Financial Health and Performance of an Organization Assignment | College Homework Help

 Businesses and other organizations must regularly measure their financial performance and health to make operational and strategic decisions affecting the
organization’s future. Management professionals utilize income statements, balance sheets, cash flow statements, and a variety of other reports and techniques
to evaluate an organization. They also work closely with professionals from departments across the organization—including marketing, human resources, and
operations—to ensure that the business runs smoothly and financial decisions are not made in isolation.
For this project, you will use the accounting and finance skills you learned in the course to review the past and current financial performance and health of
a global, publicly traded company. Using that analysis, you will create initial financial projections that forecast the company’s performance under different
scenarios and identify internal risks and opportunities in order to begin planning future activities.
In this assignment, you will demonstrate your mastery of the following course outcomes:
 MBA-520-01: Assess an organization’s’ underlying financial performance and health by analyzing relevant financial statements, variances, ratios,
and other financial information
 MBA-520-02: Draw connections between accounting and financial information and the broader organizational context for making integrated business
decisions
 MBA-520-03: Assess critical factors driving financial risks and opportunities for informing management priorities
 MBA-520-04: Forecast business performance under different assumptions about inputs and processes using simple financial models
 MBA-520-05: Evaluate the internal costs and benefits of business opportunities for their impact on budgeting and business decisions
 MBA-520-06: Communicate financial analyses clearly and coherently for persuading internal stakeholders of the validity of observations and conclusions
Prompt
Imagine you are a newly hired manager at a publicly traded, global corporation of your choosing.
You have been asked to review the company’s past and current financial performance and health and make initial financial projections in order to begin
planning for the upcoming year. Your supervisor is particularly interested in a fresh perspective on what your analysis reveals about potential risks and
opportunities, as well as recommendations for next steps. Because you will eventually need to convince internal stakeholders, including senior management, of
the feasibility and desirability of your suggested activities, it is important that you justify your projections and recommendations, explaining how they were
informed by existing information and modeling different scenarios.
Your financial analysis and projection report will include several financial tables, along with a comprehensive narrative describing the company’s context
and financial performance and health, and your analytical approach and conclusions. Your report should be geared toward an executive audience with
basic accounting and finance knowledge and should be well organized, clear, concise, convincing, and free of distracting errors. Note that, in addition to
the company’s financial statements and website, other authoritative news sources—such as annual reports and external sites like Bloomberg—may offer
insights that facilitate analysis or provide information on the company’s priorities, challenges, and geographic distribution.
Specifically, your financial analysis and projection report must include the following critical elements. Most of the critical elements align with a particular course
outcome (shown in brackets).
I. Executive Summary: Clearly and concisely summarize your principal findings, projections, and recommendations as a manager, with the goal of
persuading busy executives to support your ideas and read further. Provide your intended audience with a solid but brief sense of the parameters of
your analysis and who you would consult in refining it further, and why. Remember that your goal is to convince readers of the validity of your
observations while recognizing limitations that affect business decisions. [MBA-520-06]
II. Financial Performance and Health: In this section, you will evaluate the company’s recent financial performance and current financial health, given its
organizational context. In particular, you must cover the following:
A. Organizational Context
1. What key goods or services does your company provide, for whom, where, and why? How do these features of the company (major
products or services, customers, location, etc.) help set the boundaries for business decisions? [MBA-520-02]
2. How is the company organized and managed (by product groups, geographic region, function, etc.)? How does that affect
accounting and financial information and subsequent business decisions? [MBA-520-02]
B. Recent Financial Performance
1. Assess what the company’s consolidated income statements for the last three years say about its financial performance. Use relevant
indicators, graphs, and spreadsheets to support your narrative. (Include all spreadsheets in an appendix.) For example, what do the
amounts and year-to-year changes in revenue, operating income, net profit or loss, and earnings before interest, taxes, depreciation,
and amortization tell you? Do any items stand out? [MBA-520-01]
2. Assess what the company’s consolidated cash flow statements for the same time period say about its financial performance. Use
relevant indicators, graphs, and spreadsheets to support your narrative. For example, what do the amounts and year-to-year changes
in cash from operating activities, cash from investing, cash from financing, and total cash flow tell you? Do any items stand out? [MBA520-01]
3. Assess the company’s underlying financial performance. Support your answer with the analysis above and relevant research. For
example, is recent performance substantially affected by unusual events such as a major acquisition or spin-off? Is the business
thriving or struggling in its industry? How do you know? [MBA-520-01]
C. Current Financial Health
1. Assess how the company is capitalized and what that tells you about its financial health. Support your response with relevant graphs,
spreadsheets, and indicators such as cash and cash equivalents, total debt, shareholders’ equity, current ratio, debt/equity ratio, and
days sales outstanding (DSO). For example, does the company have enough cash for payroll and other bills? Does it have the right mix of
debt versus equity (stock)? How do you know? [MBA-520-01]
2. Does the company have the right amount of cash and other resources (e.g., key people, technologies, reputation, physical assets) to fuel
future growth? What does this suggest for business decisions? For example, if it has too much cash, should it pay a large dividend,
repurchase its own shares, or reinvest the excess funds? [MBA-520-02]
3. Assess the financial value of the company using relevant indicators. What does your assessment imply for future business health
and performance? For example, what is the business’s current market value? What is its price-to-earnings ratio? What do these
suggest about investor perceptions of the business’s future? [MBA-520-01]
III. Success Factors and Risks: Use this section to discuss the factors that may affect current and future performance. Specifically:
A. How do the company’s financial and strategic priorities affect accounting procedures and business decisions? How might that affect business
success? For example, is management growth-oriented or efficiency-oriented? What is the company’s approach to risk and short- versus longterm planning horizons? [MBA-520-03]
B. How might the company better capitalize on nonfinancial factors such as market share, reputation, human resources, physical facilities, or
patents? Support your response with relevant research and analysis. [MBA-520-03]
C. What are the most significant internal risks to the company’s financial performance? Give evidence to support your response. For example, is
the company vulnerable to technological changes or cyberattacks? Loss of high-talent personnel? Production disruptions? [MBA-520-03]
IV. Projections: Using what you know about the company’s financial health and performance, forecast its future performance. In particular, you
should:
A. Project the company’s likely consolidated financial performance for each of the next three years. Support your analysis with an appendix
spreadsheet showing actual results for the most recent year, along with your projections and assumptions. Remember that your
supervisor is interested in fresh perspectives, so you should not just replicate existing financial statements: You should add other relevant
calculations or disaggregations to help inform decisions. [MBA-520-04]
B. Modify your projections for the coming year to show a best- and worst-case scenario based on the potential success factors and risks
you identified. As with your initial projections, support your analysis with an appendix spreadsheet, specifying your assumptions and
including relevant calculations and disaggregations beyond those in existing financial reports. [MBA-520-04]
C. Discuss how your assumptions, forecasting methodology, and information gaps affect your projections. Why are your projections
appropriate? For example, are they consistent with the company’s mission and priorities? Aggressive but achievable? How would changing
your assumptions change your projections? [MBA-520-04]
V. Business Opportunities: In this section, discuss the incremental impact of a hypothetical but reasonable and simple new investment project, such as a
new product or facility or a cost-cutting investment, as an initial step in thinking about the future. Be sure to address the following:
A. Based on your knowledge of this company, what is a likely investment it would consider and why? Be sure to describe the basic features of
the investment as a foundation for considering its potential financial impact. [MBA-520-05]
B. Evaluate the approximate costs and benefits of the investment you identified, explaining how they would affect your spreadsheet
projections and business decisions. Estimates are sufficient but should be grounded in common sense and insight into the company. [MBA520-05]
C. Assess the implications of how the potential investment affects budgeting and related business decisions. For example, does the investment
involve significant cash spending this coming year, followed by benefits in the following year? How might that affect short-term and long-term
spending priorities? Does the benefit outweigh the cost? [MBA-520-05]
Milestones
Milestone One: Financial Performance and Health
In Module Three, you will submit your first milestone, in which you will evaluate the company’s recent financial performance and current financial health given
its organizational context. This milestone will be graded with the Milestone One Rubric.
Milestone Two: Success Factors and Risks
In Module Five, you will discuss factors that may affect current and future performance. This milestone will be graded with the Milestone Two Rubric.
Milestone Three: Projections
In Module Seven, you will forecast future performance based on what you know about the company’s financial health and performance. You will then modify
your projections for a best and worst case scenario, and discuss how your methodologies affect your projections. This milestone will be graded with the
Milestone Three Rubric.
Final Submission: Organizational Financial Analysis
In Module Nine, you will submit your final project. It should be a complete, polished artifact containing all of the critical elements of the final product. It
should reflect the incorporation of feedback gained throughout the course. This submission will be graded with the Final Product Rubric.
Deliverables
Milestone Deliverable Module Due Grading
One Financial Performance and Health Three Graded separately; Milestone One Rubric
Two Success Factors and Risks Five Graded separately; Milestone Two Rubric
Three Projections Seven Graded separately; Milestone Three Rubric
Final Submission: Financial Health and
Performance of an Organization
Nine Graded separately; Final Project Rubric
Final Project Rubric
Guidelines for Submission: Your financial health and performance report should be approximately 12–15 pages (excluding title page, spreadsheets and graphs,
and references list). It should be double-spaced, with 12-point Times New Roman font and one-inch margins, and use the latest guidelines for APA formatting for
references and citations. Include your name, course name, and report title on the title page.

 

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Apple Inc. Financial Projections.

 

Yahaira Flatts

Southern New Hampshire University

MBA-520-Q4874 Acct & Financial Analysis

Dr. Carl Vann

Wednesday May 27, 2020

 

 

Apple Inc. Financial Projections.

Strong Financial Health and Performance

Apple Company has been increasing its market share in the USA and wound the globe. The use of technology and the rise of the internet is promoting the growth of businesses, especially those involved in both software and hardware components. The company has been growing since it makes these two components. Although there was a slight drop in the company’s income in 2019 as compared to the other years, the company is yet to reach its full potential. The company will have to invest more in establishing itself as a strong brand both within and without the United States. Research and innovation are also a major concern in this industry; this is an issue given consideration by the company. The company also needs to address cybersecurity vulnerabilities associated with the use of its products to encourage more customers to consider its product.

Readiness to Compete

            As a technology company, Apple realizes the importance of staying relevant to its customers. Its strong brand is enabling to continue growing. With such a brand Apple can get into a better partnership and promote its sale. The unique brands of Apple play a major role in establishing its relevance in the market. The company can sell goods are at a relatively high price and still get buyers because of the luxury and prestige associated with using Apple’s product(Cybart, 2018). In strengthening the brand, Apple ought to consider partnering with local firms that are mostly regarded by big investors as small companies. This partnership will help to boost the company and help it to compete for the remaining market shares effectively. The benefit of these small companies is that Apple can get them at a relatively low cost and have total control. The small companies still have their own customer base, whether in a physical location or loyal customers on their virtual platforms. Creating a strong brand makes it easier for the company when it comes to marketing.

The field of technology is a dynamic field. There is a need to have current findings to inform the company’s decisions as it grows into the future. Apple has an excellent research and development department. The department ensures that the company is always up to date. With rapid innovation, the company can maintain the brand’s position. It also becomes easier for the company to secure a promising partnership by showcasing its ability. Research and innovation are not just about coming up with new products; it is also about understanding the change in customers’ needs. Computer users are now paying attention to aninbuilt computer camera so that they can save costs on the installation of an external webcam(Macrotrends, 2020). This issue is rising due to the ongoing need to have people conduct meetings online. By just improving a simple feature like a camera, Apple can increase its sales in the corporate industry. As the portability of laptops is essential for students and the working class, the size and the weight of these devices is an important consideration for them. There is a need to have more designs of slim laptops to take advantage of this rising demand and change in customers’ behavior.

There is a greater concern for security among people using electronic devices and operating software. The users want assurance that the devices are secure and have no prevailing underlying vulnerabilities. By investing more funds in the R&D department, the company will be able to provide a lasting solution to the threat of cybersecurity(Cybart, 2018). Apple invested more than $ 16 million in the research and development department(Macrotrends, 2020). Taking enough measures to inform customers about any rising issues in cybersecurity, the company will gain loyalty from the customers. Such communicationsare an effective technique to both keep the current customers and to get the attention of other prospective buyers. The company will, therefore, have to invest more in dealing with common viruses. The company can achieve this through third party software to secure their customers.

Even as the company invests more in improving the hardware and software, there is still a serious issue concerning social engineering. For the company to fight against this vice, they can also be issue newsletter to its customers (Digital Information World, 2020). These communications will show the company’s goodwill towards the customer. With such an established relationship, it becomes easier for the company to advertise new products to users who already trust them this technique will help in furthering the progress of the company in terms of the sales it makes.

Three Year Forecast.

Heading into the future, Apple Inc. should seek to partner with both big and small companies, design more slim laptops and high-resolution webcam, and address cybersecurity issues. Addressing these three major issues, it will be possible for Apple Inc. to raise its financial positions for high profitability. This consideration will require a huge investment, which will turn bring better returns and promote the companies brand position among its customers. The average obtained from the company’s financial statement in the last four years (2016-2017) is useful in projecting its growth in the future. The projections for the next three years (2020-2022) have been attached to the appendices section.

The assumption is that the company will continue to promote its sales online. For Apple Inc.,this is an important platform seeing the huge number of people accessing the internet daily. In these projections, the assumption is that there will be no abnormal hikes in the cost of labor. The cost of production is also to increase with an increasing returns to scales. There are more people pursuing higher education in tertiary institutions. Thus, the company can get highly qualified workers best suited for working in various departments such as the marketing department, financial department, research, and development department.

Best and Worst Case Scenarios

Worst Case Scenario.

            The assumption is that the cost of labor will remain constant. This cost may change as the demand for this labor increases in other technology-based industries.  Apple Inc. will, therefore, have to spend more on advertising recruiting and paying workers. The high demand for labor may also mean that employees well trained at Apple Inc. may shift to other companies once offered better options. The company will, therefore, need to spend more to meet the employees’ demands. What this does is that it reduces the amount of money that the company budgets for other operational works. With little investment in new projects and products, the company will be straining to keep up with its competitors. The tax rates in 2019 were 15.9%; the worst-case scenario is where the rates increase to 24.5%. With the current global pandemic (Corona Virus) affecting productivity in every sector, the sales of Apple may also drop. The implication is the rise of unemployment levels. Unemployed people will have little to spend on technology and electronic devices; they will be saving their money for other essential needs.

Best Case Scenario

With the company investment in research and development, the best-case scenario would arise where the company can produce slim laptops such as MacBook Air at a low cost. This design would then improve its sales. The assumption, in this case, is that Apple will accomplish this at the same labor cost. While the tax rate remaining at 15.9 %, Apple will also reduce its expenses on paying taxes. Partnering with other companies such as Clevo in Taiwan, Cherry mobile in the Philippines, Eurocom Corporation in Canada, will help Apple Inc to expand its reach outside the United States (Digital Information World, 2020). This partnership will further help to improve its brand and bring more income to Apple. These companies may seem to be small, but their growth in the future may improve performance in their respective countries. The assumption is that if the partnership takes place this year, benefits will mostly have significant changes after one year.

Assumptions, Forecasting Methodology and Information Gaps

Assumptions.

The projection was that as the United States Gross Domestic Product grows, the citizens’ income increases, and so is their spending. The analysis took into consideration the company’s financial statement from 2016-2019. The average percentage growth being the rate at which the company would grow in the next three years. Calculations involved the use of the year 2019 as the base year.  Projections by Forbes was that Apple Inc. would grow by a 6.0% percentage. This is less than the 6.7% growth obtained by the use of mean growth in the last four years(Forbes, 2020). The more than 15% drop in revenues for the financial year 2019 is unique, and there are no expectations it would occur for the next three years, the period considered for projection in this case. The assumption that the company would continue its online sales is valid since it is in line with Apple’s mission. The company wants to take advantage of the increased trends towards online shopping.

Forecasting Methodology

The validity of the forecasting is that it has its basis on the most recent actual financial statements from the company in the last four years. The company has audited this value. The forecasting technique also involved the use of averages, meaning that there is balancing out ofanomalies on data. If the forecasting used the previous year’s growth rate, this would be inconsistent with observations from other years. The approach that there will be more investment in research and development to protect users is in line with the company’s mandate and compliance regulations by the government. It also aligns with the management’s strategic plan of maintaining a unique brand different from its competitors.

Information Gap.

Apple Inc. involves itself in producing various software and hardware components. The two covers both mobile devices and other computers. Coming up with a recommendation to apply generally to all operations may not be valid. The financial statement represents all activities under Apple, such as sales under iPhone, Apple Watch, Apple TV, iOS, iPod. Better projections that would be best for the company is to address each item differently. Following this rule will make it possible for the company to identify products with a declining return and those with an increasing return.

 

 

References

Cybart, N. (2018, August 15). Above Avalon: Apple’s growth story. Above Avalon. Retrieved May 18, 2020, from https://www.aboveavalon.com/notes/2018/8/15/apples-growth-story

Digital Information World. (2020, February 16). Breaking down Apple’s financial success. Retrieved May 18, 2020, from https://www.digitalinformationworld.com/2020/02/how-apple-makes-its-money.html

Forbes. (2020, February 14). Will Apple’s iPhone business return to growth this year? https://www.forbes.com/sites/greatspeculations/2020/02/14/will-apples-iphone-business-return-to-growth-this-year/#7f87ff6d1685

Macrotrends. (2020). Apple financial statements 2005-2020 | AAPL. Macrotrends | The Long Term Perspective on Markets. Retrieved May 18, 2020, from https://www.macrotrends.net/stocks/charts/AAPL/apple/financial-statements

 

 

Appendix A

Historical Four Year Comparative Performance

Company: Apple          Financial Statements. Millions (US $) YEARS Percentage Change
2019 2018 2017 2016 2019 2018 2017 Avg
Revenue  $ 260,174  $   265,595  $    229,234  $ 215,639 -2.0 15.9 6.3 6.7
Cost of Goods Sold  $ 161,782  $   163,756  $    141,048  $ 131,376 -1.2 16.1 7.4 7.4
Gross Profit  $   98,392  $   101,839  $      88,186  $   84,263 -3.4 15.5 4.7 5.6
     Research and Development Expenses.  $   16,217  $     14,236  $      11,581  $   10,145 13.9 22.9 14.2 17.0
     SG&A Expenses  $   18,245  $     16,075  $      15,261  $   14,194 13.5 5.3 7.5 8.8
     Other Operating Income or Expenses  –  –  –  –  –  –  –  –
Operating Expenses.  $ 196,244  $   194,697  $    167,890  $ 155,615 0.8 16.0 7.9 8.2
Operating Income.  $   63,930  $     70,898  $      61,344  $   60,024 -9.8 15.6 2.2 2.6
Total Non-Operating Income  $     1,807  $       2,005  $       2,745  $    1,348 -9.9 -27.0 103.6 22.3
Pre-Tax Income  $   65,737  $     72,903  $      64,089  $   61,372 -9.8 13.8 4.4 2.8
Income Taxes  $   10,481  $     13,372  $      15,738  $   15,685 -21.6 -15.0 0.3 -12.1
Income After Tax  $   55,256  $     59,531  $      48,351  $   45,687 -7.2 23.1 5.8 7.3
Other Income  –  –  –  –  –  –  –  –
Income from Continuous Operations.  $   55,256  $     59,531  $      48,351  $   45,687 -7.2 23.1 5.8 7.3
Income from Discontinued Operations  –  –  –  –  –  –  –  –
Net Income.  $   55,256  $     59,531  $      48,351  $   45,687 -7.2 23.1 5.8 7.3
EBITDA  $   76,447  $     81,801  $      71,501  $   70,529 -6.5 14.4 1.4 3.1
EBIT  $   63,930  $     70,898  $      61,344  $   60,024 -9.8 15.6 2.2 2.6
Basic Shares Outstanding.         4,618          4,955           5,217        5,471 -6.8 -5.0 -4.6 -5.5
Shares Outstanding         4,649          5,000           5,252        5,500 -7.0 -4.8 -4.5 -5.4
Basic EPS  $     11.97  $      12.01  $         9.27  $      8.35 -0.3 29.6 11.0 13.4
EPS- Earnings Per Share  $     11.89  $      11.91  $         9.21  $      8.31 -0.2 29.3 10.8 13.3

 

Appendix B.

Three Year Projections.

Company: Apple          Financial Statements. Millions (US $)  Three Year Projection.
2019  % Growth 2020 2020 2020
Revenue  $ 260,174 6.71  $    277,628  $ 296,252  $ 316,126
Cost of Goods Sold  $ 161,782 7.42  $    173,784  $ 186,677  $ 200,526
Gross Profit  $   98,392  $    103,844  $ 109,576  $ 115,601
     Research and Development Expenses.  $   16,217 17.00  $      18,974  $   22,199  $   25,972
     SG&A Expenses  $   18,245 8.78  $      19,848  $   21,591  $   23,487
     Other Operating Income or Expenses  –
Operating Expenses.  $ 196,244 8.22  $    212,368  $ 229,818  $ 248,701
Operating Income.  $   63,930 2.65  $      65,623  $   67,361  $   69,145
Total Non-Operating Income  $     1,807 22.27  $       2,209  $    2,701  $     3,303
Pre-Tax Income  $   65,737  $      67,833  $   70,062  $   72,448
Income Taxes  $   10,481  $      16,619  $   17,165  $   17,750
Income After Tax  $   55,256 7.26  $      51,214  $   52,897  $   54,698
Other Income  –
Income from Continuous Operations.  $   55,256 7.26  $      51,214  $   52,897  $   54,698
Income from Discontinued Operations  –
Net Income.  $   55,256 7.26  $      51,214  $   52,897  $   54,698
EBITDA  $   76,447 3.08  $      78,801  $   81,228  $   83,729
EBIT  $   63,930 2.65  $      65,623  $   67,361  $   69,145
Basic Shares Outstanding.         4,618 -5.49  $       4,365  $    4,125  $     3,899
Shares Outstanding         4,649 -5.44  $       4,396  $    4,157  $     3,931
Basic EPS  $     11.97 13.41  $            14  $         15  $         17
EPS- Earnings Per Share  $     11.89 13.33  $            13  $         15  $         17

 

Appendix C.

Worst Case Scenario Three Year Projection.

Company: Apple          Financial Statements. Millions (US $)  Worst Case Scenario Three Year Projection.
2019  % Avg Growth  % modified growth 2020 2020 2020
Revenue  $  260,174 6.71 3.71  $ 269,822  $ 279,829  $  290,206
Cost of Goods Sold  $  161,782 7.42 10.42  $ 178,638  $ 197,249  $  217,800
Gross Profit  $    98,392  $  91,185  $   82,579  $    72,406
     Research and Development Expenses.  $    16,217 17.00 20.00  $  19,460  $   23,352  $    28,023
     SG&A Expenses  $    18,245 8.78 11.78  $  20,394  $   22,797  $    25,482
     Other Operating Income or Expenses  –  –  –  –
Operating Expenses.  $  196,244 8.22 11.22  $ 218,263  $ 242,752  $  269,988
Operating Income.  $    63,930 2.65 3.65  $  66,263  $   68,682  $    71,189
Total Non-Operating Income  $      1,807 22.27 19.27  $    2,155  $     2,571  $     3,066
Pre-Tax Income  $    65,737 2.78  $  68,419  $   71,253  $    74,255
Income Taxes  $    10,481  $  16,763  $   16,763  $    16,763
Income After Tax  $    55,256  $  51,656  $   54,490  $    57,492
Other Income  –
Income from Continuous Operations.  $    55,256 7.26  $  51,656  $   54,490  $    57,492
Income from Discontinued Operations  –
Net Income.  $    55,256 7.26  $  51,656  $   54,490  $    57,492
EBITDA  
EBIT  
Basic Shares Outstanding.  
Shares Outstanding  
Basic EPS  
EPS- Earnings Per Share  
For worst case scenario, taking 3% more for expense and  3% less for income
Income tax %=24.5

 

 

Appendix D.

Worst Case Scenario Three Year Projection.

Company: Apple          Financial Statements. Millions (US $)  Best Case Scenario Three Year Projection.
2019  % Avg Growth  % modified growth 2020 2020 2020
Revenue  $  260,174 6.71 9.71  $ 285,433  $ 313,144  $  343,546
Cost of Goods Sold  $  161,782 7.42 4.42  $ 168,931  $ 176,395  $  184,190
Gross Profit  $    98,392  $  98,392  $   98,392  $    98,392
     Research and Development Expenses.  $    16,217 17.00 14.00  $  18,487  $   21,076  $    24,026
     SG&A Expenses  $    18,245 8.78 5.78  $  19,300  $   20,415  $    21,595
     Other Operating Income or Expenses  –  –  –  –
Operating Expenses.  $  196,244 8.22 5.22  $ 206,488  $ 217,267  $  228,608
Operating Income.  $    63,930 2.65 5.65  $  67,542  $   71,358  $    75,390
Total Non-Operating Income  $      1,807 22.27 25.27  $    2,264  $     2,836  $     3,552
Pre-Tax Income  $    65,737 2.78  $  69,806  $   74,194  $    78,942
Income Taxes  $    10,481  $  17,102  $   17,102  $    17,102
Income After Tax  $    55,256  $  52,703  $   57,091  $    61,840
Other Income  –
Income from Continuous Operations.  $    55,256 7.26  $  52,703  $   57,091  $    61,840
Income from Discontinued Operations  –
Net Income.  $    55,256 7.26  $  52,703  $   57,091  $    61,840
EBITDA  
EBIT  
Basic Shares Outstanding.  
Shares Outstanding  
Basic EPS  
EPS- Earnings Per Share  
For worst case scenario, taking 3% less for expense and  3% more for income
tax %=24.5

 

 

 

 

 

 

 

 

 

 

Analysis of Apple Inc and Key Success Factors and Risks

 

Yahaira Flatts

Southern New Hampshire University

MBA-520-Q4874 Acct & Financial Analysis

Dr. Carl Vann

Sunday May 10, 2020

 

 

 

 

 

 

 

 

Analysis of Apple Inc key success Factors and Risks

Apple, Inc has developed to become one of the most successful technology companies in the world and the United States. The organization began its operations in producing highly innovative computer products in 1976. Apple Company has rapidly increased its production and penetration into markets across the world through innovation and unique branding. Apple products, including iPhones, computers, and online stores, are the most expensive as compared to other products serving similar purposes, such as HP computers. It cost about $350 to purchase an HP computer with appropriate software, speed, and memory. On the other hand, it cost about $1,000 to purchase a computer from Apple with similar memory, speed, and software as the HP models. Current economic reports in the Apple, Inc show that the company rakes in about $167 billion annually in iPhone sales and computer sales of up to $25 billion with 41% market share in the United States. Apple competitors such as Samsung have a market share of 21% in the United States (Digital information world 2020). The company has witnessed an increase in its market share over the past ten years with penetration in Africa and Asia. Despite its growth, Apple, Inc must consider the available success factors and risks for further decision-making to enhance competition.

Financial and Strategic Priorities

Brand

Apple, Inc has extensively focused on branding and creating a unique brand that is associated with the high income individuals. Apple brand, which is highlighted using its Apple mark at the back of the electronic devices, is unique in appearance and the innovative nature of the software. Apple has invested in new technology to develop a unique brand that fits into the market. The current generation prefers unique products in terms of technological devices that have been provided by Apple through exceptional computer features such as iCloud, which is a cloud storage system (Apple Inc, 2019).

Partnerships

Apple, Inc has increased its market penetration and product development through a partnership with multinational companies, including Cisco, Accenture, IBM, Box, and SAP. The company has also ventured into partnerships with companies in China, India, and Canada to create more access to the market. The German software company SAP is involved in the development of customer management systems that fits into the current digital market (Apple Inc, 2019).

People

Apple, Inc targets people, particularly the computer and iPhone users. The company has developed products that facilitate employee management and interaction for other organizations. Apple has described its products simple and effective to fit into the tastes of the middle and upper class. The use of Apple products is mainly by high-income individuals, which has been the target of the company. Apple allows its employees to work under a flexible schedule using a remote working model (Apple Inc, 2019).

Key Non-Financial Success Factors

Innovations and Differentiation

Apple, Inc has managed to expand its market portfolio through constant innovation. The company has highly skilled software developers through its partners, which has facilitated innovation. Apple is an undisputed high-tech company when it comes to portable devices such as mobile phones. Apple has developed effective models to attract consumers across the world through innovation. The development of iCloud is an example of innovation by Apple that no other companies realized during this generation of technology. The company also paired business models such as iTunes paired with Apple App Store, which has attracted a mass following by the microcontent consumers. Apple is highly transformative, which has kept it moving forward based on the demands in the market. The innovative nature of Apple has differentiated its products from those of the competitors (Johnson et al., 2012).

Apple has continued to develop innovative products by identifying the needs of the population. The company realized an increase in the consumption of online music across the world, with artists pushing for digital revenue to meet the technological changes (Apple Inc, 2019). In response, Apple created iTunes in 2003, which has become the leading online music store in the world. Apple, through innovation, is able to see beyond the current products in the company. It monitors its competitors and takes a step forward to achieve high levels of success. The development of a multitouch screen for Apple products chased other competitors such as Blackberry. Apple iPhones are also unique in that it requires user ID to use the devices which prevent theft and loss of personal data. User ID has remained as one of the most innovative ideas by Apple, which enhances competition. The increased investment in new models will likely affect the financial position of the company as innovation requires additional costs. The company, through its management, should recognize the importance of balancing revenue and the cost incurred in the development of software to prevent losses.

Global Partnership

Apple, Inc has continued to forge for partnerships across the developed countries for effective access to the appropriate market. The company has partnerships with software developers in North America and Europe, which crucial for its success. However, the company has failed to recognize emerging markets in the Middle East and Asian countries such as Singapore, where the company has not developed effective partnerships. It must recognize the importance of marketing partnerships and promotions with the leading sports such as the English Premier League, which is the world’s most-watched sport to reach markets across the globe. The company partnered with MVNO Macquarie Telecom in Australia for the supply of Apple products. The partnership with companies outside the United States should not only involve the supply chain, but also, it should encourage innovative collaboration and product development in countries with cheaper raw materials for computer systems. Apple should also forge for mergers and acquisitions with other companies with a mission to develop a global brand that meets the needs of the expanding population. It is important to recognize the growing market in Africa, where the middle and upper class are willing to purchase Apple products. As such, Apple must develop effective partnerships in Africa to compete with other companies such as HP (Apple Inc, 2019).

Expanding eCommerce

Apple is a high-tech company that invested in eCommerce, particularly in the United States and Europe. The company has about 25 stores for delivery of products across the world, which is lower than that of its competitors. The Chinese companies such as Huawei have stores that distribute products directly to the consumers in over 35,000 stores worldwide. The company must expand its online sale of products to reach different parts of the world. The number of stores should be increased as per the demands in the market. However, the expansion of the number of stores worldwide should be guided by eCommerce purchases. Apple, as a unique brand, should stop focusing on the American market as the population will likely shift to other products in the future. Ecommerce expansion by Apple is important for a global presence (Apple Inc, 2019).

Key Risks

Despite the success factors identified, Apple must recognize the potential risks to the products produced to avoid losses in the future. The main risks faced by the company include challenges in recruiting and retaining a skilled workforce, global operation, and disruption of distribution networks. The company must develop effective strategies to mitigate the risks.

Disruptions in its Distribution Networks

Natural disasters are the main causes of distribution network disruption. Apple is exposed to disruptions to its network by occurrences, including hurricanes and global pandemics such as the coronavirus. As such, the company must set up effective storage facilities and online stores to facilitate easy distribution during disruptions. The growing issue of cyber-attacks is another risk faced by Apple. International criminals are increasingly targeting online stores and data storage systems. Apple has been a victim of attacks by cyber-criminals in the past. As such, the company must develop effective security systems for the online stores and data storage system (McBride, 2019).

Productivity Initiatives and Global Strategy

Apple has achieved over 41% market growth in the United States alone, which shows its ability to reach larger markets. The company must increase its productivity while reducing development costs incurred from software creation to prevent losses. Increased access to the global market across the developed and developing countries is also important for the long-term sustainability of business (McBride, 2019).

 

Recruitment and Retention of Key Employees

The high-tech industry faces increased competition for skilled and innovative employees. The leading high-tech companies, such as Samsung, are recruiting employees with exceptional skills in software development. As such, Apple will likely invest more in hiring and retaining skilled labor in the future as the technology sector expands. New companies will introduce competitive compensation and bonuses for skilled labor. The company must develop effective bonuses and motivational strategies for skilled employees to manage the current changes in the labor market. The young generation prefers working from home to enhance satisfaction. As such, Apple should allow flexible scheduling for its employees for retention purposes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

References

Apple Inc. (2019). Apple Products. Apple. https://www.apple.com/sitemap/

Apple Inc. (2019). Business – Partners. Apple. https://www.apple.com/business/partners/

Digital information world. (2020, February 16). Digital Information World. https://www.digitalinformationworld.com/2020/02/how-apple-makes-its-money.html

Johnson K., Phan Y., Singer H., & Trinh J. (2012). The Innovative Success that is Apple, Inc.

McBride, S. (2019, December 2). Half of Apple’s business is at risk. Forbes. https://www.forbes.com/sites/stephenmcbride1/2019/12/02/half-of-apples-business-is-at-risk/#49ce2e775761

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Financial Health and Performance of Apple Inc.

 

Yahaira Flatts

Southern New Hampshire University

MBA-520-Q4874 Acct & Financial Analysis

Dr. Carl Vann

May 3, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Financial Health and Performance of Apple Inc.

Organizational Context

Apple Company is an American based international corporation with its headquarters in Cupertino, California. The corporation was established in 1976 by Steve Jobs and his close allies when they developed Apple 1 personal machines (“Apple Newsroom” 2019). Ever since, Apple has been afloat in techno-business with its research, innovation, and development rigor, ensuring the company remains competitive even in the dynamic technological world. The company boasts of permanent 130,000 employees in its production line with other employees distributed globally for sales and marketing purposes (“Apple Newsroom” 2019). Apple Company has a global reputation due to its multinational influence and financial overturns. Apple Inc. boasts of revenue overturns exceeding 150 billion dollars yearly, being the only company with a valuation of more than 1 trillion dollars (“Apple Newsroom” 2019). For example, in 2018 alone, Apple Inc. had a revenue overturn of about 260 billion dollars from its autonomous sales. Apple is globally considered a tech-giant along with other companies such as Google and Microsoft. Strategic management and excellent organizational corporate leadership have stimulated the company through shifting economic times. In turn, this has ensured that Apple Company remains a competitive global brand.

KeyGoods orServices/Features

Essential goods and services provided, for whom, where, and why. Typically, Apple Company is fundamentally involved in planning, conceptualizing, developing, manufacturing, and marketing technological devices, electronics, and online service-oriented software.  Apple Company manufactures several products such as iPhone (smartphones), iPad’s (tablets), iPods, Mac computers, wearable’s (apple TV, apple watches, home Apple pads, and other Apple-branded home accessories) (Ritholtz, 2017).  The company has a niche in three markets by diversifying its products to the smartphone market, tablet market, and the personal computer market. Apple has also manufactured several software products such as the operating system, which supports several smartphone systems, macOS for running computers, and wtOS for watches. The company also has several online utilities such as Shazam, iTunes application, iWork creative as well as other media pro applications which allow users to access digital content such as videos, movies, and podcasts.

Apple’s product market scope ranges from corporate businesses and organizations to individuals globally. Primarily, Apple products are specially designed to meet both individual and organizational needs across the globe.  To achieve its global agenda, Apple has retail shops around the world in approximately more than 150 countries (Ritholtz, 2017). The company aims at breaching the technological gap in the corporate world as well as modernizing and digitalizing the evolving parameters of the society through providing hardware products as well as online services. These facets include education, access to mass media, access to information, and creating a technological virtual reality for both individuals, corporate entities, and even governments. The company employs a third-party small scale, mid-scale, as well as a wholesale seller for the global distribution of its products.

How features of the organization help set the boundaries for business decisions. Due to the ever-changing technological world, Apple Company aims at providing innovative products that meet consumer needs and provide satisfaction while remaining viable in the current technological world. As a result, any business decision made is usually aimed at improving the quality of their products based on the customer’s responsibility. With its massive creative ability, the company is committed to utilizing its enormous power in operating system development, hardware, and accessory manufacture to provide user-friendly technology-based products and services. As its development and business strategy due to the vastness of its market, the company leverages introducing new introspective ways of accessing digital content by diversifying its online service platforms. The company has also established a software development community and hardware research that complement its proficient inventions (Ritholtz, 2017). Furthermore, as part of its strategy, the company aims at expanding its market scope both online and retail to meet consumer requirements.

Apple Inc. Business Organization

Apple Company, currently headed by Tim Cook as the chief executive officer, is administered basically on a geographical basis with an organized management system that coordinates the different geographic management facets. Apple’s management is fragmented across the different continents and nations, i.e., south and North America, Europe, Asia, Africa. Ideally, though similar products and services are offered across the various management fragments, each segment enjoys autonomous management to suit the geographical market structure, ease marketing, and distribution and understand the local market dynamics. Each management fragment is usually answerable to a board of directors that administer the whole company. Besides, since apple operates in three different market scopes, the board of directors controls the general market parameters after feedback from different segment management teams.

RecentFinancialPerformance

Assessment ofIncomeStatement

Financial performance analysis based on the consolidated income statement. The last Saturday of September marks the end of a fiscal year for Apple Company. The company has, for the past three years, experienced some uncanny dynamical finances in its consolidated financial statement, both in revenues, cash flow, and liquidity values. For the last three years, Apple has a P/E value of 16.8 as compared to the industries 12.5, implying a higher market valuation and financial stability. The company has witnessed gross net incomes of 48.351, 59.540, and 55.256 billion dollars annually for the past three years indicating a stable market and customer base (“Apple Newsroom” 2019). Besides, the company’s depreciation and amortization and depletion have grown in the past three years, from 3 million dollars to 11 million dollars, which indicates growth in its assets, both tangible and intangible. Besides, the company’s profit margins stand out in the range of 39.5% in the past three years, and this shows how stable the company is globally in the competitive techno-business

Assessment of Statement ofCash Flows

Operating Activities

Looking at the underlying financial statement. Based on the consolidated financial reports, the variance of year to year income can be attributed to several aspects. The financial performance of Apple was slightly affected in the fiscal year 2017 by the introduction of new products such as iPhone 7, and iPhone 8 and Apple Watch, making the tech giant struggle to keep a competitive edge in the market. Customers had a negative approach to these products, which resulted in reduced sales even before taxation of about 2.8%. Nevertheless, due to the company’s diversification with cash flow from both services and products, purchases from other Apple accessories and digital content ensured the company stayed afloat in the market. For instance, in 2019, due to reduced sales of iPhones across the globe, apple witnessed a net-financial dip by about 6 million dollars (2.1%) as compared to 2018, in which an increase of 17% was seen in comparison with 2017 (“Apple Newsroom” 2019). Nevertheless, the financial matrix is balanced by increased sales in apple branded home accessories and digital services cash inflow.

 

Investing Activities

Assessment based on consolidated cash flow statements. Based on the company’s consolidated revenues for the past three years, the company’s cash generation from services has increased year to year, then reduced slightly at the end of 2019. Additionally, revenue generated from investments increased gradually. It’s also notable that the company’s use of revenues has diminished in the past three years. Typically, Apple Company can be said to be healthy financially with a balanced company’s balance sheet since it’s minimizing spending while maximizing cash inflow, excluding activities that are discounted.

Financing Activities

Thenet cash PepsiCo used for financingactivities in 2017 was approximately$4.2 billion, which resulted primarilyfrom dividend payments of $4.5 billion,and repayment oflong-termdebt of $4.4 billion (net proceedsfrom long-term debt was $3.1 billion) (see Appendix E). Financingactivities include cash inflowsand outflows associated with outside financing activities, such as cashraised bysellingsecurities (stocks and bonds) orbyborrowingcashfrom banks (Early&McClure,Fundamental Analysis:TheBalanceSheet, 2018).

UnderlyingFinancialPerformance

Looking at the underlying financial statement. Based on the consolidated financial reports, the variance of year to year income can be attributed to several aspects. The financial performance of Apple was slightly affected in the fiscal year 2017 by the introduction of new products such as iPhone 7, and iPhone 8 and Apple Watch, making the tech giant struggle to keep a competitive edge in the market. Customers had a negative approach to these products, which resulted in reduced sales even before taxation of about 2.8%. Nevertheless, due to the company’s diversification with cash flow from both services and products, purchases from other Apple accessories and digital content ensured the company stayed afloat in the market. For instance, in 2019, due to reduced sales of iPhones across the globe, apple witnessed a net-financial dip by about 6 million dollars (2.1%) as compared to 2018, in which an increase of 17% was seen in comparison with 2017 (“Apple Newsroom” 2019). Nevertheless, the financial matrix is balanced by increased sales in apple branded home accessories and digital services cash inflow.

CurrentFinancialHealth

Assessment ofCapitalization.

Apple’s current capitalization. Apple has become the first company to pass 1 trillion dollars in its market value and capitalization. Using the ratio analysis method, Apple Inc. can be said to be financially healthy (“Apple Newsroom,” 2019). For instance, for the last three years, there has been an increase in P/E as inferred to the S/P ratio from approximately 17% in 2017 to about 30% in 2019, which is forecasted to continue increasing exponentially (“Apple Newsroom” 2019). Also, it is notable how shareholders are in good faith with the company after receiving an approximate stable return in the range of 35% with an average estimate of EPS of 8 dollars.

“Cash and cash equivalent.”-Apple cash and cash equivalent declined by 2% in the 3rd quarter of 2019 (June-September) but remained constant in the coming quarters (“Apple Newsroom” 2019). Apple’s fiscal earning increase by a margin of 3%.

Equity capitalization. -In totality, current Apple boasts of an equity index of 97.5 billion dollars, which is inclusive of 44 billion dollars as the valuation of stock rates, and 56 billion dollars as hold-on earnings (“Apple Newsroom” 2019). As a result, Apple has an efficient capital structure by capital utilization and an increase in equity.

Financial position to stir growth and pay bills and payroll-Apple has a D/E ratio of 0.5 with a shift to 1.2, indicating the dynamism in the financial markets (). Apple Company is financially well placed to stir growth and development in the future. With the current capitalization, the liquid flow cash is expected to satisfy the operating needs, material purchase, manufacture and production, marketing, and innovation. Apple has both tangible and intangible assets that will be able to stir the company development plan.

Assessment ofGrowth

Financial position to stir growth and pay bills and payroll-Apple has a D/E ratio of 0.5 with a shift to 1.2, indicating the dynamism in the financial markets (). Apple Company is financially well placed to stir growth and development in the future. With the current capitalization, the liquid flow cash is expected to satisfy the operating needs, material purchase, manufacture and production, marketing, and innovation. Apple has both tangible and intangible assets that will be able to stir the company development plan.

Assessment ofFinancialValue

Financial value analysis. Currently, Apple has a liquidity ratio in the range of 1.28, which is higher than the cash and quick rate. Ideally, this indicates Apple’s ability to meet current short term requirements. Currently, Apple has a market value of 293 billion dollars (“Apple Newsroom,” 2019). Furthermore, the company has a share value of 293 dollars to earning cost of 12.7 hence a PE value of 23.81. As a result, investors are willing to pay more for share values due to the potential of future growth exhibited by the Apple Company’s current financial parameters.

           

 

 

 

References

Apple Newsroom. (2019). Apple Reports Fourth Quarter Results. Apple Newsroom. Retrieved 25 April 2020, from https://www.apple.com/ke/newsroom/2019/10/apple-reports-fourth-quarter-results/.

MEYER, P. (2019). Apple Inc.’s Organizational Culture & Its Characteristics (An Analysis) – Panmore Institute. Panmore Institute. Retrieved 25 April 2020, from http://panmore.com/apple-inc-organizational-culture-features-implications.

Ritholtz, B. (2017). The Big Four of Technology. Bloomberg.com. Retrieved 25 April 2020, from https://www.bloomberg.com/opinion/articles/2017-10-31/the-big-four-of-technology.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AppendixA

Apple Product Offerings

 

 

 

 

 

 

 

 

 

 

 

 

AppendixB

ConsolidatedStatementofIncome

Apple Inc.

 

 

Recent financial performance (EPS growth)

 

Apples consolidated cash flow.

Current market capitalization

Current fiscal capitalization

Apples current market value

Consolidated sales  statement

Consolidated operation statement

 

 

 

 

 

 

 

 

 

 

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