Apple and Google: Interpretation of Financial Statement

Apple and Google: Interpretation of Financial Statement Changes

Based on the computations presented in Table 1, Apple comes across as being the best performer. My assertion is in this case largely based on the changes in the revenue figure. In the two years under consideration, the company registered a 66% increase in revenues. The enhanced revenue could in this case be an indicator of enhanced sales as a result of aggressive marketing or new product launch. An increase in unit selling price of the company's products could also have contributed to the change in revenue. Google on the other hand managed to increase its revenues by 29% within the same period. It is however important to note that in each case, the cost of goods sold also increased significantly.

From a managerial perspective, the information derived from the computations and comparisons in Table 1 are useful for a number of reasons. To begin with, I could utilize the said information to assess the current status of the companies in question. For instance, Apple's cost of goods sold increased from $39,541 million in the year 2010 to $64,431 in 2011. This represents a 63% increase in the cost of goods sold within the period under consideration. An increase in the cost of goods sold essentially leads to a decrease in net income. From a managerial perspective, the information contained in Table 1 in regard to changes in COGS over the two-year period could help in the determination of the appropriate measures to be taken in a bid to control the escalating cost of sales. Thus the information could be used as a diagnostic tool. Secondly, I could utilize the said information to compare the performance of one company against that of the other. This is more so the case given that the two companies happen to be in the same industry. For instance, in this particular case, it would be possible to compare the two companies' accounts payable figures. In the words of Duchac, Reeve and Warren (2006), "firms that grant long credit terms usually have larger accounts receivable balances than those granting short-term credit terms." From the comparisons in Table 1, Apple and Google's accounts receivable figures for the most recent financial period are captured as $13,731 million and $6,387 respectively. The top leadership of either company could use this information to review credit terms.