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Financial Analysis of Apple Inc.

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Apple Inc. Financial Report

Company Overview

Apple is a giant cooperative company with international operations headquartered in

California, specifically Cupertino. The company is well renowned for possessing an excellent

research and development department that constantly ensures that Apple is putting new products

on the market and coming up with new ways of enhancing its existing products. Technology has

high levels of competition, and Apple has leading competitor firms, including Microsoft and

Samsung. For this reason, Apple has a wide range of products in the electronic devices and

software niche. Some of the company’s products are the iPhone, which the firm has sold well in

the market after it was launched, while others are Mac computers, HomePods, and Apple

Watches. The firm has also bowled over the software industry by developing several operating

systems, including tvOS, iOS, watchOS, and macOS (Li, 2024). Apple Inc. also earns its income

through numerous application subscriptions, such as iCloud, Apple Pay, the App Store, and

Apple Music. Loyal customers are attained because the firm has adopted green energy, and to be

in harmony with the environment, they use recyclable materials in their production. To this end,

this paper analyzes the technology sector and industry. It establishes an overall assessment of

Apple in terms of key financial ratios and a recommendation on the firm’s stock.

Economy and industry analysis

Currently, the world economy is still in the slow process of getting back to normal after

the pandemic, and economic predictions for the coming year are that it will be higher than in the

past two years when the world had high inflation rates, global uncertainties, and high interest
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rates, which in turn lowered consumer spending. In a Wall Street Journal article, they forecast

that consumer spending will bounce back as the recession threat is believed to be diminishing

among economists (Silverglate, 2024). Despite existing pressures, such as the high rates, which

are still a concern in 2024, in the near future, AI and cloud computing, along with cybersecurity,

are expected to bring forth a great opportunity in the technology market as organizations

continue with their journey toward digital transformational growth (Onabanjo, 2024). Since

Apple Inc. basically forms its strategies in the international market due to the high prices for its

products, consumer behavior and the global market environment will define the firm’s

development.

Ratio analysis

Profitability

The two dominant rivals of Apple include Samsung Electronics and Microsoft

Corporation. In 2023, Apple's net profit was 25.31%, while that of Samsung and Microsoft was

5.59% and 34.15%, respectively. Microsoft stands higher than all three firms with regard to

profit margin, and right below Microsoft is Apple. Its net profit margin of 25.31% shows that the

company applies the policy of high prices to sell the products in a small market. On the same

note, Samsung's and Microsoft's returns on assets ratios are at 3.2% and 19.07%, whereas

Apple's is 27.50%. The firm's high ROA is a result of the efficient utilization of its various assets

to generate profits.

Olayinka (2022) has stated that a high return on equity means that the shareholder’s

equity is being utilized to generate income for the firm. Thus, Apple’s high ROE of 171.5
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percent shows that out of the firm's several competitors, it uses its stakeholders’ equity

efficiently. Apple’s competitors had a very small ROE, while Microsoft was next to Apple with

an ROE of 38.82, and the member with the lowest ROE was Samsung, with only 4.15%.

Analysis of Liquidity

The current ratio for the fiscal year ending August 2011, according to the latest statistical

reports, puts Apple Inc. way below the nominal line of one at 0.99, as are those of Samsung and

Microsoft, with respective figures of 2.59 and 1.77. It is seen that Apple’s current ratio is lower

than the required one, which suggests that this firm has been having problems with liquidity.

This is in contrast to that of Samsung and Microsoft, who have current ratios above one and do

not have any liquidity problems.

Similarly, for the same year, though Apple had a 0.84 quick ratio, which was less than the

ideal quick ratio, Samsung Electronics had a 1.79 quick ratio. In comparison, Microsoft has a

1.54 quick ratio. The quick ratio examines how suitable it is for these firms to pay their short-

term liabilities from the sale of current assets (Olayinka, 2022). Apple’s low quick ratio asserts

that the company has very limited quick assets to meet short-term obligations. It also shows that

the company is possibly incapable of paying its creditors.

Analysis of Productivity

By 2023, Apple had invested 7.17 in fixed assets, Samsung had invested 1.46, and

Microsoft had invested 2.15. On average, fixed asset turnover appears to be the best option for

Apple because it has several capital investments to make and can quickly recover them. Apple
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noted a total asset turnover of 1.09, Samsung 0.57, and Microsoft 0.55. The high total asset

turnover in Apple shows that assets are efficiently being utilized to generate revenues.

Analysis of Solvency

Both Samsung and Microsoft have relatively low debt-to-equity ratios, and in

comparison, Apple Inc. has a high ratio of 1.71. The debt-to-equity ratio of Samsung is 0.01,

while that of Microsoft is 0.22. Among all three firms, Apple has a high debt-to-equity ratio,

which will be justified by its strategy of improving shareholder value through share repurchase,

dividend distribution, and utilizing cheap sources of debt financing to ensure the continuous

expansion of the firm (Olayinka, 2022). Samsung and Microsoft have low values for the debt-to-

equity ratio, which is a clear indication that these companies have a lot of owned capital from

their shareholders; therefore, they do not have to borrow capital from the banks to finance their

operations.

Trend Analysis

Apple has recorded a good performance in the last three years. Analysis of profitability

ratios reveals that Apple has remained relatively unscathed in the face of economic shocks. The

company had a net profit margin of 25.88% in 2021 and 25.31% in both 2022 and 2023. In the

year 2021, the firm's return on assets was 28.06%, slightly better in 2022 at 28.36%, but then

dragged down to 27.50% in 2023. The firm's ROE was selective: 147.44% in 2021 but got higher

in 2022, nearing 175.46%; it lowered to 171.95% in 2023. An evaluation of the profitability

ratios illustrates that the firm has remained constantly profitable in view of the various economic

depletions that affect the company.

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2023 2022 2021

Net Profit 25.31% 25.31% 25.88%

Margin

ROA 27.50% 28.36% 28.06

ROE 171.95% 175.46% 147.44%

Apple’s liquidity ratio has also fallen drastically, as depicted in the company’s current

and quick ratios over the past three years. In fact, a reduction in both quick and current ratios

means that the firm has raised short-term obligations while the cash flow remains healthy.

2023 2022 2021

Current Ratio 0.99 0.88 1.07

Quick Ratio 0.84 0.71 0.91

Decisions based on the company’s performance

Comparing Apple Inc. and its rival firms shows that the former is better placed. It has

been profitable for the last three years and has had high productivity compared to Microsoft and

Samsung. Holding lower liquidity ratios than its rival firms, Apple Inc. still exhibits a high

capacity to manage short-term obligations. Furthermore, Apple has yet another long-term

business strategy of enhancing shareholder value with much emphasis on utilizing paybacks and

dividends to purchase its shares.

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References

Li, F. (2024). Analyze and evaluate Apple’s investment potential in the current financial

market. Finance & Economics, 1(5).

Onabanjo, E. (2024). Digital Transformation: The impact of AI on Cloud

Transformation. Journal of Artificial Intelligence General Science (JAIGS) ISSN: 3006–

4023, 5(1), 174–183.

Olayinka, A. A. (2022). Financial statement analysis as a tool for investment decisions and

assessment of companies’ performance. International Journal of Financial, Accounting,

and Management, 4(1), 49-66.

Silverglate., P. (2024). 2024 Technology industry outlook: Refocusing on innovation and

growth. Wall Street Journal https://deloitte.wsj.com/cio/2024-technology-industry-

outlook-refocusing-on-innovation-and-growth-b0fa8a13