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Apple Inc Essay

1473 words - 6 pages

Ryan Plumbo
ACC 205
Thomas Sutton
7 Dec 14

The decision to invest in a company is an important one. When investing your money into the free market there is never a guarantee on investment. That is why a little bit of research and due diligence is always recommended beforehand. It is the hope that with this knowledge our investment will have a better chance at returning a profit. The company we will be looking at in this report is the tech giant Apple Inc. or to most just known as Apple.
Apple Inc. (Apple), incorporated on January 3, 1977, designs, manufactures and markets mobile communication and media devices, personal computers, and portable digital music players, and ...view middle of the document...

Now that we know a little more about the company let’s take a look at a three year horizontal analysis of Apple’s Income Statement and Balance Sheet. This will help identify any changes to certain accounts over the reporting periods along with showing any trends in company income either positive or negative. This type of comparison is important because it allows companies and investors to identify shifts in key business elements and allow them to make informed decisions about what and if a key process needs to be adjusted or changed to increase profitability.

Apple Inc.
Income Statement
Horizontal Common Size Report
2011 Through 2013 |
 Sales/Revenue | + | 36% |
 Cost of Goods Sold (COGS) incl. D&A | + | 4% |
 Gross Income | - | 4% |
 SG&A Expense | No | Change |
 Pretax Income | - | 3% |
Income Tax | No | Change |
 Net Income | - | 2% |

Looking at this horizontal analysis of Apple’s income statement at first glance the increase in Sales/Revenue is the first thing that jumps out. Through this three year period Sales/Revenue increased 36%. This is great for any retail business as long as you can capitalize on the increased revenue. Unfortunately in this case it seems that Apple’s Gross Income dropped 4% while its Net Income also dropped 2%. This is could be due to that fact Cost of Goods Sold increased by 4% thus cutting into their profits even with the increase in Sales/Revenue. A couple good thing this chart shows is that their Operating Expenses and Income Taxes stayed the same over the three year period. Now let’s take a look at the balance sheet and see what information it can share.
Apple Inc.
Balance Sheet
Horizontal Common Size Report
December 31, 2011 through 2013 |
  |   |   |   |   | 2013 |
Cash |   |   | 200% |
Accounts Receivable |   |   | 76% |
Inventories |   |   | 127% |
Short-Term Investments |   |   | 38% |
Net Property, Plant & Equipment |   | 113% |
  Total Assets |   |   | 78% |
  |   |   |   |   |   |
 Accounts Payable |   |   | 53% |
  Total Liabilities |   |   | 110% |
  |   |   |   |   |   |
 Common Equity |   |   | 61% |
Retained Earnings |   |   |   | 66% |
Total Equity |   |   | 61% |
  |   |   |   |   |   |
Total Liabilities and Equity |   | 78% |

What this shows is that the company is growing very rapidly. Their total assets grew 78% over the past three years. But as there assets grew so did their liabilities. There was a 110% increase in their total liabilities over the three year reporting period. This one categories growth should raise some alarms in how fast debt is growing when compared to the company’s assets. It is ideal for a company to have a manageable amount of debt. When debt levels are falling, that's a good sign. Generally speaking, if a company has more assets than liabilities, then it is in decent condition. By contrast, a company with a large amount of liabilities relative to assets...

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