1. Research Apple Inc. a report revealing an Investment Recommendation" based upon your research and analysis of this company's financial information. Identify 3-5 significant points that justify your conclusion. Support your points with a comprehensive explanation incorporating sound reasoning. While the main focus of your investment recommendation should be on the financial indicators, you should also consider other non-financial factors in your overall analysis, including the overall strategic direction of the company.
2. 4-5 pg long. The three previous reports are attached and will help to compose the final report

RUNNING HEAD: Case Study Part 1: Company Research, Apple, Inc. JESSICA BIDWELL CASE STUDY PART 1: COMPANY RESEARCH - APPLE, INC. EXCELSIOR COLLEGE ACCOUNTING FOR MANAGERS 6 JUNE 2017 1 RUNNING HEAD: Case Study Part 1: Company Research, Apple, Inc. 2 Introduction Apple, Inc. is a multinational technology company based in the United States. The cooperation creates and distributes computer hardware, software and digital applications. Apple, Inc. dominates the tech scene through the manufacturing and marketing of computer hardware, software, iPhones, iPads, iOS, smartwatch, iCloud, and so forth. The company is, regarding assets and revenue, the world's largest technology company. Apple, Inc.'s chairman is Arthur D Levinson, Tim Cook is the CEO of the enterprise, and Luca Maestri is CRO. The company's headquarters are located at Apple Campus, Cupertino, California. The company boasts 469 retail stores distributed over 21 countries, manned by more than 116,000 employees. Apple, Inc. ticker symbol is AAPL, a component of Dow Jones Industrial Average, S&P 500 and NASDAQ-100. History Steve Jobs, Steve Wozniak, and Ronald Wayne established the company, April 1, 1976. The company first introduced a personal computer, Apple I. The success of Apple I led to the company's incorporation on January 3, 1977. The company went public company on December 12, 1980, the cost of their initial public offering sat as 22 dollars per share. In 1984 Apple launched another successful product, the Macintosh computer. In 1991 Macintosh was replaced by PowerBook. The company launched iMac, an all in one computer, in 1998 selling over 800,000 units in first five months. By the turn of the century, Apple Inc. opened their first retail stores in Virginia and California. In 2003, Apple's iTunes Music Store was introduced. From 2003 - 2006 the stock price of Apple soared to 80 dollars per share. Apple's most successful product, the iPhone was first released in 2007. RUNNING HEAD: Case Study Part 1: Company Research, Apple, Inc. 3 Competitors Apple's product diversity has resulted in an extensive range of competitors. Apple is primarily challenged by Microsoft in the personal computer industry, other competitors of this niche include Dell, Acer, Lenovo, and Hewlett-Packard. The creation of iPads led to competitors such as Samsung, Nokia, and Asus. Apple is revered in the smartphone industry; their competitors include Sony, HTC, and Samsung. In the realm of entertainment media and application programs, Google is the companies only competitor. Samsung is Apple's largest competitor, but Apple is continually widening the gap between the cooperation's. "According to data from Counterpoint's Monthly Market Pulse, Apple has significantly increased its lead over Samsung in the premium smartphone market ($400+) since the launch of the iPhone 7. Over the summer, Apple was selling just over 50 percent of the global premium smartphones, and Samsung was selling just under 25 percent. By December 2016, those numbers had grown to 70 percent and 17 percent, respectively\" (Heisler Y., 2017, pg. 3.) Industry Position Apple Inc. is the world's largest tech company and the ninth largest company in the world. \"Apple Inc. took the top spot in the tech group weeks after shares hit a new record high, reaching over 147 dollars per share for the first time on May 2, 2017...For the past year, Apple saw 217 billion in sales, 45 billion in profit, 331 billion in assets and a market cap of 752 billion\" (Meyer, P., 2017, pg. 3.) Recent Developments On July 5, 2017, Apple announced a slew of new developments. New computer platforms and software updates, greater Apple Watch capability, and innovated iPad design will all be RUNNING HEAD: Case Study Part 1: Company Research, Apple, Inc. 4 rolled out throughout the year. Largest of all advancements was the announcement of their Siri Speaker, HomePod. \"Apple today finally took the wraps off of its standalone speaker, which it hopes will \"reinvent home music.\" The Siri Speaker offers hi-fi audio with a seven tweeter array paired with precision acoustic horns and directional control. Additionally, there's an Appledesigned 4-inch woofer, while the speaker itself is powered by Apple's A8 chip\" (Miller, C., 2017 pg.4.) Key Risk Factors For a tech giant such as Apple Inc., the risk list is aplenty. Their 10K filing for 2016 list over thirty major risk factors. One to highlight would be that the Company's operations and performance depend significantly on global and regional economic conditions. \"The Company's products and services compete in highly competitive global markets characterized by aggressive price cutting and resulting downward pressure on gross margins, frequent introduction of new products, short product life cycles, evolving industry standards, continual improvement in product price/performance characteristics, rapid adoption of technological and product advancements by competitors and price sensitivity on the part of consumers\" (Investor Relations, SEC Filings- Apple, 2017, pg. 15.) Apple Inc. relies on several other companies as suppliers of digital content and software development Apple Inc. will likely suffer. \"The Company relies on sole-sourced outsourcing partners in the U.S., Asia, and Europe to supply and manufacture many critical components, and on outsourcing partners primarily located in Asia, for final assembly of substantially all of the Company's hardware products. Any failure of these partners to perform may have a negative impact on the Company's cost or supply of components or finished goods\" (Investor Relations, SEC Filings- Apple, 2017, pg. 20.) RUNNING HEAD: Case Study Part 1: Company Research, Apple, Inc. 5 Strategic Direction Apple will likely continue with the same strategic direction that it has followed since incorporation. The company focuses on pricing, marketing, and innovation. As a tech leader, the company must maintain their position of advantage against their competition. \"With a high rate of innovation and emphasis on excellence in product design, Apple succeeds even with its relatively high selling prices\" (Meyer, P., 2017, pg. 5.) Furthermore, customers are key; Apple Inc. has forever been dedicated to their clients, this is proven through their constant developments and innovations. \"The company keeps on developing and delivering digital content to its customers through the internet. It enables them to update the products online. Being a technology company, it believes that higher investment in research and development, marketing and advertising is necessary for the sale of new innovative technologies\" (Meyer, P., 2017, pg. 3.) Other Items of Significance According to NASDAQ, Apple Inc. will continue to grow over the next five years, at an average annual rate of 10.12%. \"This year, analysts are forecasting earnings increase of 7.57% over last year. Analysts expect earnings growth next year of 17.83% over this year's forecasted earnings\" (NASDAQ.com, 2017, pg. 2.) Innovation and product upgradations will continue to be the key factors for the success of this company. Conclusion Apple, Inc. is a tech giant. The company is a pioneer in the technology space and has a modest edge over its competitors. The company keeps on innovating new products and adding features to its existing products. The clients of the business have high satisfaction and loyalty. RUNNING HEAD: Case Study Part 1: Company Research, Apple, Inc. The company is one of the world's most profitable corporations. Despite risk factors the company is performing incredibly well and continues to progress. 6 RUNNING HEAD: Case Study Part 1: Company Research, Apple, Inc. 7 References: Apple Inc. (AAPL) Forecast Earnings Growth. (2017). NASDAQ.com. Retrieved from http://www.nasdaq.com/symbol/aapl/earnings-growth Heisler, Y., Smith, C., & Mills, C. (2017). Apple is destroying Samsung where it really matters. BGR. Retrieved from http://bgr.com/2017/02/03/apple-vs-samsung-sales-2016/ Investor Relations - Financial Information - Apple. (2016). Apple. Retrieved from http://investor.apple.com/financials.cfm Investor Relations - SEC Filings - Apple. (2017). Apple. Retrieved from http://investor.apple.com/sec.cfm? ndq_keyword=&DocType=Annualhttp://www.apple.com/hotnews/http://finance.yahoo.com/ q/hp?s=AAPL Meyer, P. (2017). Apple's Generic Strategy & Intensive Growth Strategies - Panmore Institute. Panmore Institute. Retrieved from http://panmore.com/apple-inc-generic-strategyintensive-growth-strategies Miller, C. (2017). Roundup: Everything Apple announced today at WWDC 2017 [Poll]. 9to5Mac. Retrieved from https://9to5mac.com/2017/06/05/roundup-everythingapple-announced-today-at-wwdc-2017-poll/ Ritchie, R. (2017). Biggest problems facing Apple in 2017. iMore. Retrieved from https://www.imore.com/biggest-problems-facing-apple-2017 RUNNING HEAD: Case Study Part 1: Company Research, Apple, Inc. Stoller, K. (2017). Forbes Welcome. Forbes.com. Retrieved 6 June 2017, from https://www.forbes.com/sites/kristinstoller/2017/05/24/the-worlds-largest-tech-companies2017-apple-and-samsung-lead-facebook-rises/#38e6c0d6d140 8 RUNNING HEAD: Case Study Part II: Computing Ratios; Apple, Inc. JESSICA BIDWELL CASE STUDY PART II: COMPUTING RATIOS; APPLE, INC. EXCELSIOR COLLEGE ACCOUNTING FOR MANAGERS 12 JUNE 2017 1 RUNNING HEAD: Case Study Part II: Computing Ratios; Apple, Inc. 2 Introduction Ratio analysis is pertinent to gaining an understanding of a company's financial readings over a period of time. Furthermore, it gives insight into the cooperation's performance over an extended period of time. \"Ratio analysis can reveal valuable information about a company's financial attributes, such as profitability, efficiency in managing assets, and whether the company has too much debt. When computing ratios, analysts often compare a company's ratios with prior periods, competitors, or industry averages\" (Schoenebeck, 2012, Pg. 8.) Ratio analysis enables business owners to spot trends and to compare their performance and condition with the average performance of similar businesses in the same industry. Analysis of Ratios Debt Ratio Debt ratio calculates total liabilities of the company as a percentage of total assets. Fraser, 2013, defines debt ratio as the proportion of all assets that are financed with debt. This solvency ratio indicates the ability of company to pay off its liabilities from its assets. The strength of the ratio increased. Gross Profit Margin This expedience ratio calculates the profitability of the company based on selling its merchandise or inventory. \"Gross profit margin compares gross profit to revenue, expressing gross profit as a percentage of net revenue. It measures how successfully a company buys and sells merchandise at a profit\" (Schoenebeck, 2012, Pg. 73.) It is a profitability ratio, higher ratio equates to better performance. The ratio for 2015 was 40 RUNNING HEAD: Case Study Part II: Computing Ratios; Apple, Inc. 3 percent it decreased to 39 percent for the close of 2016. The ratio reveals that the company is not quite selling its products at higher margin, which is resulting in a decrease of profitability. Free Cash Flow Free cash flow is simply the amount of cash generated by the company after accounting for all capital expenditures. According to Schoenebeck, 2012, free cash flow is the total amount of cash available for business activities after all allowances are paid. A surplus in free cash flow allows for growth and increased financial flexibility. Total free cash flow was at $70 million during the 2015 and decreased by $18,000 million for 2016. Times Interest Earned Also referenced as interest coverage ratio, it indicates the proportionate amount of income that can be used to cover future interest expenses. According to Fraser, 2013, times interest earned measures how many times operational earnings cover interest expense. The greater the ratio, the better off the company is. The ratio was high at the close of 2015, it sat at 99.93, yet throughout 2016 this number dropped to 43.15. The ratio is median, it exhibits that Apple Inc. can pay its interest obligations. Accounts Receivable Turnover An efficiency ratio, which measures the number of times a company, can convert its accounts receivables into cash over the period of one year. \"Accounts receivable turnover measures how quickly a company collects accounts receivable, specifically, how many times a year, on average, a company makes a sale on a receivable and collects it\" (Schoenebeck, 2012, Pg. 161.) This ratio also highlights the efficiency of the company's ability to collect for credit sales. The RUNNING HEAD: Case Study Part II: Computing Ratios; Apple, Inc. 4 ratio for the company decreased from 13.87 in 2015 to 13.69 in 2016 indicating a lower efficiency during the year 2016. The ratio proves that the company is not collecting its credit sales as quickly as in the past. Inventory Turnover Inventory turnover accents how efficiently the company manages its inventory by measuring the number of times inventory is sold during the year. \"Inventory turnover measures the efficiency of the firm in managing and selling inventory\" (Fraser, 2013, Pg. 267.) The ratio stood at 59.64 for the year 2015 and improved to 61.61 in 2016. This ratio indicates a higher efficiency in inventory management. Furthermore, it indicates that the company turns its inventory into sales quickly. Return on Sales Also referred to as the operating profit margin, it measures the efficiency of the company in generating profits from its revenue. Schoenebeck, 2012, defines it as the measure of profitability from each dollar of revenue, which reflects a firm's ability to translate revenue into profits; control expenses. Simply put it measures the percentage of company's revenue that is actually turned into profit. The return on sales dropped from 20.45% in 2015 to 14.93% in 2016 indicating a weaker return on sales within the company. Asset Turnover Asset turnover is a ratio that calculates the company's ability to generate sales from its assets. \"Total asset turnover measures the efficiency of the firm in managing all assets\" (Fraser, 2013, Pg. 267.) The ratio was 89% at the close of 2015 and dropped to 70% for 2016 indicating RUNNING HEAD: Case Study Part II: Computing Ratios; Apple, Inc. 5 an decrease in efficiency. The ratio of the company is lower and points to less than optimum utilization of assets in generating sales. Return on Assets Return on assets calculates the net income generated by the assets during of the company during the year. \"Return on Assets measures how productively a company uses its assets to generate profits\" (Schoenebeck, 2012, Pg. 161.) This profitability ratio is the most comprehensive measure of profitability. The ratio, for 2015, was 18.38% it decreased to 14.20% in 2016 indicating a higher efficiency of the company in deriving profits from its assets. Financial Leverage Financial leverage is the measure of debt that the company uses in purchasing more assets or to increase production. Fraser, 2013, explains financial leverage as the indication of whether a firm is employing debt successfully. The ratio of the company improved from 2.43 in 2015 to 2.51 in 2016. It indicates a higher financial leverage of the company. Return on Equity (ROE) Return on equity is a profitability ratio, which calculates the ability of the company in generating net profits from the stockholders investment. Schoenebeck, 2012, refers to return on equity as the measure how effectively stockholders' equity is used to produce net income. The ratio for 2015 was 45%, which substantially decreased to 36% in 2016 this indicates a lower utilization of stockholders' equity and decreased return to stockholders on their investment. DuPont Analysis ROE Dupont Analysis is a profitability ratio used to analyze a company's ability to increase its return on equity. \"The DuPont Analysis of ROE divides return on equity into components that help to better assess company performance and indicate ways that management can improve 6 RUNNING HEAD: Case Study Part II: Computing Ratios; Apple, Inc. ROE\" (Schoenebeck, 2012, Pg. 326.) Essentially it breaks down ROE and tells how the company can increase the return to its investors. The analysis reveals increase in return to the stockholders from 0.33 in 2015 to 0.45 in 2016. APPLE, INC. Ratio Analysis Ratio Formula Debt Ratio Total Debts/Total Assets Gross Profit Margin Times Interest Earned Accounts Receivable Turnover Gross Margin/Net Sales Cash flow from operations + cash flow for capital expenditure Income before Interest and Taxes/ Interest Expenses Net Credit Sales/ Average Accounts Receivable Inventory Turnover Cost of Goods Sold/Average Inventory Free Cash Flow 2016 2015 Ratio Trend .81 0.59 Stronger 39% 40% Weaker $52Mil $70Mil Weaker 43.15 99.93 Stronger 13.69 13.87 Slower 61.61 59.64 Quicker 14.93% 20.45% Weaker 70% 89% Weaker DuPont Analysis of ROE Return on Sales Operating Income/Net Sales Asset Turnover Total Revenue/Total assets Return on Assets Net Income/Average Total Assets Financial Leverage Total Assets/Total Equity Return on Equity Net Income/Shareholders equity Profit Margin Net Income/Net Sales Profit Margin*Total Asset Turnover* Financial Leverage DuPont Analysis 14.20% 18.38% Stronger 2.51 2.43 Stronger .36 0.45 Weaker 21.19% 22.85% Weaker .36 0.45 Weaker RUNNING HEAD: Case Study Part II: Computing Ratios; Apple, Inc. 7 References: Fraser, L. (2013). Understanding Financial Statements (10th ed.). Investor Relations - SEC Filings - Apple. (2017). Apple. Retrieved from http://investor.apple.com/sec.cfm? ndq_keyword=&DocType=Annualhttp://www.apple.com/hotnews/http://finance.yahoo.com/ q/hp?s=AAPL Schoenebeck, Karen P.; Holtzman, Mark P. (2012-06-20). Interpreting and Analyzing Financial Statements (Page 34). Pearson Education. Kindle Edition. RUNNING HEAD: Case Study Part II: Industry Analysis; Apple, Inc. JESSICA BIDWELL CASE STUDY PART III: INDUSTRY ANALYSIS; APPLE, INC. EXCELSIOR COLLEGE ACCOUNTING FOR MANAGERS 17 JUNE 2017 1 RUNNING HEAD: Case Study Part II: Industry Analysis; Apple, Inc. 2 Introduction Apple, Inc. is a multinational technology company based in the United States. The cooperation creates and distributes computer hardware, software and digital applications. Apple, Inc. dominates the tech scene through the manufacturing and marketing of computer hardware, software, iPhones, iPads, iOS, smartwatch, iCloud, and so forth. The company is, regarding assets and revenue, the world's largest technology company. Apple, Inc.'s SIC code is 3571. Industry Analysis Current Ratio This ratio highlights a firm's ability to pay liabilities using assets that can quickly be converted to cash. \"The current ratio is a commonly used measure of short-run solvency\" (Fraser, 2013, Pg. 201.) The ratio for the company sits at .9 as compared to of the industry average of 1. The ratio is low in comparison to the industrial average. Total Debt to Equity Ratio Debt ratio measures the ability of the company to pay its liabilities with its assets. It facilitates the investors and creditors to do an analysis of the debts of the company and its ability to pay off its debts in future. \"The debt-to-equity ratio and the Financial Leverage ratio offer the same information as the debt ratio, but present it in a different format, which helps analysts more easily evaluate the trade-offs between risk and return\" (Schoenebeck, 2012, Pg. 329.) Apple Inc.'s debt-to-equity ratio 0.43 compared to an industry wide ratio of 0.34. Gross Profit Margin Ratio This ratio measures the profitability of the company in terms of selling its inventory; it compares gross margin to net sales. Schoenebeck, 2012, defines gross profit margin as a ratio, which compares gross profit to revenue, expressing gross profit as a percentage of net revenue. RUNNING HEAD: Case Study Part II: Industry Analysis; Apple, Inc. 3 Apple Inc.'s gross profit margin ratio is in line with the industry average of 38.68 percent. The cooperation is in a good position in terms of percentage of revenues available to cover operating expenses and yielding a profit. Times Interest Earned Also known as interest coverage ratio. Times interest earned measures the proportionate amount of income that can be utilized to pay the interest liability in coming years. \"Times interest earned measures a company's ability to earn (cover) its periodic interest payments\" (Schoenebeck, 2012, Pg. 335.) The interest coverage ratio for Apple Inc. sits at 11.4; this is also the average for the industry. Accounts Receivable Turnover Accounts receivable turnover measures the number of times the business has turned its accounts receivables in cash. Schoenebeck, 2012, defines accounts receivable turnover ratio as the measurement of how quickly a company collects accounts receivable. Apple Inc. came in at 7.62, which is lower than the industry average of 8.52. These numbers imply that the cooperation is not as efficient as other players in industry in terms of collection of accounts and has given more extension of credit. Inventory Turnover This ratio measures the efficiency of cooperation in the realm of inventory turnover. Inventory turnover measures the efficiency of the firm in managing and selling inventory (Fraser, 2013, Pg. 267.) Apple Inc. is highly efficient in turning its inventory into sales they sit at 7.9, while the industry average remains at 7.8. RUNNING HEAD: Case Study Part II: Industry Analysis; Apple, Inc. 4 Net Return on Sales Calculated by dividing profits after taxes by revenues this ration is often referred to as profit margin. \"Return on sales measures the profitability of each dollar of revenue; how well expenses are kept under control (Schoenebeck, 2012, Pg. 334.) Apple Inc.'s performance is higher than industry average, which indicates a good performance of the company in generating revenue in comparison to its peers. Asset Turnover Asset turnover ratio measures the company's ability to generate net sales by utilizing its assets. \"Asset turnover ratio measures how efficiently the company uses assets to generate revenue (Schoenebeck, 2012, Pg. 330.) The ratio of Apple Inc. is equivalent to that of the industry indicating that the company is utilizing the firm's assets much like the other players in the industry. Return on Assets This ration measures the net income produced by the assets of the company by comparing net income with average total assets. Return on asset ratio reveals how efficiently assets are used to generate profit (Schoenebeck, 2012, Pg. 334.) The ratio assists management and investors in seeing how efficiently the company converts its investments into profits. The ratio for Apple Inc. is higher as compared to industry proving that Apple Inc. is more efficient in making profit from its assets. Financial Leverage RUNNING HEAD: Case Study Part II: Industry Analysis; Apple, Inc. 5 Financial leverage is a measure of long-term debts that the company holds. The ratio compares long-term debts to total assets. Fraser, 2013 defines financial leverage as an indication of whether a firm is employing debt successfully. The ratio of the company stood 0.54, higher than the industry average of 0.53. These numbers indicate that Apple Inc. is more financially leveraged compared to other players in the industry. Financial Ratios Current Ratio Apple Industry 0.9 1 Total Debt to Equity 0.43 0.34 Gross Profit Margin 38.68 26.7 Times Interest Earned 11.4 11.4 Accounts Receivable Turnover 77.7 85.2 Inventory Turnover 7.9 7.8 Net Return on Sales 3.5 3.23 Net Return on Sales 3.7 3.5 Asset Turnover 2.4 2.4 Return on Assets 8.1 7.7 Return on Assets 8.7 7.9 0.54 0.51 Financial Leverage RUNNING HEAD: Case Study Part II: Industry Analysis; Apple, Inc. 6 References: Fraser, L. (2013). Understanding Financial Statements (10th ed.). Investor Relations - SEC Filings - Apple. (2017). Apple. Retrieved from http://investor.apple.com/sec.cfm? ndq_keyword=&DocType=Annualhttp://www.apple.com/hotnews/http://finance.yahoo.com/ q/hp?s=AAPL Schoenebeck, Karen P.; Holtzman, Mark P. (2012-06-20). Interpreting and Analyzing Financial Statements (Page 34). Pearson Education. Kindle Edition