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Week 7- apple
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Financial Statements

The financial performance can be determined by the calculation of various fiscal ratios

that indicate revenues, sales, liquidity, and capital transactions. For instance, companies can

calculate the return on assets, return on equity, debt to assets ratio, and cash return on assets. In

particular, the return on assets indicates the percentage of the rate at which assets generate

revenues in a business. Also, the return on equity points out the amount of revenues generated in

a business while eliminating liabilities incurred during operations. Conversely, the debt to assets

ratio shows the amount of assets in a business that creditors finance rather than the investors.

Finally, cash return on assets indicates how a company manages its assets regarding the net

income generated during operations.

Categorically, the return on assets is calculated by dividing the net income by the total

assets. Therefore, in the past five years, Apple Company has recorded the return on assets as

follows;

2016 2017 2018 2019 2020

Net income $50.68bn $45.73bn $53.32 $55.7 $57.22

Total assets $305.28bn $334.53bn $367.5 $342bn $320.4bn

ROA 17.44% 14.15% 14.27% 15.98% 17.31%

In this case, the ROA has gradually increased, implying that Apple Company registered effective

utilization of assets geared towards high revenues (Al Mheiri et al., 2021). Higher ROA values

indicate efficiency in assets. In other words, it shows that the company is more strategic at

generating income from invested capital (assets). Overall, ROAs above 5% is considered good

while those more than 20% are considered excellent. Apple’s ROAs throughout the 5 years

indicate that it could effectively use its assets to generate profits. The ROA increased every
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financial year, which means that the company was good at maximizing its profits with each

dollar investment spent.

Similarly, the return on equity is determined by dividing the net income by shareholders’ equity.

At Apple Company, the return on equity for the past five years was as follows;

2016 2017 2018 2019 2020

Net income $50.68 bn $45.7bn $53.32bn $55.7bn $57.22bn

Shareholders’ $130.46bn $134.08bn $126.88bn $105.86bn $78.43bn

equity

ROE 40.24% 35% 39.97% 51.29% 64.49%

From the data, the Company has constantly reduced the liabilities in daily operations as the

revenues continue to increase in the past five years. ROE is usually calculated as a measure of a

company’s profitability. Often, ROE’s near the long-term average of 14% is considered

acceptable while anything below 10% is poor. Since Apples ROE increased in the past five

years, with a single decline in 2017, it can be argued that the company’s growth rate is

sustainable. The data also indicates fewer financial risks since the company’s profitability is

undoubtedly consistent. In 2020, Apple’s ROE was 64.49%. This means that the company

generated $0.64 of profit for every dollar of equity in that year, giving the company an ROE of

64%. Another explanation is that Apple does not have a higher debt burden making it more

financially sound and profitable.

Also, the debts to assets ratio can be given by dividing the total debts by the total assets in the

firm (Al Mheiri et al., 2021). The Apple Company recorded the ratio as follows in the past five

years;

2016 2017 2018 2019 2020

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Total Debts $193,437 $241,272 $258,578 $248,028 $258,549

Total assets $321,686 $375,319 $365,725 $338,516 $323,888

Debts to 0.60 0.64 0.71 0.73 0.80

assets ratio

Over the past five years, Apple Company has increased the amount of funds borrowed from

creditors rather than the real investors’ contribution in the operations. Besides, cash return on

assets is usually calculated by dividing the net income by average total assets (Simko et al.,

2021). Apple recorded debt ratios of 60%, 64%, 71%, 73%, and 80%, respectively. Debt ratios

that surpass the 100% mark indicate that a company has more debts than assets. Throughout the

five years, Apple’s debt ratios were slightly below the 100% mark. This means that Apple’s

debts are substantially high and that the company may find it substantially expensive to borrow

in the future. Nevertheless, Apple's debt ratios are below 100%, which means that the company

has more debts than assets.

Apple Company recorded the cash return on assets as follows in the past five years;

2016 2017 2018 2019 2020

Net income $50.68 bn $45.7bn $53.32bn $55.7bn $57.22bn

Average total $321,686 $375,319 $365,725 $338,516 $323,888

assets

Cash return 157544.9351 121763.0869 145792.6037 164541.7056 176666.008

on assets

Deductively, the cash return on assets has gradually increased over the past five years,

implying that Apple Company has increased the generation of income from the available assets

in the firm. Generally, the Apple Company has registered continual growth over the last five
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years, calculated by financial ratios. Apple has a substantially high cash return on assets, which

means that the company is earning more money on less investment. The increasing ROA also

indicates that the company is doing a good job at increasing its profits with every dollar it spends

on investments.
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References

Al Mheiri, R., Al Hosani, N., & Saif, E. (2021). Ratio Analysis of Apple. Available at SSRN

3895231. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3895231

https://skillshop.exceedlms.com/profiles/bc894cda17eb4a0eaeaf7ea0235cb5a5Simko, P. J.

Apple Inc. (2021): An Application of Financial Analysis, 2003–2018.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3310469