5 pages, APA format.

Prompt: In this milestone, you will submit a draft of the Risk Analysis section (III) and the Risk Management Strategies section (IV) of the final project. You will analyze the different risks that APPLE INC. faces and classify the risks (e.g., stand-alone risk, corporate risk, or market risk), which were discussed in Module One and more specifically in Module Five. You will also analyze the impact of these risks in regards to the company?s internal and external environments. Lastly, you will recommend risk management strategies that minimize the risk and maximize the return for APPLE INC. For example, you might think about whether the company should reduce its use of debt or seek short-term or long-term financing options instead.

Specifically, the following critical elements must be addressed:

III. Risk Analysis

1. a) What is a specific risk that you have identified as relevant to this company, its product(s), and its industry?
2. b) As which type of risk would you classify it? In other words, is it considered stand-alone, corporate, or market risk? Be sure to defend your reasoning.
3. c) What do you feel is the impact of the risk with regard to the company?s external environment (i.e., economic trends, regulatory landscape, and competition), as well as its internal environment (i.e., people, process, and infrastructure)?
4. d) To what extent do you feel this risk can be effectively balanced with return? Be sure to justify your reasoning.

IV. Risk Management Strategies

1. a) What risk management technique do you feel would be most appropriately employed to minimize or mitigate the effect(s) of this risk? Why?
2. b) Similarly, what strategies might you suggest for maximizing return in the face of this identified risk? Why?
3. c) What recommendations would you make in terms of determining the effectiveness of these risk/return management measures over time? Be sure to justify your recommendations.

**I have also attached my Milestone 1 below, please refer to the numbers and content from my Milestone 1 before you start doing Milestone 2. Thank you.

Running Head: INTRODUCTION AND FEASIBILITY OF APPLE INC. Final Project Milestone 1: Introduction and Feasibility of Apple Inc. FIN 685: Risk Management Emily Wong Yien San Prof. Scott Gillman Southern New Hampshire University August 28, 2016 INTRODUCTION AND FEASIBILITY OF APPLE INC. Introduction Apple Inc. was founded on January 3,1977, by Steve Jobs and Steve Wozniak. Together they have a strong vision towards the company, which is to change the way of people perceived computers; they have successfully evolved computers to the size that is small enough for people to be able to use them in their homes or offices. Today, the company offers a wide range of mobile communication and media devices, computing products and portable digital music players, and software products (Rawlinson, 2016). A. Apple Inc. Size of Operation and Major Competitors Direct Competitor Comparison 2015 AAPL HPQ GOOG Industry Market Cap: 576.24B 24.62B 528.88B 512.00M Employees: 110,000 287,000 66,575 895.00 -0.15 -0.53 0.21 0.16 220.29B 99.88B 81.76B 497.70M 0.39 0.24 0.62 0.30 73.96B 9.36B 26.90B 41.72M 0.29 0.08 0.26 0.06 47.80B 4.50B 17.99B N/A EPS (ttm): 8.58 1.88 25.81 0.37 P/E (ttm): 12.47 7.66 29.82 17.03 PEG (5 yr expected): 1.66 4.40 1.22 1.67 P/S (ttm): 2.63 0.25 6.47 1.00 Qtrly Rev Growth (yoy): Revenue (ttm): Gross Margin (ttm): EBITDA (ttm): Operating Margin (ttm): Net Income (ttm): AAPL= Apple Inc. HPQ= Hewlett Packard GOOG= Google Alphabet Inc. INTRODUCTION AND FEASIBILITY OF APPLE INC. A1. Historical Data APPLE In Millions of USD (except for per share items) Revenue Other Revenue, Total Total Revenue Cost of Revenue, Total Gross Profit 52 weeks ending 2015-09-26 52 weeks ending 2013-09-28 52 weeks ending 2012-09-29 233,715.00 170,910.00 156,508.00 - - - 233,715.00 140,089.00 170,910.00 106,606.00 156,508.00 87,846.00 93,626.00 64,304.00 68,662.00 HPQ In Millions of USD (except for per share items) Revenue 12 months ending 2015-10-31 12 months ending 12 months ending 2013-10-31 2012-10-31 103,355.00 112,298.00 120,357.00 - - - 103,355.00 112,298.00 120,357.00 Cost of Revenue, Total 78,596.00 86,380.00 92,385.00 Gross Profit 24,759.00 25,918.00 27,972.00 Other Revenue, Total Total Revenue GOOGLE In Millions of USD (except for per share items) Revenue 12 months ending 2015-12-31 12 months ending 12 months ending 2013-12-31 2012-12-31 74,989.00 55,519.00 46,039.00 - - - Total Revenue 74,989.00 55,519.00 46,039.00 Cost of Revenue, Total 28,164.00 21,993.00 17,176.00 Gross Profit 46,825.00 33,526.00 28,863.00 Other Revenue, Total INTRODUCTION AND FEASIBILITY OF APPLE INC. B. Leadership Position Apple Inc. has a strong leadership position in the market presently and historically. Apple Inc. owns retail stores in 18 countries and online stores in 120 countries. The company generates over 500 billion revenue per year as compared to 497 competitors in the industry. It owns the market capitalization of $576 billion (Reuters, 2016). C. Current Financial position AAPL Market Cap: 576.24B Employees: 110,000 Qtrly Rev Growth (yoy): -0.15 Revenue (ttm): 220.29B Gross Margin (ttm): 0.39 EBITDA (ttm): 73.96B Operating Margin (ttm): 0.29 Net Income (ttm): 47.80B EPS (ttm): 8.58 P/E (ttm): 12.47 PEG (5 yr expected): 1.66 P/S (ttm): Historical Financial Position 2.63 In Millions of USD (except for per share items) Revenue 52 months ending 2015-09-26 52 months ending 12 months ending 2013-09-28 2012-09-29 233,715.00 170,910.00 156,508.00 - - - Total Revenue 233,715.00 170,910.00 156,508.00 Cost of Revenue, Total 140,089.00 106,606.00 87,846.00 93,626.00 64,304.00 68,662.00 Other Revenue, Total Gross Profit INTRODUCTION AND FEASIBILITY OF APPLE INC. C. Product Line Apple Inc. engages in designs, manufactures and promotes mobile communication and media devices, personal computers and portable digital music players and sells a wide range of related software, services, networking solutions and third-party digital content and applications. The company main products are IPhone, IPad, Mac, Apple TV and IPod; but most of all, Mac is an essential part of Apple Inc., its music related products, IPod and iTunes are the company's most profitable segment (Reuters, 2016). Apple Inc. Feasibility A. Financial Ratio of Apple Inc. Leverage Total Debt / Equity ratio Profitability Profit Margin 21.70% Operation Operating Margin 28.55% Solvency Current Ratio 67.12 1.31 B. Financial Ratio of Competitors HPQ Total Debt / Equity ratio N/A Profit Margin 3.33% Operating Margin 8.11% Current Ratio GOOGLE 0.96 INTRODUCTION AND FEASIBILITY OF APPLE INC. Total Debt / Equity ratio 4.90 Profit Margin 22% Operating Margin Current Ratio 26.17% 5.43 C. Ratio Discrepancies between Apple Inc. and Competitors From the data above we can see that the markets for Apple Inc. products and services are highly competitive and challenged by its competitors in all areas of its business. This is due to a large number of product introductions lately and rapid technological advances that significantly increased the capabilities and use of mobile communication and media devices, computers, and other electronic devices. Moreover, Apple Inc.'s competitors who are also highly depend on the mobile device and computer sectors have aggressively cut prices and lowered their product margins in order to increase or sustain market share. As a result, the company's financial condition and operating results can be undesirably affected by all these factors mentioned above in the long run (CSI Market, 2016). Being the lead player of the industry, Apple Inc. continues focusing on increasing its market opportunities related to personal computers and mobile communication and media devices. These markets are extremely competitive especially competitors are well funded and experienced in the industry. The company also expects competition in these markets to be more aggressive as competitors tend to replicate the features of many of their major products and applications within their own products or, on the other hand, cooperate with other players in the industry to the extend that they can fully compete with Apple Inc. (CSI Market, 2016). INTRODUCTION AND FEASIBILITY OF APPLE INC. Apple Inc.'s future financial condition and operating results greatly depend on the company's ability to continue to promote and offer new innovative products and services in each of the markets. The company believes that with its superior innovation including IPhone, IPad, Mac and IPod, software like IOS, OS X and ITunes, online services, and distribution of digital content and applications, the company will continue to have a great potential in competing its competitors (Rosoff, 2015). D. Strengths and Weaknesses of Apple Inc. Considering from the ratios above, one of the major weaknesses of the company has that high leverage and low solvency. Comparing to Google Inc., Apple Inc. is heavily capitalized with debt and it has comparatively lower solvency in terms of current assets to pay for its debts (Yoshikami, 2016). Overall, Apple Inc. is a good company for investment since it is a lead player in all the markets that it competes in and it has always been dominating the industry. Looking at the performance of the company, Apple Inc. has showed a strong growth in the near future. One of the biggest strengths of the company is has a strong marketing and advertising capabilities, excellent brand reputation, vertical integration and massive line of products in one ecosystem (Yoshikami, 2016). Apple Inc.'s earnings growth in year 2015 signifies that these strengths balance out the company's competitive advantages, such as those weaknesses that I mentioned above. Hence, new IPhone releases are always popular and it guarantees good sales by offering substantial new features. For instance the latest product IPhone 6, it offers much larger displays than previous models and a well-designed fingerprint reader that provides easy INTRODUCTION AND FEASIBILITY OF APPLE INC. access from the lock screen. As a result, the device has made it into record-breaking sales for the company in the first few quarters of its release (Price, 2016). In near future, Apple Inc. will focus in producing new innovative products and have some interesting opportunities to expand its product lines into IoT market and health related gadgets. At least for another cycle, these factors are what investors should focus on (Price, 2016). References CSI Market. (2016). Apple Inc. Retrieved from http://csimarket.com/stocks/compet_glance.php?code=AAPL Price, C. (2016). Is Apple A Good Investment For Dividend Growth Investors? Retrieved from http://seekingalpha.com/article/3980776-apple-good-investment-dividend growth-investors INTRODUCTION AND FEASIBILITY OF APPLE INC. Rosoff, M. (2015). Apple's iPhone revenue is bigger than any other tech company's total revenue. Retrieved from http://www.businessinsider.com/apple-iphone-revenue vs-competitors-total-revenue-2015-9 Rawlinson, N. (2016). History of Apple, 1976-2016: The story of Steve Jobs and the company he founded. Retrieved from http://www.macworld.co.uk/feature/apple/history-of-apple-steve-jobs-what happened-mac-computer-3606104/ Reuters. (2016). Apple Inc. Retrieved from http://www.reuters.com/finance/stocks/companyProfile?symbol=AAPL.O Yahoo Finance. Apple. Retrieved from: https://finance.yahoo.com/quote/AAPL/key statistics?p=AAPL Yahoo Finance. Google. Retrieved from: https://finance.yahoo.com/quote/GOOG/key statistics?p=GOOG Yahoo Finance. HP. Retrieved from: https://finance.yahoo.com/quote/HPQ/key statistics?p=HPQ Yoshikami, M. (2016). 7 reasons Apple is a buy. Retrieved from http://www.cnbc.com/2016/01/07/7-reasons-apple-is-a-buy-commentary.html INTRODUCTION AND FEASIBILITY OF APPLE INC