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Learning Assignment

Background of Apple Inc.

Apple Inc. was founded in Cupertino, California, but now has locations all around the

world. Currently, Apple distributes its goods in 516 retail locations in 25 countries. According to

Broussard (2019), Apple became the most valuable brand in the world in 2013, surpassing Coca-

Cola. Despite competition from Nokia, Samsung, and Motorola, Apple's devices have continued

to rise to popularity in markets around the world.

According to a recent report by Broussard (2019), Apple divides its business operations

into five distinct regions: It includes the Americas, Greater China, Europe, Japan, and the rest of

Asia and the Pacific. The Americas contain both North and South America. Included in Europe

are the continents of Africa, the Middle East, and India. However, Greater China not only

incorporates China but also Hong Kong and Taiwan. All of Asia and Oceania make up the "Rest

of Asia Pacific" market. The company's commitment to R&D has paid off with the release of

reliable consumer electronics (Broussard, 2019). The last five years of the company's existence

have been marked by consistent expansion, with 2013 marking the peak of its financial success

(Broussard, 2019). About 164,000 people are employed full-time by Apple Inc.

Financial Standing of Apple Inc.

Income Statement

The success of Apple's signature goods has been a major factor in the company's ability

to maintain a healthy financial position over the years. Over the past five years, Apple Inc. has

shown constant revenue growth, a reflection of the company's dominant market position and

popular product lines. Let us take a look at the company's revenue and profit margins throughout

this time frame (Apple Inc., 2022).

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Apple's overall sales grew from $260.2 billion in 2019 to $394.3 billion in 2022. A rate

of 11.8% per year reflects a compound annual growth rate (CAGR). Several factors have

contributed to this expansion, including the iPhone's enduring appeal, robust demand for Apple's

other hardware offerings like the Mac and iPad, and expanding demand for Apple's online

services like the iTunes Store and App Store. Increasing sales are a reflection of the company's

ability to satisfy demand and attract new customers. With its global expansion and foray into

new markets, Apple has seen a rise in its bottom line.

Apple's operational income will increase to $119.4 billion by 2022 as a result of this

trend. Successful cost management and increasing profitability from core operations have paved

the way for this growth. Strategic investments in research and development, marketing, and

customer support are the driving forces behind Apple's overall profitability.

Cash Flow Statement

Apple Inc.'s cash flow has been trending upward over the past five years, pointing to the

company's ability to produce large operating cash flow from its core business. Operating cash

flow (indicating cash earned from day-to-day activities) has increased annually from 2019's

expected $69.4 billion to 2022's predicted $122.2 billion. Operating cash flow has been on the

rise, which demonstrates the company's financial health and its capacity to support its operations.

Apple has poured a lot of money into research and development, new products, and

improved infrastructure. The negative investing cash flow reflects the outflows of funds used to

finance these activities. The company's financing activities are reflected in the financing cash

flow, which includes dividends, share repurchases, and debt repayments. As a consistent

dividend payer and stock repurchase, Apple has always paid back its shareholders.
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Balance Sheet

Apple Inc. has a healthy balance sheet with substantial assets and minimal debt. The total

value of the firm's assets is highly reliable, amounting to $352.8 billion by the year 2022.

Evidence of Apple's tremendous value in terms of its cash on hand, investments, intellectual

property, and physical infrastructure. The sum of Apple's debt has been rising gradually but not

unmanageably fast. The company's debt level of $120.1 billion in 2022 demonstrates a

responsible approach to debt management. Even after accounting for cash on hand, Apple's net

debt is positive and has grown over time. This indicates that, despite having debt, the company

has kept a healthy cash flow.

Financial Ratios

The Apple financial data used for this study was gathered from AnnualReports.com

(2022). This report includes a ratio analysis based on the provided data. Using the results of the

ratio analysis, Apple's financial health, performance, and prospects will be assessed. Apple's

financial statements and balance sheet for the past five years provide the data.

Liquidity Ratios

2022 2021 2020 2019 2018

Current Ratio= C.A/C.L 0.87 1.08 1.36 1.54 1.12

Quick Ratio= (C.A- Inventory)/ C.L 0.85 1.2 1.33 1.5 1.09

The ability of a corporation to pay its current debts is measured by liquidity indicators

used by investors and management. One liquidity ratio used by managers and investors is the

current ratio. A company's ability to satisfy its annual debt commitments can be gauged by

looking at its current ratio. From 2018 to 2022, Apple's current ratio went from 1.12 to 0.87.
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These figures suggest that Apple has adequate assets to cover its annual obligations. For every $1

in current obligations that Apple has in 2022, it will have $ 0.87 in current assets. This means

Apple has a solid financial foundation and can fulfill its current obligations (Chnar, 2018).

Profitability ratios

2022 2021 2020 2019 2018

Return on Equity = Net income / 1.6 1.5 0.88 0.61 0.56

Shareholder’s equity

Return on Assets = Net income / Total 0.28 0.27 0.18 0.16 0.16

assets

Profit Margin = Net profit / Revenue 25.31% 25.88% 20.91% 21.24% 22.41%

According to the company's financials, Apple is quite profitable and offers its investors

substantial returns. The return on equity ratio is a common metric for evaluating a company's

profitability relative to the investment made by its shareholders. Return on equity refers to the

percentage of profit a company generates from the money its shareholders have invested in the

company (Fernando, 2023). Apple's return on equity in 2022 was 1.6, up from 0.56 in 2018. For

every dollar Apple invests, it gets back $1.60 in profit. A growing return on equity bodes well for

the future profitability and stability of a business (Al Dhaheri & Nobanee, 2020).

Income Statement Trend Analysis

Apple Inc.

Consolidated Statements of Operations

2022 2021 Change Percentage

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Net Sales:

Products 316,199 297,392 18,807 6.3%

Services 78,129 68,425 9,704 14.8%

Net Sales 394,428 365,817 28,611 7.8%

Cost of Sales:

Products 201,471 192,266 9,205 4.8%

Services 22,075 20,175 1,900 9.4%

Total Cost of Sales 223,546 212,981 10,565 5%

Gross Margin 170,782 152,836 17,946 11.7%

Operating Expenses:

Research & Development 26,251 21,914 4,337 19.8%

Selling, General and Adm. 25,094 21,973 3,121 14.2%

Total Operating Expenses 51,345 43,887 7,458 17%

Operating Income 119,437 108,949 10,488 9.6%

Other Income (334) 258 (592) -229.5%

EBIT 119,103 109,207 9,896 9%

Provision for Income Taxes 19,300 14,527 4,773 32.9%

Net Income 99,803 94,680 5,123 5.4%

Revenue Growth

Apple's net sales grew by 7.8% in 2022, from $365.8 billion in 2021 to $394.4 billion.

With product sales up 6.3% and service revenue up 14.8%, this bodes well for future revenue
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growth. Apple can maintain, and possibly accelerate, revenue growth by capitalizing further on

its product portfolio and expanding its service offerings.

Gross Margin Improvement

In 2022, the gross margin was $170.8 billion, up from $152.8 billion the previous year, a

rise of 11.7 percent from the previous year (Apple Inc., 2022). This rise is indicative of Apple's

success in controlling its selling prices. However, with better cost controls and supply chain

efficiency, there is possibility to grow margins even more.

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References

Al Dhaheri, A. & Nobanee, H. (2020). Financial Stability and Sustainable Finance: A

MiniReview.

AnnualReports.com. (2022). Apple Inc. 2018-2022 Annual Report. Available at:

https://www.annualreports.com/Company/apple-inc

Apple Inc. (2022). FORM 10-K. SEC.gov.

https://www.sec.gov/Archives/edgar/data/320193/000032019322000108/aapl-

20220924.htm#ief5efb7a728d4285b6b4af1e880101bc_73

Broussard, M. (2019). Apple’s Recent Leadership Changes Suggest Transition from iPhone

Reliance to Focus on Services, Mac Rumors, Available at:

https://www.macrumors.com/2019/02/18/apples-leadership-changes-services/

Chnar, A. (2018). Efficiency of Financial Ratios Analysis for Evaluating Companies’ Liquidity.

International Journal of Social Sciences & Educational Studies, 4(4).

Fernando, J. (2023, May 24). Return on equity (ROE) calculation and what it means.

Investopedia. https://www.investopedia.com/terms/r/returnonequity.asp

Yahoo Finance. (2022). Apple Inc. (AAPL). Stock Market Live, Quotes, Business & Finance

News. https://finance.yahoo.com/quote/AAPL/financials?p=AAPL