Ethics and the SEC Apple Inc.

Junior (College 3rd year) ・Accounting ・APA ・2 Sources

An organization's financial statements have the necessary information needed by the users. Ratio analysis determines a company's profitability, efficiency, liquidity and leverage as at a given time. Investors are usually concerned with quantitative analysis as provided for in ratios (Babalola and Abiola, 2013). The below are some of the ""ratios"" derived from Apple Inc. for the years 2016 and 2015 respectively, and a relative performance deviation which is useful in decision-making.
 Apple Inc. 
  SGR Calculation 
 Years INC/DEC 
 2016 2015 
  Revenue $ 215,639.00  233,715.00 $ (18,076.00) 
  Net Income $ 45,687  53,394.00 $ (7,707.00) 
  Profitability Ratios 
  Net profit Margin 
  : Net Income/Revenue 21%  23% $ (0.02) 
  Gross Profit $ 84,263.00  93,626.00 $ (9,363.00) 
 Gross profit Margin 
 Gross profit/Revenue 39%  40% (0.01) 
  Return On Asset 
 Total Assets $ 321,686  290,479.00 $ 31,207.00 
 Return on Assets 
 : = Net Income/Total Assets 14% 18%  (0.04) 
  Liquidity Ratios 
 Current Ratio 
 Current Assets $ 106,869  89,378.00 $ 17,491.00 
 Current Liabilities $ 79,006  80,610.00 $ (1,604.00) 
 : Current (Assets/Liabilities)  1.35  1.11  0.24 
  Market Ratio 
 Price Per Share (PPS) $ 112.71 $ 114.71  (2.00) 
  : Total Assets $ 321,686.00 $ 290,479.00 $ 31,207.00 
  : Total Liabilities $ 193,437.00 $ 171,124.00 $ 22,313.00 
  Shareholders' Equity(SHE) $ 128,249.00 $ 119,355.00 $ 8,894.00 
 No. Outstanding Shares(T) 5,336  5,579.00  (243.00) 
 EPS: Net income/T $ 8.56  9.57  (1.01) 
 Book Value per share (BVS) 
 : SHE/T  24.03  21.39 $ 2.64 
 a) P/E Ratio: PPS/EPS  13.16  11.99 $ 1.18 
 b) Market to Book Ratio 
 PPS/BVS  4.69  5.36  (0.67) 
  Debt Measures 
 Debt to Asset Ratio (D/A 
 Total Debts (TD) $ 193,437 $ 171,124 $ 22,313.00 
 Total Assets (TA) $ 321,686 $ 290,479 $ 31,207.00 
 D/A = TD/TA  0.60  0.59 $ 0.01 
 (Retrieved from Apple Inc. Excel, n.d)
 Apple Inc.
 Dividends paid (D) $ 12,150 $ 11,561 $ 589 
  ROE = NI/SHE 36% 45% -9% 
  Dividend paid out Ratio =D/NI 27% 22% 5% 
  1-DPR 73% 78% -5% 
 SGR = ROE x (1-DPR) 26% 35% -9% 
 (Retrieved from Apple Inc. Excel, n.d)
 The Company posted overall gross revenues amounting to $ 233,715.00 in the year 2015 which significantly dropped to $ 215,639.00 by $18,076.00 in the following year (Apple Inc. Excel, n.d). The figure may not please investors as they would get worried that very little is done to generate income. With such a drop, its sustainability is in question because it may not be able to take care of its future administrative expenses and those needed for administrative purposes. 
 Net Income
 The net income registered in the year years 2015 and 2016 were $ 45,687 and $ 53,394 respectively. The company did not perform well since there was a drop in net revenue of $ 7,707 (Apple Inc. excel, n.d). By registering low gross income, the expectation is that the net income too would drop. Lack of proper financial management office could be another problem as a lot of cash go into unexplained expenditures. This factor doesn't portend a positive future for the organization's sustainable growth.
 Gross Profit Margin
 The margin recorded in 2015 and 2016 were 40% and 39% respectively. There is a fall of 1% which signifies that it used more to generate revenues than expected (Apple Inc. excel, n.d). It is a financial metric required for the assessment of an organization's ""financial"" condition. It reveals the amount of money that remains after taking account of the cost of sales. The performance as indicated also reflects that the company is headed the wrong direction or not correctly financial managed. 
 Net profit Margin
 The net profit margin for 2015 was 23% which fell by 2% to 21% in the year 2016. The ratio shows how much each dollar generated translates into profits. It is what investors are interested in as it assures them of the returns on their investment. Dipping by 2% symbolizes a wrong direction the company has taken regarding revenue generation and use (Apple Inc. excel, n.d). The company may find it hard sustaining going into the future if the trend continues.
 Return on Assets (ROA)
 Measures the degree of how assets were used to generate revenue. The company posted 18% and 14% in the years 2015 and 2016 respectively (Apple Inc. excel, n.d). The sudden fall by 4% is a reflection that financial management is lacking. A lower ROA necessarily mean that Apple Inc. is not efficiently using the available resources to generate income. The overall mentality should change, if it is to register a positive return much higher than what is recorded in 2016, going into the future.
 Current Ratio
 It measures an organization's ability to meet short-term debts using existing assets. The more significant it is (more than 1), the better for the company. From the analysis, 1.11 and 1.35 were registered in 2015 and 2016 respectively (Apple Inc. excel, n.d). It shows that the organization posted a strong performance and should continue doing so if to remain relevant. The margin of 0.24 is highly favorable.

Earnings per Share (EPS)

It shows the proportion of net income allocated to outstanding shares. Apple Inc. recorded EPS of $ 9.57 and $ 8.56 in the years 2015 and 2016 respectively which was a drop of $ 1.01 (Apple Inc. excel, n.d). The performance registered was not good for the organization. The EPS that arose from net earnings fell with a decline in Net profit and gross profit margin for the years. There is the need for control of expenses if it is to sustain into the future.

Price-earnings Ratio (P/E)

Most people intending to value a company usually go for PE ratio because it measures current share price relative to earnings per share. Apple Inc. registered $ 11.99 and $ 13.16 for the years 2015 and 2016 respectively (Apple Inc. excel, n.d). The registration of a higher P/E ratio in the current year to the previous one portends a positive future for the company. The company must continue doing so to gain shareholders and potential investor's confidence.

Debt to Asset Ratio (D/A)

The ratio measures total debt relative to assets. The company registered 0.59 and 0.60 ""ratios"" in the year 2015 and 2016 (Apple Inc. excel, n.d). The marginal increment of 0.01 is though inconsequential but should not arise. It shows that the organizations' leverage is risky and may not be suitable for it sustainability. It has to keep the debts at minimum low for it to have a favorable D/A ratio

Sustainable Growth Rate (SGR)

The Company intimated to grow at 35% in the year 2015. However, this was not to be when it recorded an SGR of 26% in the subsequent year (Apple Inc. excel, n.d). The decrease in growth rate should be a worry for potential and existing investors. It is because should it need to expand, it may be forced to look for other external sources of financing which may expose it to unnecessary debts. Worst still is the fact that investors may not get good returns on their investment in the long run. 


Apple Inc. (n.d). Excel Sheet

Babalola, Y. A., & Abiola, F. R. (2013). Financial ratio analysis of firms: A tool for decision making. International journal of management sciences, 1(4), 132-137.

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