Question

Refer to Apple inc company and perform a trend analysis for the most recent 4 years (the financial statements needed for this assignment may be available at https://finance.yahoo.com/). Analyze the trends for 3 line items you believe are most important in evaluating a company for the balance sheet and for the income statement (3 each). In your initial post, answer the following questions:

• What do you observe in the linear trends (i.e., are values increasing or decreasing)?
• What are the trends on a common-size basis?
• What would be your next steps in completing a thorough analysis of the trends?
• Your Discussion should be a minimum of 250 words in length and not more than 450 words.

Answer 1

Key Data of last 4 Year - Audited
Apple Inc
	2018($ Mio)	2017($ Mio)	2016($ Mio)	2015($ Mio)
Net Sales	2,65,595	2,29,234	2,15,639	2,33,715
Net Sales Growth	16%	6%	-8%	28%
Cost of Sales	1,63,756	1,41,048	1,31,376	1,40,089
Gross Margin	1,01,839	88,186	84,263	93,626
Gross Margin %	38.34%	38.47%	39.08%	40.06%
Net Income	59,531	48,351	45,687	53,394
Net Income %	22%	21%	21%	23%
Non Current Portion of Term Debt	93,735	97,207	75,427	53,329
Non Current Liability increased	76%
Balance Sheet
Account receivable Net	23,166	17,874	15,754	16,849
Current Asset	1,31,339	1,28,645	1,06,869	89,378
Current Laibility	1,16,866	1,00,814	79,006	80,610
Current Ratio	14,473	27,831	27,863	8,768
Closing Cash and cash Equivalent	25,913	20,289	20,484	21,120

Revenue Trend – Net Sales of Last 4 year , from the above table is quite clear that Apple made major revenue jump in 2015 ( by 28%) . Year 2016 revenue suddenly showed negative growth. Negative growth turn back in the year in 2017 and posted growth +ve 6% . Definitely in year 2108 , revenue growth close with 16% jump .

From product wise revenue chart , noticed that major revenue contributor is iphone + Service . Other product( Mac, ipad) revenue are almost flat in nature

In 2016 , Net Sales reduced sharply mainly due to slow down in iPhone sales and impact of weakness in most foreign currencies relative to US dollar

Gross Margin - $ value wise gross Margin has improved in 2018 as compared earlier year mainly due to favourable shift in mix of i Phones with higher average selling price and higer services net sales . Albeit this increase has been slightly down by higher product cost .

Also the strength foreign currencies relative to the US dollar had a favourable impact on gross margin and gross margin % in 2018

Gross margin % slightly drop mainly due higher production structure cost .

Future look out of Gross Margin – Company expect to earn Gross Margin in around 38% - 38.5% mainly due to following factor : Company expect gross margin still volatile and under pressure

1. Tremendous pricing pressure
2. Potential increase in the cost of components
3. Outside manufacture service
4. Fluctuation in exchange rate

Future alarming –

Foreign currency fluctuation as compared with $ , adversely impact company’s gross margin . Even though company adopted Derivatives ( Foreign currency forward + option contract ) to hedge certain exposure to fluctuation in foreigh currency exchange rates The use of such hedging activities may nit be effective to offset any or more than a portion , of the adverse financial effects of unfavourable movements in foreign exchange rates over the limited time the hedges are in place.

Future outlook on Quarterly revenue and operating result – Will fluctuate

The company at present generates a majority of its net sales from a single product and declined that product definitely will adversely impact on net sales and margin . Company expect material impact due to shifts in mix of product and services    

Net Profit Margin – company establishing margin on YoY basis around 20%+, which is quite good under tremendous competitive Technology market .

Other Factor – Legal Compliance + Data protection

Companies business is subject to risk of international operation,

Balance Sheet – Non current portion of term debt has increased by 76% over the last 4 year as against revenue growth only 14% .

Trade Receivable – The company’s cellular network carrier accounted or 59% of total receivable as both in 2018 and 2017 . At present company has a considerable amount outstanding with its 03^rd party cellular network carriers , wholesaler , retailer, reseller etc,

From current ratio analysis – it is quite clear that company maintain proper solvency ratio on YOY basis .

From cash and cash equivalent – noticed that company maintain good amount of cash balance after absorbing following factor :

1. Constant payment of dividend on YOY basis ( avg payout $12000+ )
2. Repurchase of common stock
3. Borrowing of loan mostly set of repayment amount .

Overall company giving Basic Earning per share $ 12.01 in 2018 , $9.27 in 2017 , $ 8.35 in 2016 .. constant flow of EPS