Apple Computer Inc.: Financial Statement Analysis

Apple Computer Inc (AAPL) produces software and consumer electronics such as computers. Steve Wozniak and Steve Jobs founded Apple in 1978. The company revolutionized the music industry with the release of the iPod that gave the customers the opportunity to experience and listen to music in a very different manner. Since then, Apple has continued to be a market leader in the electronic industry. The Smartphone industry has experienced exponential growth with the entrant of Android Smartphones, which has led to stiff competition. The increased competition made me interested in the financial position of Apple Computer Inc. in competing favorably with the new players.

Apple’s return on assets, profit margin and asset utilization (September 2009-September 2014)

Profitability 2009/09 2010/09 2011/09 2012/09 2013/09 2014/09
Net profit margin 19.19 21.48 23.95 26.67 21.67 21.61
Asset turn over 0.99 1.06 1.13 1.07 0.89 0.83
Return on assets 18.92 22.84 27.07 28.54 19.34 18.01

Samsung return on assets, profit margin and asset utilization (December 2009-December-2013)

Profitability 2009/12 2010/12 2011/12 2012/12 2013/12
Net margin 7.02 10.22 8.32 11.53 11.32
Asset turn over 1.25 1.25 1.14 1.19 1.16
Return on assets 8.8 12.82 9.47 13.77 13.11

According to Subramanyam and Wild (2008) Return on Assets (ROA) helps in establishing the efficiency of a business. It determines how effective a company is in converting the cash it has invested in net income. The implication is that a firm with a high ROA stands a better competitive position as it is having huge returns on the investment. Based on the ROA for Apple Computer Inc. and Samsung Electronics Company Limited, Apple recorded a decrease in ROA in 2013 and 2014. Even though Apple Inc. still enjoys high revenues, the reduction points to a reduction in the financial stability that may reduce its competitiveness. Higher ROA translates to a better competitive advantage as it points to a company using less investment to earn more.

Free cash flow for Apple Computer Inc. and Samsung Electronics Co. Ltd. (September 2009-September 2014)

2009/09 2010/09 2011/09 2012/09 2013/09 2014/09
Operating cash 10159 18595 37529 50856 53666 59713
Capital Exp 1213 2121 7452 9402 9076 9813
Free cash flow 8946 16474 30077 41454 44590 49900

Free cash flow for Samsung Electronics Co. Ltd (December 2009-December 2013)

2009/12 2010/12 2011/12 2012/12 2013/12
Operating cash flow 18484668 23321153 22903177 37972809 46707440
Capital expenditure 8622218 22879140 22629356 23616155 24092330
Free cash flow 9862451 442013 273821 14356654 22615110

Observing the trend since 2009, Apple Electronic Inc. has been recording an increase in the free cash flow margins each year, which points to a relative stable cash position. However, since 2012, the increase has been slow compared to the earlier years. In general, the company expenditure has been on the increase as well as the operating cash flow. On the other hand, Samsung Electronics Co. Ltd has been experiencing a substantial free cash flow increase since 2010. The financial period ending 2012 and 2013 indicated very high increase. The increase pointed to the fact that Samsung has reduced cash use and increased operating cash flow that signify the company has a significant stable cash position that aligns it to a better competitive position (Subramanyam &Wild, 2008). The position of the cash flow at Apple Computer Inc. does not give it a hefty competition position, which may compromise its position as a market leader.

References

Morningstar, Inc. (2015). Market barometer. Web.

Morningstar, Inc. (2015). Market barometer. Web.

Subramanyam, K. and Wild, J. (2008). Financial Statement Analysis. London: Mc-Graw Hill.

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