Investing In Apple Through Changing Markets

3117 words - 13 pages

Investing in Apple through changing markets
Veronica Fritsch
MGT/521
May 23, 2011
J. Allison Kazerounian

Investing in Apple through changing markets
Global economy is constantly in a state change. Countries change from prosperous states to floundering states. The change can be quick, in matter of a year or less, or the change can occur slowly over decades. Businesses need to take into account the changes in economy when setting up strategies and tactics. To be successful businesses must have the capabilities to change with the economy to meets current consumer needs, demands, and spending habits.
Apple, Incorporated has proven resistant to the economic tide. Some of ...view middle of the document...

Apple can be found in more than 75 countries across Asia, Europe, Africa, the Middle East, North, and South America (Apple, 2011). This is already a large market, but still allows more growth into other countries and an increase of store availability. Apple may need to consider this option if the economy does not improve as predicted. Another method to survive this economic storm is for Apple to continue to improve on its existing products and continue to release new types of products. Apple has been a forerunner in releasing new technology gadgets and must remain that way to stay in the top. The company can also invest some its surplus in buying other smaller companies that can be intermixed into its current products. One such example would be purchasing Netflix for the Apple TV as noted by Evelyn Rusli from the New York Times (2011). The wider the range of products and services, the more the company can continue to prosper.
On the 2011 Fortune 500 list Apple is ranked at 35th, which is a 21 spot increase from its former 56th spot. Apple ranked 196th on the Fortune Global 500 list, which pits the company against companies worldwide rather than companies based in the United States of America. According to CNN Money this success occurred as the company expanded its current markets and continues to create new ones (Fortune 500, 2011). The rankings are based on company gross revenue. The list includes both public and private owned companies providing for a large amount of competitors. Despite Apple’s location on both lists, this information alone is not enough to prove Apple to be a safe investment. Additional information that needs to be included in an investment decision is Apple’s financial standing and marketability.
Apple towers over competitors in its financial statements. Apple’s current ratio when calculated from its March 2011 financial statement is $1.93 (Apple Investors, 2011). Apple is overshadowing Hewlett-Packard’s (HP) current ratio of $1.17 (Hewlett-Packard Company, 2011), Samsung’s of $1.20 (Samsung Electronics, 2011), and Dell’s of $1.45. Apple has more assets per dollar of liability than three other major electronic companies. This good standing is the result of limited liabilities and an increase of assets.
A second financial ratio that should be considered by mutual fund managers is the debt to owners’ equity ratio. Companies must be able to pay back the debts they acquire or face negative actions such as bankruptcy or buy-outs. Apple’s debt to owners’ equity ratio is 54% (Apple Investors, 2011). The goal with the debt to owners’ equity ratio is obtain a percentage below 100% because a financially stable company should not have more debt than equity. Hewlett-Packard is failing with 188% (Hewlett-Packard Company, 2011) and Dell appears to be floundering with a 445% debt to owners’ equity (Dell Inc., 2010). Samsung’s debt to owners’ equity ratio is 49% (Samsung Electronics, 2011), which is below Apple’s...

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