows the companys under-performance in assets utilization. Its
direct impact can be seen on return on assets (ROA) which has been reduced by 35% in last two
years- in 2012, it was 28.54 while in 2014, it is only 18.01. Financial leverage has been increased
to 2.08 in year 2014 which was below 2.0 in rest of the last four years. Therefore, Apples risk of
insolvency has been increased. Return on Equity (ROE), however, somehow has maintained its
consistent level of 33.5%. Overall, the profitability condition of Apple has come down in last
two years.
If we look at the cash flow statement of last five years, operating cash flows growth rate has been
drastically reduced to 11.3% in 2014 from the highest figure of 102% in 2011. Consequently free
cash flow growth rate has also been reduced to 12%. The capital expenditure as a portion of sales
has been decreased to 5.4% against 6.9 in 2011. Free cash flow over net income has become
highest at 1.26 in last five years. Overall, Cash position of Apple has also been deteriorated in
last two years.

If we analyze the liquidity position of Apple, then it is observed that Current ratio has touched
the lowest value of 1.08 in last five years. Quick ratio also has come down to 0.82 against 1.72 in
2010. Therefore, the liquidity position of Apple has become tighter and if it persists in future,
liquidity crunch may arise.
To know the management efficiency, certain ratios are calculated like Inventory turnover ratio,
fixed assets turnover ratio, receivable turnover ratio, cash conversion cycle etc. It is observed
that inventory turnover ratio has reached at the level of 58.0 which is lowest after year 2010.
Fixed assets turnover ratio is also at the lowest to 9.82. Asset turnover has also been decreasing
from 1.06 to 0.83 in last five years. Cash conversion cycle has been hovered around -50. The
overall impression is the management efficiency has been reduced specifically in the last two
years. Year 2011 was the best year in the terms of its performance.
Now, look at the balance sheet items. The Cash and cash Equivalent proportion has been
reduced its lowest level of 10.82, although account receivable and inventory has been increased
in last two years but still lower that the average of five years. Overall current asset has touched
the lowest level of 29.5% in last five years. Account payable has increased by 30% in year 2014.
Last years total current liabilities have risen to 27.4 which are same as of year 2010 although
from year 2011 to 2013 it has reduced significantly. Overall, the current liability position has
increased in last five years and its direct impact can be seen on the working capital position
which is also at the lowest level in year 2014 and it is merely 17% of the last years working
capital. The overall capital has increased in year 20014 but the debt proportion has also increased
in same fashion which left the company with higher burden of interest liabilities. The current
debt-equity ratio is 0.26 which 80% higher than the previous years. Since it is very low, Apple is
still in highly safe position.

Now, we examine the financial performance of Apple from investors perspective. Apple has
started paying dividend from year 2012 onwards. In 2012, it was $0.38 while in year 2013 and
2014; it rose to $1.63 and $1.81 respectively. Pay-out ratio was 6 in 2012 while in the last two
years it is around 28. So, investors would surely be happy with such increase in dividend income.
Increased EPS is also showing that the money of shareholders is being well utilized. Book value
per share has crossed the level of 19.0 in last two years which shows the increased worthiness of
firm. Free cash flow per share was merely 2.55 in year 2010 but with good pace it has reached to
the level of 8.15 in year 2014.
Overall the financial performance of Apple has gone down in last two years. Whether it is
profitability, liquidity, managements efficiency, or debt paying ability, all have reduced. The
higher Earnings per share and dividend payout ratio have obviously boosted the confidence of
shareholders but the average return over year has significantly fallen down. In year 2013, the
average return was 5.4% against 31.4% in 2012. With the huge capital base and very lower
leverage position, Apple Inc. is financially very strong and safe. Poor performance in last couple
of years doesnt appeal any big threat or matter of concern to the Apple Inc, but need to be
improved soon.
Future prospects of Apple IncSince, revenue, income and EPS have been increasing albeit at diminishing growth rate, so in
coming years it can be expected to be stagnated. Year 2011 and 2012 were good for the business
but afterwards we have seen downward turn in companys performance. In short run, may be for
couple of years, no significant improvement can be expected but it would very early to say about
companys long term performance. The change in companys strategy and long term goal are

reflected in stock price movement. If we look at the pattern of Apples stock movement in past
10 years, there is no significant change is observed except in year 2008. However, the growth
pace has been diminishing, it would be not appropriate to conclude negative performance in
future. We should wait till more information are gathered and get more insight of Apples long
term plan.
Corporate governance Apple is committed to do business ethically, honestly and in full compliance with laws and
regulation. It has always insured to maintain the integrity and image of companys brand and
products. That is the reason why shareholders have great confidence over the companys fair
means of operations. While dealing with third party for business Apple has always put zero
tolerance approach against corruption. There are four principals of Apples business conduct honesty, respect, confidentiality and compliance. Apple strictly restricts the business with any
close relation or family members. It encourages a creative, culturally diverse and supportive
work environment for its employees. It doesnt tolerate any harassment or discrimination based
on factors such as race, gender, religion, color, marital status, identity characteristics or
expression. Apple gives the highest value of any invention of its employees and protect through
patents and copyrights. It has always ensured to maintain all records and documents, customers
information, technical and product information, correspondence and public communication etc.
Apple conducts its business with conservation of environment and takes care of health of
employees. The compensation and benefits to the employees, directors and CEO are according to
the companys norms and in line of corporate governance bylaws.

As far as its effectiveness is concerned, there has not been any past significant record of
breaching any corporate governance laws and rules. Apple has put it best effort to maintain the
integrity of corporate governance. Its ranking was 2 in the list of companies with low corporate
governance risk (2011). Recently, Apple is facing criticism about diversity changes bylaws where
some shareholders are putting pressure to add more female director and executives (2014). The
upcoming time will better judge the Apple to adhere with corporate governances rules.
According to the Cook, CEO, Apple has shown a more conciliatory approach when dealing
with investors. The company has instituted in 2013 one of the largest dividend and buyback
programs among U.S. companies after years of shareholder requests (2014).

References:
http://financials.morningstar.com/ratios/r.html?t=AAPL&region=usa&culture=en-US
http://investor.apple.com/corporate-governance.cfm
http://www.1stock1.com/1stock1_148.htm

http://financials.morningstar.com/income-statement/is.html?
t=AAPL&region=usa&culture=en-US
http://financials.morningstar.com/balance-sheet/bs.html?
t=AAPL&region=usa&culture=en-US
http://financials.morningstar.com/cash-flow/cf.html?
t=AAPL&region=usa&culture=en-US

Appendix
AppendixProfitability Ratio
Revenue USD Mil
Gross Margin %
Operating Income USD Mil
Operating Margin %
Net Income USD Mil
Net Margin %
Ratio for shareholders
Earnings Per Share USD
Dividends USD
Payout Ratio %
Book Value Per Share USD
Free Cash Flow Per Share USD
Return on Equity %
Cash Flow Ratios
Operating Cash Flow Growth
% YOY
Free Cash Flow Growth % YOY
Cap Ex as a % of Sales
Free Cash Flow/Sales %
Free Cash Flow/Net Income
Balance Sheet Items (in %)
Cash & Short-Term
Investments
Accounts Receivable
Inventory
Total Current Assets
Accounts Payable
Total Current Liabilities
Total Liabilities
Liquidity/Financial Health
Current Ratio
Quick Ratio
Efficiency
Cash Conversion Cycle
Receivables Turnover

2010
65,22
5
39.4
18,38
5
28.2
14,01
3
21.48

2011
108,2
49
40.5
33,79
0
31.2
25,92
2
23.95

2012
156,5
08
43.9
55,24
1
35.3
41,73
3
26.67

2013
170,9
10
37.6
48,99
9
28.7
37,03
7
21.67

2014
182,7
95
38.6
52,50
3
28.7
39,51
0
21.61

2.16

3.95

7.45
2.55
35.28

11.78
4.59
41.67

6.31
0.38
6
17.98
6.26
42.84

5.68
1.63
28.7
19.63
6.84
30.64

6.45
1.81
28.1
19.02
8.15
33.61

83.04
84.15
3.25
25.26
1.18

101.8
2
82.57
6.88
27.79
1.16

35.51
37.83
6.01
26.49
0.99

5.53
7.57
5.31
26.09
1.2

11.27
11.91
5.37
27.3
1.26

34.08
13.2
1.4
55.44
15.98
27.56
36.43

22.3
10.07
0.67
38.66
12.57
24.04
34.16

16.54
10.62
0.45
32.75
12.03
21.89
32.86

19.59
9.97
0.85
35.4
10.81
21.09
40.31

10.82
11.74
0.91
29.56
13.02
27.37
51.89

2.01
1.72

1.61
1.35

1.5
1.24

1.68
1.4

1.08
0.82

-49.53
14.71

-51.96
19.9

-52.13
19.2

-44.5
14.22

-48.64
11.96

Inventory Turnover
Fixed Assets Turnover
Asset Turnover

52.51
16.89
1.06

70.53
17.26
1.13

112.1
2
13.48
1.07

83.45
10.67
0.89

57.94
9.82
0.83

APPLE INC (AAPL) CashFlowFlag INCOME STATEMENT

Fiscal year ends in September. USD in
millions except per share data.
Revenue

65225

2011
10824
9

Cost of revenue

39541

64431

Gross profit
Operating expenses
Research and development

25684

43818

1782

2429

Sales, General and administrative

5517

7599

Total operating expenses

7299

10028

Operating income
Interest Expense
Other income (expense)

18385

33790

155

415

Income before taxes

18540

34205

4527

8283

14013

25922

Net income
Net income available to common
shareholders
Earnings per share
Basic
Diluted
Weighted average shares outstanding
Basic
Diluted

14013

25922

14013

25922

522
5576
3
1403
0
4173
3
4173
3
4173
3

2.2
2.16

4.01
3.95

6.38
6.31

5.72
5.68

6.49
6.45

6366
6473

6470
6557

6477
6522

6086
6123

EBITDA

19412

35604

6544
6617
5851
8

57048

61813

Provision for income taxes

Net income from continuing
operations

2010

2012
1565
08
8784
6
6866
2

2013
17091
0
10660
6

2014
182795

64304

70537

3381
1004
0
1342
1
5524
1

4475

6041

10830

11993

15305

18034

48999
136
1292

52503
384
1364

50155

53483

13118

13973

37037

39510

37037

39510

37037

39510

112258

APPLE INC (AAPL) CashFlowFlag BALANCE SHEET

Fiscal year ends in September. USD in
millions except per share data.
Assets
Current assets
Cash
Cash and cash equivalents
Short-term investments
Total cash
Receivables
Inventories
Deferred income taxes
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Gross property, plant and equipment
Accumulated Depreciation

201
0

112
61
143
59
256
20
551
0
105
1
163
6
786
1
416
78

723
4
246

2011

2012

2013

2014

5369

1074
6
1838
3
2912
9
1093
0

1425
9
2628
7
4054
6
1310
2

1384
4
1123
3
2507
7
1746
0

776

791

1764

2111

2014
1087
7
4498
8

2583
1422
0
5765
3

3453
1442
1
7328
6

4318
1956
5
6853
1

1176
8
-3991

2188
7
-6435

2851
9
1192

3901
5
1839

9815
1613
7
2595
2

Net property, plant and equipment

Equity and other investments
Goodwill
Intangible assets
Other long-term assets
Total non-current assets
Total assets
Liabilities and stockholders' equity
Liabilities
Current liabilities
Short-term debt
Accounts payable
Taxes payable
Accrued liabilities
Deferred revenues
Other current liabilities
Total current liabilities
Non-current liabilities

6
476
8
253
91
741
342
226
3
335
05
751
83

120
15
210
485
0
298
4
663
207
22

7777
5561
8
896
3536

1545
2
9212
2
1135
4224

2
1659
7
1062
15
1577
4179

1
2062
4
1301
62
4616
4142

3556
7138
3
1163
71

5478
1184
11
1760
64

5146
1337
14
2070
00

3764
1633
08
2318
39

1463
2
1140

2117
5
1535

2236
7
1200

6308
3019
6
1209

8107

8387

5217

7689

4091

5953
1492
3854
2

7435
7439
4365
8

9548
8498
6344
8

1696
0
1648
9

2898
7
2025
9

2625

3031

3719
3979
3
8345
1

4567
5684
4
1202
92

2797
0

Long-term debt
Deferred taxes liabilities
Deferred revenues
Other long-term liabilities
Total non-current liabilities
Total liabilities
Stockholders' equity

113
9
553
1
667
0
273
92

1686
1010
0
1178
6
3975
6

2648
1666
4
1931
2
5785
4

2331
3

Common stock
Additional paid-in capital
Retained earnings
Accumulated other comprehensive

106
68
371
69
-46

1333
1
6284
1
443

1642
2
1012
89
499

1976
4
1042
56
-471

8715
2
1082

income
Total stockholders' equity
Total liabilities and stockholders' equity

477
91
751
83

APPLE INC (AAPL) Statement

Fiscal year ends in September. USD in
millions except per share data.
2010
Cash Flows From Operating Activities
1401
Net income
3
Depreciation & amortization
1027
Deferred income taxes
1440
Stock based compensation
879
Accounts receivable
2142
Inventory
-596
Accounts payable
6307
Other working capital
2357
Other non-cash items
24
Net cash provided by operating
1859
activities
5
Cash Flows From Investing Activities
Investments in property, plant, and
equipment
2005
Acquisitions, net
-638
5781
Purchases of investments
1
4671
Sales/Maturities of investments
8
Purchases of intangibles
-116
Other investing activities
-2
1385
Net cash used for investing activities
4
Cash Flows From Financing Activities
Debt issued
Common stock issued
Common stock repurchased

912

7661
5
1163
71

1182
10
1760
64

1235
49
2070
00

1115
47
2318
39

of CASH FLOW
2011

2012

2013

2014

25922
1814
2868
1168

4173
3
3277
4405
1740

3703
7
6757
1141
2253

39510
7946
2347
2863

143
275
2515

-5551
-15
4467

-2172
-973
2340

-4232
-76
5938

2824

800

7283

5417

37529

5085
6

5366
6

59713

-8295
-350
1512
32
1128
05
-1107
-48
4822
7

-8165
-496
1484
89
1244
47
-911
-160
3377
4

665

1689
6
530
2286
0

-4260
-244
10231
7
69853
-3192
-259
40419

831

-9571
-3765
21712
8
20811
1
-242
16
22579

18266
730
45000

Dividend paid
Other financing activities
Net cash provided by (used for)
financing activities
Net change in cash
Cash at beginning of period
Cash at end of period
Free Cash Flow
Operating cash flow
Capital expenditure
Free cash flow

345

613

-2488
125

1257
5998

1444
-1446

-1698
931

5263
1126
1

11261
9815

9815
1074
6

1056
4
-381
1637
9
3513
1074
6
1425
9

37529

5085
6

5366
6

-9402
4145
4

-9076
4459
0

1859
5
2121
1647
4

-7452
30077

11126
-419
37549
-415
14259
13844

59713
-9813
49900