Group Assignment

Assignment Overview:
Please select two public traded companies that are either listed in NYSE or TSX. Obtain each of
your company’s annual reports for the year 2018, 2019 and 2020. Research the Morningstar
and other sources of information to familiarize yourself with the industry in which your chosen
company operates and with company specific factors that may have or will affect either
company’s performance.

Assignment Task
1. Company background research
Write a short response to each item below to build background knowledge of each
company and their industry.
a) Describe the operating activities of each company noting similarities and difference
between two companies.
b) Identify two economy wide factors and industry wide factors that could impact on the
financial performance and position of two companies.
2. Financial Ratio Analysis
Calculate all the relevant financial ratios for both companies and comment on the financial
health of the company. You need to give explanations for all the ratios and compare the
performances of both companies in terms of financial ratios.
Financial results of Apple and Samsung (consolidated) show resiliency despite the pandemic
crisis. In 2020, Apple’s revenue was up by 6%, two-fold higher than Samsung’s rate of 3%.
In profitability terms, Apple displayed almost stable profit margins covering 2018 to 2020
period. Samsung, on the other hand, showed erratic trend on profit margins sliding in 2019
following lower revenue, and rebounded in 2020.
Anent the liquidity position, both Apple and Samsung posted current ratios and quick ratios
above par. However, cash ratios for both companies were below 1.0x which makes
liquidation dependent on receivables and other liquid assets except cash.
Both Apple and Samsung collected their respective receivables within one (1) month
evidenced by the receivables turnover ratio of Apple at 17 days in 2020 (2019: 11 days).
While Samsung collected its receivables in a shorter period of 8 days in 2020 (2019: 7 days).
In terms of inventory, Samsung sold its inventories faster than Apple over the past three
years. On average, it took Apple 41 days to sell its products, while Samsung sold its products
just within five (5) days over the past three years.
 For solvency ratios, Apple displayed a high debt-profile with a weaker DE ratio of 3.93x in
2020 from 2.74x in 2019. The high DE ratio in 2020 was mainly due to the abrupt fall on
retained earnings from P$45.8B in 2019 to $14.9B in 2020 caused by the adoption of ASU
2017-12 to utilize the modified retrospective transition method. (See Apple Annual Report,
page 39, Hedging). Apple obtained additional long-term debt amounting to P$6.8B which
further weakened the DE ratio.
Samsung showed low leverage ratios (below 1.0x) covering years 2018 to 2020 owing from
substantial retained earnings with a high of $229B and minimal debts. To sum up, Apple is
more dependent on debts to fund its operations, while Samsung utilizes more of its own
cash flow to maintain the operations.
For Debt Service Coverage Ratio, Apple recorded DSCR of 5.05x in 2020 while Samsung
posted 2.96x. Both Apple and Samsung showed their respective earnings were sufficient to
cover debt service obligations for years 2019 and 2020.

3. Z score Calculation
Calculate the z score for both companies and comment.

4. If you are a potential investor, then which company’s stock you want to buy and why?

*Please use excel to perform all the calculations. You need to write your report in the MS word
file. Please submit both the MS word file and excel file.