Topic:

Financial Analysis In 2013, Apples shareholders had become increasingly concerned about the amount that it held in cash and marketable securities, which had reached $137 billion in December 2012 based on its first quarter filing. Apples cash pile had grown over the prior decade as a result of the successes of the iPod (launched in 2001), the iPhone (launched in 2007), and the iPad (launched in 2010). By late 2012, shareholders were growing restless due to the fact that no new groundbreaking devices had been launched since the iPad in 2010 as Apples market share in both the phone and tablet industries was steadily decreasing, mostly due to Android-powered devices. Apple was not using its cash hoard or returning it to shareholders. Apples shareholders had also seen the firms stock price decline from its high of over $700 in September 2012 to around $420 in April 2013. Using your remarkable financial analysis skills, address the following:

Question

How did Apple amass so much cash in the first place? From the beginning of 2000 until its peak in 2012, Apples stock price rose from $27.97 to $702.10, an increase of over 25 times. Conduct an analysis of Apples annual financial data from 2000 to 2012 and determine what specific attributes of its operational performance account for its cash generation and stock performance. Consider the following:

DuPont analysis of ROE?

How does Apples ROE compare to its growth rate? Is the growth rate sustainable?

A B D E F H 1 L M N 1 9/30/00 9/25/04 33.3896 9/30/06 38.6596 4 27.1395 6.6496 9.8596 5 6 110.4396 50.4496 9/29/01 -32.8296 27.1396 -6.2196 -0.4796 -740.0096 ce 80.8596 ce 1.10612245 -0.5896 19.1496 1,766 -1.4296 Ratios FY Ending Sales growth rate 3 Gross profit margin (gross profit/sales) Operating profit margin (EBIT/sales) Net profit margin (net profit/sales) Cash flow margin (cash flow/sales) 1 Asset turnover (sales/assets) / 8 Equity multiplier (assets/equity) ROA (net income/assets) ROE (net income/equity) Adjusted equity (equity - investments) Adjusted ROE (net income/adjusted equity 13 14 Growth Rate in Sales 9/28/02 7.0796 27.1395 0.8496 1.1396 136.9296 75.5396 1.05909646 1.5096 19.1496 1,971 3.3096 9/27/03 8.1096 27.1395 0.4096 1.1196 418.8496 73.5696 ce 1.08122188 ce 1.5196 19.1496 3,053 2.2696 9/24/05 68.2796 27.1396 11.7996 9.5396 190.8996 secret 59.3096 1.11214324 16.0896 19.1496 2,658 49.9696 27.1396 4.0696 3.2196 351 1356 66.0096 1.07643814 4.8796 19.1496 2,581 10.3196 9/29/07 27.2596 27.1395 17.9396 14.2295 156.5195 62.6096 ce 1.05876686 22.7296 19.1495 8,498 27.1396 12.7095 10.3096 111.6196 52.3495 1.01262019 ca 19.6796 19.1496 6,266 31.7495 9/27/08 52.5495 27.1396 22.2196 16.3296 156.8296 65.3296 1.09835404 2011 24.9996 19.1496 9,682 63.2096 9/25/09 14.4496 27.1396 27.3696 19.1996 123.3696 een 79.2396 1.07433628 24.2396 19.1496 2.911 282.8996 9/25/10 52.0296 27.1396 28.1996 21.4896 132.7096 78.2196 1.0673767 27.4795 19.1496 8,041 174.2796 7 9/24/11 65.9696 27.1395 31.2296 23.9596 144.7896 75.3596 1.06467402 31.7896 19.1496 4,860 533.3796 9/29/12 44.5896 27.1395 35.3095 26.6796 121.8696 77.4796 1.0257254 34.4296 19.1496 7,705 541.6496 0.3162 27.13 14.80 12.0492 108.9192 88.9492 1.062876871 17.55 19.149 4852.07692 145.759 9 0.98052106 19.5295 19.1495 485 10 11 12 41.1396 162.0696 Questions: A B D E F H 1 L M N 1 9/30/00 9/25/04 33.3896 9/30/06 38.6596 4 27.1395 6.6496 9.8596 5 6 110.4396 50.4496 9/29/01 -32.8296 27.1396 -6.2196 -0.4796 -740.0096 ce 80.8596 ce 1.10612245 -0.5896 19.1496 1,766 -1.4296 Ratios FY Ending Sales growth rate 3 Gross profit margin (gross profit/sales) Operating profit margin (EBIT/sales) Net profit margin (net profit/sales) Cash flow margin (cash flow/sales) 1 Asset turnover (sales/assets) / 8 Equity multiplier (assets/equity) ROA (net income/assets) ROE (net income/equity) Adjusted equity (equity - investments) Adjusted ROE (net income/adjusted equity 13 14 Growth Rate in Sales 9/28/02 7.0796 27.1395 0.8496 1.1396 136.9296 75.5396 1.05909646 1.5096 19.1496 1,971 3.3096 9/27/03 8.1096 27.1395 0.4096 1.1196 418.8496 73.5696 ce 1.08122188 ce 1.5196 19.1496 3,053 2.2696 9/24/05 68.2796 27.1396 11.7996 9.5396 190.8996 secret 59.3096 1.11214324 16.0896 19.1496 2,658 49.9696 27.1396 4.0696 3.2196 351 1356 66.0096 1.07643814 4.8796 19.1496 2,581 10.3196 9/29/07 27.2596 27.1395 17.9396 14.2295 156.5195 62.6096 ce 1.05876686 22.7296 19.1495 8,498 27.1396 12.7095 10.3096 111.6196 52.3495 1.01262019 ca 19.6796 19.1496 6,266 31.7495 9/27/08 52.5495 27.1396 22.2196 16.3296 156.8296 65.3296 1.09835404 2011 24.9996 19.1496 9,682 63.2096 9/25/09 14.4496 27.1396 27.3696 19.1996 123.3696 een 79.2396 1.07433628 24.2396 19.1496 2.911 282.8996 9/25/10 52.0296 27.1396 28.1996 21.4896 132.7096 78.2196 1.0673767 27.4795 19.1496 8,041 174.2796 7 9/24/11 65.9696 27.1395 31.2296 23.9596 144.7896 75.3596 1.06467402 31.7896 19.1496 4,860 533.3796 9/29/12 44.5896 27.1395 35.3095 26.6796 121.8696 77.4796 1.0257254 34.4296 19.1496 7,705 541.6496 0.3162 27.13 14.80 12.0492 108.9192 88.9492 1.062876871 17.55 19.149 4852.07692 145.759 9 0.98052106 19.5295 19.1495 485 10 11 12 41.1396 162.0696 Questions