Return on Assets
Apple Inc. is one of the companies that are doing well in the market industry today since the time it was established. It is also a company that has been known for many years due to its unique brand that it has maintained for the longest time possible. Its financial analysis is one of the aspects that need to put into consideration. Starting with the return on asset, this is defined as the ratio that is meant to show the profit percentage of the company as well as its earnings in regards to its resources. Its main purpose is to show how much an organization is worth in terms of profits as much as its assets are concerned (Morningstar.com, 2019). The return on asset is responsible for indicating the efficiency in terms of management and how the assets are utilized in order to generate income. In relation to Apple Inc, it is clear that the ROA of Apple has been increasing significantly with a notable percentage from 13.87% to 16.07% in 2017 and 2018, respectively. This is a clear indication that the company has been using its assets accordingly to increase its earnings and this is also possible in the future (Johnson et al., 2012).
Return on Equity
This is a kind of metrics that are used in the measurement of net income that has been returned as part of the percentage of shareholder's equity. It is also the ratio that is given the responsibility of showing how profitable a company is through exposing the company's earnings that have particularly been generated from the investors as well as the shareholders. In accordance with Apple's case, the ROE has increased to a total of 49.36% in the year 2018 alone ( Schroeder, Clark, & Cathey, 2013). This is a significant number and it is also a clear indication that the company is being led well especially in regards to its shareholders to increase its earnings.
Delegate your assignment to our experts and they will do the rest.
Return on Capital
ROC or what is known as return on capital is the ratio that is calculated through the division of the after-tax operating by the book value of equity as well as the debt-less cash together with its equivalents. This is one of the most significant metrics due to the fact that it aids in the comparison of the relative value-creating as well as profitability potential of an organization after the consideration of the initial invested capital has been completed. Apple's ROC had an increase of 19.86% to 24.41% respectively from 2017 and 2018 (Morningstar.com, 2019). This clearly indicates that the relative profitability, as well as value-creating, has been increasing significantly and the situation is expected to be even better in the future with regards to the invested capital in the company.
Gross Margin
Generally, gross margin is simply measured by dividing the gross profit by net revenue that is being generated by the company. It is very important since it aids in the identification of the value of all the sales that are incremental and to guide the process of pricing decisions. Just like all the other aspects, the gross margin of Apple Inc has reduced with a small value from 38.47 to 38.34% in 2017 and 2018 respectively (Schroeder, Clark, & Cathey, 2013). This means that the company needs to address this drop since it shows that the company has not been managing its cost of goods hence reducing the gross profit.
SG&A Margin
It is comprised of the measurements as well as the comparison of major non-production cost to sales. Apple also seemed to experience a drop in this sector although not that huge since it ranged from 6.66% to 6.29% in 2017 and 2018. This shows that the company is sliding a little in regards to the management of non-production cost (Morningstar.com, 2019). Therefore, the company needs to incorporate new strategies for managing the cost.
Current Ratio
It involves the comparison of current assets to current liabilities. It contains the indication of a company's market liquidity as well as the ability to meet all the short-term demands from the creditors. The current ratio of Apple Inc is currently at 1.28 to 1.12 in 2017 and 2018 respectively (Schroeder, Clark, & Cathey, 2013). This shows that the company has failed to meet its short-term obligations and therefore needs to improve this sector through the implementation of various strategies.
Quick Ratio
This is a ratio that is used in the measurement of a company's capability of using its near cash in the aim of meeting its current obligations at that particular moment of need. Quick assets to current liabilities are compared in order to establish how viable a company is in regards to meeting its current obligations easily. Apple Inc quick ratio currently stands at 1.09 to 0.99 in 2017 and 2018. This indicates that the company is not doing much in regards to its usage of quick assets to meet its short-term obligations (Morningstar.com, 2019).
Total Debt/Equity
This includes the calculation of a company's financial leverage. It simply involves the measurement of how committed the creditors to the company in comparison to the shareholders' commitment. The debt to equity ratio for Apple Inc increased by a margin of 0.14 between the years 2017 and 2018 accordingly (Johnson, et al, 2012). This is a significant increase which means that the creditors are more committed when compared to the shareholders. However, it also needs to be improved to a better number.
Total Revenue
It consists of the total turnover that a company makes from the overall sales of its goods and services. When looking at Apple's revenues, it has been increasing with a significant number throughout the years which means that the company has been making good pricing as well as promotion decisions (Schroeder, Clark, & Cathey, 2013).
Gross Profit
Gross profit is responsible for representing the differences in revenue as well as the costs that are involved in the production of the revenue. Clearly, Apple Inc has been only experiencing an increase in gross profit throughout the years which means that the company has been successful in the management process of its cost of goods ( Johnson, et al, 2012).
References
Johnson, K., Li, Y., Phan, H., Singer, J., & Trinh, H. (2012). The Innovative Success that is Apple, Inc.
Morningstar.com (2019 ). Apple Inc.: Financial Statements . Retrieved on 18 July 2019, from http://financials.morningstar.com/ratios/r.html?t=AAPL
Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2013). Financial accounting theory and analysis: text and cases . New York, NY: Wiley Global Education.
