Apple: Ratio and SWOT Analysis
Financial Trend Comparison
Ratio Category: Liquidity Ratios
In basic terms, liquidity ratios demonstrate a company's ability to settle its obligations (short-term) if and when they fall due. To begin with, from the computations, it is clear that Apple's current ratio has consistently been less than the industry average. Hence for short-term creditors, this could be an issue of concern as the trend increases their risk. Further, a look at the company's cash ratio shows that the firm could have difficulties settling its current obligations if payment for the same was demanded immediately. Generally, most (if not all) the company's relevant liquidity ratios fall below the industry average. Hence going forward, the company could find it hard accessing short-term-credit from creditors.
Ratio Category: Asset Ratios
Asset turnover ratios are basically used as pointers of a company's level of efficiency when it comes to asset utilization. Apple's inventory turnover ratio by far surpasses industry average and hence is an indicator of strong sales. The other asset ratios including asset to equity ratio, total assets ratio and fixed assets turnover ratio fall below the industry average. This is an indicator of challenges on the part of Apple when it comes to the generation of revenues on assets.
Ratio Category: Profitability Ratios
Profitability ratios measure an entity's prowess when it comes to profit generation. Again, in this case, most of the company's ratios fall below industry average. Apple's return on assets for the year which is captured as 0.26 against the industry's average of 2.00 means that in comparison to other firms in the industry, the company is less efficient in the generation of profits using its assets. This could impact negatively on the company's profitability going forward. The company's shareholders in this case could also voice their dissatisfaction in future with the company's performance in regard to how much they are getting for every dollar invested as highlighted by the firm's return on equity.
Ratio Category: Debt Ratios
Debt ratios come in handy in the determination of an entity's solvency in the long-term. Two ratios which could help us chart Apple's financial health going forward include the total debt ratio and the debt to equity ratio. Apple's total debt ratio which stands at 0.34 indicates that the company has more assets than debt. On the other hand, the company's debt to equity ratio shows that the company is using very little debt to finance its growth. This basically protects Apple from volatile earnings going forward.
Ratio Category: Market Ratios
Basically, market ratios are critical for the analysis of a firm's viability as an investment. Considered an important ratio in this category, earnings per share shows how much profit is allocated to each common stock of Apple. As an indicator of the profitability of the company, Apple's EPS comes across as being rather impressive. In all instances, it surpasses the industry average effectively meaning that Apple's stock is a viable and attractive investment option for most investors in comparison to the stocks of the other firms operating in the same industry. Hence the company's prospects for future growth are not in any way threatened as the company could easily raise its level of retained earnings to fuel future growth and expansion. Further, looking at the company's price to earnings ratio, it is clear that investors are optimistic of higher earnings growth going forward. This assertion is based on Apple's relatively high price to earnings ratio in comparison to that of other companies in the same industry. The company's low payout ratio in relation to its peers in the same market could be constructed to mean that Apple is more interested on earnings retention as opposed to dividend payment. This could result in higher earnings in the future if the company is putting retained earnings to good use.
Section C: Apple's Comparative Financial Analysis Compared to Industry Performance
Based on the analysis of the four ratio categories, it is clear that Apple's performance in comparison...
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