had tremendously increased in year 2013 by 123.01% as compared to 2012. However, in the year 2014, it increased by 19.67% as compared to 2013. Apple Inc. explains the change; “the Company must order components for its products and build inventory in advance of product shipments” (Apple, 40). Additionally, vertical analysis shows the inventory to be under 1%, which is 0.45%, 0.85%, and 0.91% for 2012, 2013, and 2014, respectively. In this case, it seems that Apple Inc. does not have a lot of inventory and does not manage it well in time manner.
The profit margin is just how much of a company’s sales they keep as a profit. Apple’s profit margin is 21.67% while Microsoft has a 28% profit margin so Microsoft is accumulating more profit off each sale but their sales are lower. The return on shar... ... middle of paper ... ...equity depends on profitability, activity and financial leverage (Spiceland, Sepe, and Nelson 258-264). Apple, along with its competitors, are easily analyzed by investors and owners through the Dupont analysis and other activity ratios while also bringing to light the construed formulas Apple uses. Works Cited "Apple Inc." (2014): n.pag.
In 2010 Hewlett-Packard Co.’s current ratio was 1.10, the current ratio for the company in 2011 was 1.01, in 2012 the current ratio was 1.09, in 2013 the current ratio was 1.11, and in the most recent year reported by Hewlett-Packard Co., 2014, their current ratio was 1.15. Looking at HP’s current ratios, it can be assumed that they are less likely to pay back their short-term debts as compared with both Apple and Google (“Annual Financials for Hewlett-Packard
Looking at both companies’ outstanding shares, Apple has more outstanding shares of common stock on the open market than Microsoft. We can assume that Apple increases its stock issuance of outstanding shares to reduce the stock price thus making Apple’s stocks affordable (Miller-Nobles, Mattison and Matsumura 669). Lastly, Apple’s stock sells at 15230.83 times one year’s earnings compared to Microsoft selling at 38.82 times. This ratio tells investors how much they will to pay for every dollar of a company’s earnings. As a result, Apple has a higher ratio, signifying that a higher price/earnings ratio, a higher return on investment (Miller-Nobles, Mattison and Matsumura 670).
There are various number of ratios to investigate company’s return on investment. Investors always relay on the higher return ratio the more investor look for. Asset Turnover Formula: Asset Turnover = Revenue / Average total assets No. Microsoft Oracle 1. 85,320,000/((174,472,000+193,694,000)/2)= 46.35% 37,057,000/((110,903,000+112,180,000)/2)= 33.22% The above calculation shows that Microsoft uses the assets more efficiently than Oracle.
It can be easily infered that the company went into a liquidity trap during 2012 with falling current ratio and quick ratio providing evidence for it. However, the company improved its liquidity psoition during 2013 when the current ratio increased from 1.49 to 1.68 and quick ratio increasing from 1.47 to 1.67. Another important point to note was there is a very negligible difference between current ratio and quick ratio which means that inventory accounts for a very small portion of current assets. Problem 2: Please highlight that refering to the financial statements of Apple Inc, we found that the company has total bond outstanding worth $17 Billion. Following is the detailed description of bonds issued by Apple Inc: (MorningStar Analyst Team) Maturity Date Amount Credit Quality Price Coupon % Coupon Type Callable Rule 144 A Yield to Maturity% 5/3/2023 5,500.00 --- 90.1 2.4 Fixed No No 3.67 5/3/2018 4,000.00 --- 97 1 Fixed No No 1.72 5/4/2043 3,000.00 --- 83.2 3.85 Fixed No No 4.94 5/3/2018 2,000.00 --- 99.3 0 FRN No No --- 5/3/2016 1,500.00 --- 99.6 0.45 Fixed No No 0.61 5/3/2016 1,000.00 --- 99.8 0 FRN No No --- Problem 3: No bond issue of Apple Inc has experienced change in Yield to Maturity during last one year.
Therefore, by comparing Apple and Blackberry ratios over a span of three years we realize that Apple has been doing a better job in terms of ROE, meaning that Apple is more effective and efficient in its use of money from investments to generate profit. The return on invested capital (ROIC) measures how efficiently a company uses the capital (owned or borrowed) that has been invested in its operations. A high ROIC means that a company is getting a high return on invested capital. Not surprisingly, Apple has the higher ROIC, with a ROIC of 35% in 2012, when Blackberry was only making a return of 14%. In 2013, Blackberry’s ROIC dropped to 0$, which means that, for every 1$ invested in invested capital, their return is
Additionally, Apple usually manages debt maturities to be less than nine months, because interest rates also affect interest paid on debt, (Maestri, 2014). To mitigate foreign currency risk, Apple uses a value-at-risk (VAR) model to analysis their foreign currency exchange risk. According to Maestri, (2014), “The Company’s practice is to hedge a portion of its material foreign exchange exposures, typically for up to 12 months” (p.
“This happens beause the higher the discount rate, the lower the investment needs to be in order to achieve the target yield” (Schmidt 2013). For example, Home Depot has a 2015 free cash flows future value of $113 million. By increasing the risk discount rate from 8% to 10%, Home Depot’s present value decreases by $1.9 million from ($104.63) million to ($102.73) million. The higher discount rate enables Home Depot to invest its available $1.9 million in free cash flows into other capital leases or other growth-related opportunities. If Home Depot decreases its discounting rate to 6%, the present value for 2015 increases to ($106.60).
Changing the value of beta will lead to a change of cost of capital and WACC. We assume that the value of beta is between 0.7 and 1. If the tax rate, risk free rate and market risk premium were constant, Amazon’s cost of capital would be between 8.6% and 11%. Therefore, Amazon’s WACC should be 8.48% to 10.82%. By using the same numbers that we estimated to calculate stock prices, the stock price would in between $294.08 and $420.11.