Professional Documents
Culture Documents
Financial Policy at Apple-Nive
Financial Policy at Apple-Nive
Financial Policy at Apple-Nive
This course software was prepared solely as the basis for class discussion. Cases are not intended to serve as
endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright ©
2014 President and Fellows of Harvard College. No part of this product may be reproduced, stored in a
retrieval system, used in a spreadsheet or transmitted in any form or by any means—electronic, mechanical,
photocopying, recording or otherwise—without the permission of Harvard Business School.
ed to serve as
Copyright ©
, mechanical,
Balance Sheet as of:
Sept. 25, 2010 Sept. 24, 2011 Sept. 29, 2012
ASSETS
Cash And Equivalents 11,261.0 9,815.0 10,746.0
Short Term Investments 14,359.0 16,137.0 18,383.0
Trading Asset Securities - - -
Total Cash & ST Investments 25,620.0 25,952.0 29,129.0
LIABILITIES
Accounts Payable 12,015.0 14,632.0 21,175.0
Accrued Expenses 3,641.0 4,829.0 6,749.0
Currrent Income Taxes Payable 658.0 1,140.0 1,535.0
Unearned Revenue, Current 3,647.0 6,129.0 7,445.0
Other Current Liabilities 761.0 1,240.0 1,638.0
Total Current Liabilities 20,722.0 27,970.0 38,542.0
Long-Term Debt - - -
Unearned Revenue, Non-Current 1,139.0 1,686.0 2,648.0
Deferred Tax Liability, Non-Current 4,300.0 8,159.0 13,847.0
Other Non-Current Liabilities 1,231.0 1,941.0 2,817.0
Total Liabilities 27,392.0 39,756.0 57,854.0
Source: Capital IQ
In millions of USD
Income Statement
For the Fiscal Year Ending
Sept. 25, 2010 Sept. 24, 2011 Sept. 29, 2012
Revenue 65,225.0 108,249.0 156,508.0
Cost of Goods Sold 39,541.0 64,431.0 87,846.0
Gross Profit 25,684.0 43,818.0 68,662.0
Sales, General, and Administration Expenses 5,517.0 7,599.0 10,040.0
Research and Development Expenses 1,782.0 2,429.0 3,381.0
Total Operating Expenses 7,299.0 10,028.0 13,421.0
Operating Income 18,385.0 33,790.0 55,241.0
Interest Expense - - -
Interest and Investment Income 311.0 519.0 1,088.0
Net Interest Expense 311.0 519.0 1,088.0
Income Tax Expense 4,527.0 8,283.0 14,030.0
Earnings from Cont. Ops. 14,013.0 25,922.0 41,733.0
Net Income to Company 14,013.0 25,922.0 41,733.0
Minority Interest in Earnings - - -
Net Income 14,013.0 25,922.0 41,733.0
Net income available to Common Shareholders 14,013.0 25,922.0 41,733.0
Earnings per Share
Basic 15.41 28.05 44.64
Diluted 15.15 27.68 44.15
Weighted Average Shares Outstanding
Basic 909.5 924.3 934.8
Diluted 924.7 936.6 945.4
Dividends per Share - - $2.65
Payout Ratio % - - 6.0%
EBITDA 19,412.0 35,604.0 58,518.0
Source: Capital IQ
In millions of USD, except per share items.
Cash Flow
For the Fiscal Year Ending
Sept. 25, 2010 Sept. 24, 2011 Sept. 29, 2012
Net Income 14,013.0 25,922.0 41,733.0
Depreciation & Amortization 958.0 1,622.0 2,672.0
Amortization of Goodwill and Intangibles 69.0 192.0 605.0
Total Depreciation & Amortization 1,027.0 1,814.0 3,277.0
Stock-Based Compensation 879.0 1,168.0 1,740.0
Other Operating Activities 1,440.0 2,868.0 4,405.0
Change in Accounts Receivable (2,142.0) 143.0 (5,551.0)
Change In Inventories (596.0) 275.0 (15.0)
Change in Accounts Payable 6,307.0 2,515.0 4,467.0
Change in Unearned Revenue 1,217.0 1,654.0 2,824.0
Change in Other Net Operating Assets (3,550.0) 1,170.0 (2,024.0)
Cash from Operations 18,595.0 37,529.0 50,856.0
Capital Expenditure (2,005.0) (4,260.0) (8,295.0)
Cash Acquisitions (638.0) (244.0) (350.0)
Divestitures - - -
Sale (Purchase) of Intangible assets (116.0) (3,192.0) (1,107.0)
Investment in Marketable & Equity Securt. (11,075.0) (32,464.0) (38,427.0)
Net (Inc.) Dec. in Loans Originated/Sold - - -
Other Investing Activities (20.0) (259.0) (48.0)
Cash from Investing (13,854.0) (40,419.0) (48,227.0)
Short Term Debt Issued - - -
Long-Term Debt Issued - - -
Total Debt Issued - - -
Short Term Debt Repaid - - -
Long-Term Debt Repaid - - -
Total Debt Repaid - - -
Issuance of Common Stock 912.0 831.0 665.0
Repurchase of Common Stock - - -
Dividends Paid - - (2,488.0)
Other Financing Activities 345.0 613.0 125.0
Cash from Financing 1,257.0 1,444.0 (1,698.0)
Net Change in Cash 5,998.0 (1,446.0) 931.0
Cash Interest Paid NA NA NA
Cash Taxes Paid 2,697.0 3,338.0 7,682.0
Levered Free Cash Flow 12,524.6 20,918.8 31,224.6
Unlevered Free Cash Flow 12,524.6 20,918.8 31,224.6
Change in Net Working Capital (1,249.0) (4,270.0) (1,084.0)
Net Debt Issued NA NA NA
Source: Capital IQ
In millions of USD
Annual Sum+A1:L32mary
For the Fiscal Year Ending 9/30/2000 9/29/2001 9/28/2002 9/27/2003 9/25/2004 9/24/2005 9/30/2006 9/29/2007 9/27/2008 9/26/2009 9/25/2010 9/24/2011
Total Revenue 7,983 5,363 5,742 6,207 8,279 13,931 19,315 24,578 37,491 42,905 65,225 108,249
Cost of Goods Sold 5,817 4,128 4,139 4,499 6,022 9,889 13,717 16,426 24,294 25,683 39,541 64,431
Sales, General, and Admin. 1,256 1,138 1,109 1,212 1,430 1,864 2,433 2,963 3,761 4,149 5,517 7,599
Gross Profit 2,166 1,235 1,603 1,708 2,257 4,042 5,598 8,152 13,197 17,222 25,684 43,818
EBIT 530 -333 48 25 336 1,643 2,453 4,407 8,327 11,740 18,385 33,790
Net Income 786 -25 65 69 266 1,328 1,989 3,495 6,119 8,235 14,013 25,922
Cash Flow 868 185 89 289 934 2,535 2,220 5,470 9,596 10,159 18,595 37,529
Cash and Marketable Securities 4,027 4,336 4,337 4,566 5,464 8,261 10,110 15,386 24,490 33,992 51,011 81,570
Accounts Receivable 953 466 565 766 774 895 1,252 1,637 2,422 3,361 5,510 5,369
Total Assets 6,803 6,021 6,298 6,815 8,050 11,516 17,205 25,347 36,171 47,501 75,183 116,371
Accounts Payable 1,157 801 911 1,154 1,451 1,779 3,390 4,970 5,520 5,601 12,015 14,632
Total Shareholders' Equity 4,107 3,920 4,095 4,223 5,076 7,428 9,984 14,532 22,297 31,640 47,791 76,615
Source: Capital IQ
In millions of USD
9/29/2012
156,508
87,846
10,040
68,662
55,241
41,733
50,856
121,251
10,930
791
176,064
21,175
118,210
Quarterly Summary
For the Fiscal Quarter Ending 6/25/2011 9/24/2011 12/31/2011 ### ### ### 12/29/2012
Cost of Goods Sold 16,649 16,890 25,630 20,622 20,029 21,565 33,452
Sales, General, and Admin. 1,915 2,025 2,605 2,339 2,545 2,551 2,840
Cash and Marketable Securitiesa 76,156 81,570 97,601 110,176 117,221 121,251 137,112
Long-term Debt 0 0 0 0 0 0 0
Total Shareholders' Equity 69,343 76,615 90,054 102,498 111,746 118,210 127,346
Source: Capital IQ
In millions of USD
Key assumptions in Apple Forecast
Annual growth rate of sales: 10% Interest Rate: 5.6%
Income Statement
Net sales $156,508
Cost of goods $87,846
Research & development $3,381
Sell, gen'l, admin $10,040
EBIT $55,241
Interest expense $1,088
Profit before tax $54,153
Tax at Effective Rate of 23% $12,420
Net income $41,733
Balance Sheet
Total Cash $121,251
Required Cash
Excess Cash (plug)
Accounts receivable $18,692
Inventories $791
Other Current Assets (10.3% of COGS) $9,041
Net PPEN $15,452
Other (12.3% of COGS) $10,837
Total assets $176,064
Selected Ratios:
Return on equity 35.3%
Sales/total assets 88.9%
Assets/Equity 148.9%
Net income/Revenue 26.7%
Sales, General, and Admin. 1,256 1,138 1,109 1,212 1,430 1,864 2,433
Cash and Marketable Securities 4,027 4,336 4,337 4,566 5,464 8,261 10,110
0 0 0 0 0 0
0 0 0 0 0 0 0.0113016856
14,532 22,297 31,640 47,791 76,615 118,210
-0.61 -0.68 -0.72 -0.68 -0.70 -0.69 -0.66
9/30/2000 9/29/2001 9/28/2002 9/27/2003 9/25/2004 9/24/2005 9/30/2006
ROE 0.1913806 -0.006378 0.015873 0.0163391 0.0524035 0.178783 0.1992188
Profitability 0.0984592 -0.004662 0.0113201 0.0111165 0.0321295 0.095327 0.102977
Asset Turnover 1.1734529 0.8907158 0.911718 0.910785 1.0284472 1.2097082 1.1226388
Leverage 1.6564402 1.5359694 1.5379731 1.6137817 1.5858944 1.55035 1.7232572
Dupont Analysis
ROE = Profitability*Asset Turnover* Leverage
Profitability= Net Income/Total Revenue
Asset Turnover= Total Revenue/ Total Asset
Leverage= Total Assests/ Shareholder Equity
9/29/2007 9/27/2008 9/26/2009 9/25/2010 9/24/2011 9/29/2012
0.2405037 0.2744315 0.2602718 0.2932142 0.3383411 0.3530412
0.1422003 0.1632125 0.1919357 0.2148409 0.2394664 0.2666509
0.9696611 1.0364933 0.9032441 0.8675498 0.930206 0.8889268
1.7442197 1.6222362 1.5012958 1.5731623 1.5189062 1.4894171
Annual Sum+A1:L32mary
For the Fiscal Year Ending 9/30/2000 9/29/2001 9/28/2002 9/27/2003 9/25/2004 9/24/2005
Total Revenue 7,983 5,363 5,742 6,207 8,279 13,931
Cost of Goods Sold 5,817 4,128 4,139 4,499 6,022 9,889
Sales, General, and Admin. 1,256 1,138 1,109 1,212 1,430 1,864
Gross Profit 2,166 1,235 1,603 1,708 2,257 4,042
EBIT 530 -333 48 25 336 1,643
Net Income 786 -25 65 69 266 1,328
Cash Flow 868 185 89 289 934 2,535
Cash and Marketable Securities 4,027 4,336 4,337 4,566 5,464 8,261
Accounts Receivable 953 466 565 766 774 895
Inventory 33 11 45 56 101 165
Total Assets 6,803 6,021 6,298 6,815 8,050 11,516
Accounts Payable 1,157 801 911 1,154 1,451 1,779
Long-term Debt 300 317 316 0 0 0
Total Shareholders' Equity 4,107 3,920 4,095 4,223 5,076 7,428
The Cash conversion Cycle is negative for years 2002-2012. This means company needs lesser time to get payment from its com
time it requires to pay its competitors. This means the company is financing its operation through the money r
9/30/2006 9/29/2007 9/27/2008 9/26/2009 9/25/2010 9/24/2011 9/29/2012
19,315 24,578 37,491 42,905 65,225 108,249 156,508
13,717 16,426 24,294 25,683 39,541 64,431 87,846
2,433 2,963 3,761 4,149 5,517 7,599 10,040
5,598 8,152 13,197 17,222 25,684 43,818 68,662
2,453 4,407 8,327 11,740 18,385 33,790 55,241
1,989 3,495 6,119 8,235 14,013 25,922 41,733
2,220 5,470 9,596 10,159 18,595 37,529 50,856
10,110 15,386 24,490 33,992 51,011 81,570 121,251
1,252 1,637 2,422 3,361 5,510 5,369 10,930
270 346 509 455 1,051 776 791
17,205 25,347 36,171 47,501 75,183 116,371 176,064
3,390 4,970 5,520 5,601 12,015 14,632 21,175
0 0 0 0 0 0 0
9,984 14,532 22,297 31,640 47,791 76,615 118,210
get payment from its competitors and and sell its inventory than the
tion through the money received from its customers.
Key assumptions in Apple Forecast
Income Statement
Net sales $156,508 $172,159 $189,375 $208,312
Cost of goods $87,846 $96,631 $106,294 $116,923
Research & development $3,381 $3,719 $4,091 $4,500
Sell, gen'l, admin $10,040 $11,044 $12,148 $13,363
EBIT $55,241 $60,765 $66,842 $73,526
Interest expense $1,088 1197.68 1317.44 1449.19
Profit before tax $54,153 $59,567 $65,524 $72,077
Tax at Effective Rate of 23% $12,420 $13,701 $15,071 $16,578
Net income $41,733 $45,867 $50,454 $55,499
Times interest earned 50.8 50.7 50.7 50.7
Balance Sheet
$229,143 $252,058
$128,615 $141,477
$4,950 $5,445
$14,700 $16,170
$80,878 $88,966
1594.11 1753.52
$79,284 $87,213
$18,235 $20,059
$61,049 $67,154
50.7 50.7
$335,707 $403,324
$27,268 $29,995
$1,158 $1,273
$13,247 $14,572
$22,636 $24,900
$15,820 $17,402
$415,836 $491,465
$30,996 $34,096
$9,903 $10,894
$15,562 $17,119
$28,295 $31,125
$84,758 $93,233
$331,078 $398,232
$415,836 $491,465
18.4% 16.9%
55.1% 51.3%
125.6% 123.4%
26.6% 26.6%