How to Analyze Apple Inc.'s Financial Statements

The DuPont equation is a relatively fast and straightforward way to evaluate the general condition of an organization. The analytic methodology was first used by the DuPont Corporation in the 1920s to assess their company's component section of the return on equity ( Lockamy III, 2017 ). The analytic tool will as a result of this be used to compute the financial statements of Apple Inc. to determine its health. 

Thus, 

DuPont = A. Turnover x NP Margin x Equity M. 

But, 

Turnover = Rev ÷ Av. T. Assets 

NP Margin = N. Income ÷ Rev 

Equity M. = Av. T. Assets ÷ Av. S. Equity 

In 2016, 

Turnover = 215,639,000/321,686,000 = 0.670340021014281 

Apple Inc. has been using its assets effectively in producing sales in as much as it has a large asset base. 

NP Margin = 45,687,000/215,639,000 = 0.211867983064288 

The company managed to produce profits in the last quarter of the year equivalent to 21 cents for each sale in the dollar. 

Equity M. = 321,686,000/119,629,000 = 2.689030251862007 

Apple Inc. has demonstrated a good asset to debt ratio. 

DuPont =2.689030251862007x0.211867983064288x0.670340021014281=0.3819057252004113 

From the results, the company is efficient in using shareholders resources in generating profits. 

2017, 

Turnover = 229,234,000/375,319,000 = 0.6107711040474903 

The effectiveness of the use of company assets in generating sales is still evident. 

NP Margin = 48,351,000/229,234,000 = 0.2109242084507534 

In the last quarter of the year the company made profits equivalent to 21 cents for every sale made. 

Equity M. = 375,319,000/134,047,000 = 2.799906003118309 

The debt to equity ratio is still very strong. 

DuPont = 0.6107711040474903 x 0.2109242084507534 x2.799906003118309= 0.360701843383291 

The company continues to show its ability in turning shareholder’s money into profits. 

2018, 

Turnover = 265,595,000/365,725,000 = 0.0727185726980655 

The company has become more efficient compared to the previous two years in the use of its assets to generate sales. 

NP Margin = 59,531,000/265,595,000 = 0.2241420207458725 

There was a slight increase in profits equivalent from 21 to 22 cents for each sale in dollar. 

Equity M. = 365,725,000/107,147,000 = 3.413301352347709 

The debts are more than covered by the asset base and in case of default can be repaid three times over ( Etzioni, 2018) . 

DuPont = 0.0727185726980655x0.2241420207458725x3.413301352347709=0.0556343811934677 

The use of shareholders equity is not as strong compared to the two previous years. 

References 

Etzioni, A. (2018). Apple: Good business, poor citizen?.  Journal of Business Ethics ,  151 (1), 1-11. 

Lockamy III, A. (2017, July). An examination of external risk factors in Apple Inc.’s supply chain. In  Supply Chain Forum: An International Journal  (Vol. 18, No. 3, pp. 177-188). Taylor & Francis.