Apple Company on Education Sector
Financial Analysis
In essence, the financial analysis of Apple would come in handy in efforts to assess its performance over time. Data for the analysis will be sourced from the Form 10K statements the company has filed over the last 5 years. Table 1 captures the key metrics that were used in the analysis of the performance of Apple.
From the onset, it is clear from Table 1 that Apples net sales have been on an upward trend over the last 5 years i.e. from $ 229,234 million in 2017 to $ 365,817 million in 2021 (Apple, 2022). This represents a 59.6% growth in net sales over the 5 year period. The companys net income has also exhibited a similar trend with an impressive 95.8% growth in net income having been registered between 2017 and 2021 (Apple, 2022). The companys operating expenses over the last 5 years increased by 63.5%.
The return on equity (ROE) ratio happens to be a crucial profitability ratio. This is more so the case given that as Brigham and Houston (2015) points out, it could be considered the bottom line measure for the shareholders, measuring the profits earned for each dollar invested in the firms stock (193). It is clear that Apple has been effective in the conversion of its equity financing into profits. This is more so the case given that as can be seen in table 1, this key ratio has been on an upward trend over the last 5 years i.e. from a ROE of 0.36 in 2017 to a ROE of 1.50 in 2021. Thus, in essence, for every dollar invested by shareholders in Apple in 2017, the company was able to generate 0.36 dollars of net income. On the other hand, for every dollar invested by shareholders in Apple in 2021, the company was able to generate an impressive $1.50 of net income. When it comes to return on assets (ROA), the sustained increase in the same over the 5-year period demonstrates that Apple has further enhanced its ability to effectively utilize its assets to generate profits.
Item
2021
2020
2019
2018
2017
Net sales
$ 365,817
$ 274,515
$ 260,174
$ 265,595
$ 229,234
Operating expenses
$ 43,887
$ 38,668
$ 34,462
$ 30,941
$ 26,842
Net income
$ 94,680
$ 57,411
$ 55,256
$ 59,531
$ 48,351
Return on equity
$94,680/
$63,090
= 1.50
$57,411/ $65,339
= 0.88
$55,256/ $90,488
= 0.61
$59,531/ $107,147
= 0.56
$48,351/ $134,047
=...
…below highlights three competitive advantages of Apple using the VRIO framework.Competitive advantages
Value (V)
Rarity (R)
Imitability (I)
Organization (O)
Innovativeness
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Product quality
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Brand recognition
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Table 2
When it comes to innovativeness, it should be noted that there is no doubt that Apple is a hugely innovative enterprise. This gives the company a unique competitive advantage. Podolny and Hansen (2020) indicate that the company is organized for innovation on multiple fronts and it is for this reason that it manages to maintain a high innovation rate across multiple product categories which is in itself a rare feat.
The company also strives to ensure that it offers the market premium products and services. To a large extent, this happens to be one of the most outstanding property of the companys products. This could be viewed from the perspective of one of Porters generic strategies, i.e. differentiation. Essentially, Apples products are more exclusive in comparison to similar products from the companys competitors. Apples commitment to product quality has been part and parcel of the companys manifesto from the onset.
Apple happens to be a globally recognized brand. What this means is that most people are familiar and can relate with the companys key features such as its logo …
References
Apple (2022). SEC Filings. https://investor.apple.com/sec-filings/default.aspx
Brigham, E.F. & Houston, J.F. (2015). Fundamentals of financial management. Cengage Learning.
Berk, J., DeMarzo, P., & Harfod, J. (2021). Fundamentals of corporate finance (5th ed.). Pearson.
Markander, M. (2020). Apple named world’s most innovative company. https://www.macworld.com/article/674701/apple-named-worlds-most-innovative-company.html
Podolny, J.M. & Hansen, M.T. (2020). How Apple Is Organized for Innovation. https://hbr.org/2020/11/how-apple-is-organized-for-innovation
Taylor, C. (2022). Tim Cook says he uses ‘a very good formula’ to look for Apple employees—these are the 4 traits he seeks out. https://fortune.com/2022/10/03/tim-cook-4-qualities-get-hired-at-apple/
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