Introduction
As a financial analyst, I will analyze the Apple Company and Samsung Company's financial statements to understand their financial performance in the global market. With the advancement of new technology, the two companies were formed where they have provided various products in the technology world. Samsung is a company based in Japan which contains multiple subsidiaries and other associated firms in the market. The company has been producing high-quality mobile phones, television sets, fridges, microwaves among other major household products. On the other hand, Apple Company is also a technology firm which deals with the manufacture of high-quality products such as mobile phones such as iPhone, computers, and software among others. Financial statements are recorded statements which try to explain and reveal the financial position of the company in the market. Therefore, this paper will try to understand Apple and Samsung financial statements such as balance sheet and income statements. Apple is more dominant in the market than Samsung; hence, it is in a better financial position.
Samsung Financial Analysis
Samsung Company has continued to grow and gain enough profit in the market where due to quality products and services, there has been a gradual increase in sales hence the profit level. It is clear from the financial statements that Samsung Company was able to increase on sales and revenue generation where sales grew from $ 201867 in 2016 to $ 239575 in 2017 which was an excellent and positive indicator of strong financial performance in the market (Chen & Ann, 2016). Therefore there was more than a 6.7% increase in sales revenue that helped to boost the financial performance of the company. Ratio analysis would also be conducted which helped to reveal more financial information for the company. P/E ratio was recorded at 5.93 while asset turnover was 0.76 meaning the company has various issues in using its available assets to generate revenue. It is the role of the management to ensure that asset turnover increases to ensure higher revenue recognition in the market. On a positive note, some of the profitability ratios were also calculated from the form 10 k where gross profit margin was 45.69% in 2017 good indicator that there is stable and robust revenue generation in the market (Daniel, Neves & Horta, 2017). Net profit margin was also 18.19% meaning that the management was able to control and keep the cost and expenses at a manageable level in the market.
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Moreover, return on equity was 19.49 while return on assets was 13.83 which all helped to reveal more financial information that was needed in the market. It is therefore clear that the shareholder was able to get higher dividends payout as well as better return on investment in the market. To ensure there are enough funds to support business operations, the company has not been highly levered which has ensured that the debt and equity ratio has been maintained at a considerable level (Lesser, 2016). As a result of high dividend payout, the company share price in the market has also increased which has increased the company value and image in the market. Some of the main competitors for the company include Apple Company, Nokia, and Techno among others.
Since most of the customers are price sensitive, the company has embraced price discrimination to charge high income earning customer higher prices. As part of the book value per share and cash flow per share, it has also increased since 2013, and it is projected to continue rising over the years.
Apple Financial Analysis
The company management has the sole responsibility to ensure that all the financial statements have been prepared in accordance with the set international accounting standards. Net sales were able to increase from $ 215639 in 2016 to $ 229234 in 2017 which can be attributed to high-quality products and services in the market. In 2017, most of the sales came from America which accounted for more than $ 98600 followed by Europe at $ 54938 while the rest of the regions followed. It is therefore clear that Apple Company has ensured increased product diversification hence better market penetration. Still in 2017, with $ 229234 sales, it can also be classified under sales by products where iPhone recorded $ 141319 while iPad recorded $ 19222, Mac $ 25850, other services $ 29980 while other products recorded $ 12863 (Kalyani, Bharathi & Jyothi, 2016).
Net sales consisted of revenue generated from sales of hardware products, software, applications, other digital content as well as various accessories. Moreover, the company only records deferred revenue when the payments have been received to ensure the accuracy of the financial statements.
Besides, despite increase innovation and better service delivery, the company has also ensured cost minimization such as research and development, selling and administrative cost and other operating expenses. From the prepared income statements, the gross profit margin increased from $ 84263 in 2016 to $ 88186 in 2017 which also provided the company with the much-needed revenue. The total operating expenses accounted for $ 266842 which helped to increase the net profit of the company in the long run. Due to excellent financial performance, the shareholders were provided with good earnings per share were basic was $ 9.27 while diluted was $ 9.21 that was still an increase from $ 8.35 in 2016 (Walla & Schweiger, 2017).
An adequately constituted balance sheet was also prepared which helped to reveal the financial position of the company in the market. Asset capitalization was achieved since the financial position recorded was able to increase in the market. Asset growth increased from $ 321686 in 2016 to $ 373319 in 2017 which indicated a good growth in the market.
Ratio analysis can also be conducted which can help in the proper understanding of the financial performance in the market. For example, profitability ratios were able to express the value of the profitability in the market. Apple was able to heavily invest in its various fixed assets through its new expansion programs where the return on assets was 24.66% (Kalyani, Bharathi & Jyothi, 2016). Also, there was also a higher return on shareholder equity that expresses better earning for the stakeholders. Profitability also increased from 9% to 11% which was a clear indication that in 2017, shareholders wealth was maximized in the market (Xu, 2015).
Some of the leading financial instruments recorded included cash equivalent and marketable securities and derivative financial instruments. In terms of cash generating activities, the company has ensured an increase in various operations that would help to increase revenue and sales within the organization. Over the years, the share price of Apple Company has also increased in the market due to excellent financial performance in the market. In addition, to ensure accuracy and transparency in the financial statements, the company has incorporated strong internal controls.
Apple and Samsung Company
The two firms are major global companies in the world which are involved in the production of various products in the market in the technology sector. With increased global competition, each company hopes to ensure that it can service its customers using the best customer care in the market (Cortis, Freitas, Daudert, Huerlimann, Zarrouk, Handschuh & Davis, 2017). They have fully applied massive marketing and advertising in the market which has assisted in ensuring that each firm gains a competitive advantage in its geographical region. In such a case, the firms hope to increase in revenue generation while ensuring minimization of operating cost. Therefore, the management has provided proper budget analysis, preparation and financial statements for proper accounting.
Apple Ratio analysis 2017
Current ratio= current asset/current liabilities
131339/116866= 1.12
Current ratio indicate that the company can cater for the current liabilities
Quick ratio
(131339-23000)/116866= 0.92
Seems the company is in a better financial position
Debt ratio
Debt/equity
145000/209000=0.69
The company is not highly levered
Debt to asset turnover
Debt/total assets
145000/4000000= 0.03
The available assets can cater for the debt
Inventory turnover
Cost of goods sold/average inventory
4500090/2360000= 1.91
The company takes less number of days to sell inventory.
Days sales in inventory
500000/2360000*365= 77.3
Profit margin
Gross profit/sales
High profitability
23729/265551*100= 8.94%
Return on assets
Net income/total assets
59531/365725*100= 16.28%
The company can use available assets to generate income
Return on equity
Net income/equity
59531/107147*100= 55.56
Samsung Ratio analysis (000)
Current ratio=current assets/current liabilities
121939593/47165446= 2.58
Lower level of current liabilities
Quick ratio
Current assets-inventory/current liabilities
1219399593-123000/47165446= 1.767
Debt to equity ratio= debt/equity
50774/166371229= 0.03
The company is not highly levered
Asset turnover=
234589/457964=0.51
Company takes less time to convert assets into cash
Inventory turnover= cost of goods sold/inventory
456999/340000= 1.34
Sales in inventory
20000/600000*365= 12.17
Higher sales level
Profit margin= gross profit/sales*100
21311123/78000000*100= 27%
Return on assets
Company can use available assets to generate income
Net profit/total assets
2131123/217424498= 0.98
Return on equity=net profit/equity
21311230/16637129= 0.128
References
Cortis, K., Freitas, A., Daudert, T., Huerlimann, M., Zarrouk, M., Handschuh, S., & Davis, B. (2017). Semeval-2017 task 5: Fine-grained sentiment analysis on financial microblogs and news. In Proceedings of the 11th International Workshop on Semantic Evaluation (SemEval-2017) (pp. 519-535).
Chen, C. M., & Ann, B. Y. (2016). Efficiencies vs. importance-performance analysis for the leading smartphone brands of Apple, Samsung and HTC. Total Quality Management & Business Excellence , 27 (3-4), 227-249.
Daniel, M., Neves, R. F., & Horta, N. (2017). Company event popularity for financial markets using Twitter and sentiment analysis. Expert Systems with Applications , 71 , 111-124.
Lesser, W. (2016). Multiple Intellectual Property Damages Complications as in Apple v. Samsung-Try Using Excel. Chi.-Kent J. Intell. Prop. , 15 , 201.
Kalyani, J., Bharathi, P., & Jyothi, P. (2016). Stock trend prediction using news sentiment analysis. arXiv preprint arXiv:1607.01958 .
Xu, D. (2015, December). Research on Influence of Sumsung Project on the International Logistics Development of Shaanxi Province. In 2015 3rd International Conference on Education, Management, Arts, Economics and Social Science . Atlantis Press.
Walla, P., & Schweiger, M. (2017). Samsung versus Apple: smartphones and their conscious and non-conscious affective impact. In Information Systems and Neuroscience (pp. 73-82). Springer, Cham.
