Summary and Reflection on the Future of Apple Inc.

According to Silverstein, Samuel, and DeCarlo (2013), revenue is the amount of money that a company earns over time. It includes the company’s deductions and discounts given over a specified time period. Apple Inc.’s revenue patterns show a decrease in the overall amount of money the company collected in fiscal years 2015 and 2016. Numbers were $233,715 million and $215,639 million, respectively. According to the numbers, the company’s sales have decreased marginally as a result of numerous market shifts. As a result, the tendency is bad for the company because it jeopardizes the outfit’s long-term viability. The net income of a company describes total earnings and profits that the firm obtains (Silverstein et al., 2013). It is derived by deducting business costs such as interests, depreciation, taxes, among other expenses, from a corporation’s revenue. The net income for Apple Inc. reduced from $53,394 to $45,687 million between the fiscal years 2015 and 2016. The drop indicated that the company’s profit margin decreased over the two-year span and showed that Apple Inc. had a negative amount of sales leading to the decrease in the firm’s net income.

Profitability Ratios

Gross Profit Margin

Gross profit margin is the ratio between gross profit made by a company and the total revenue for a company expressed a s a percentage. For Apple Inc., the Gross Profit margin for the two Fiscal years, 2015 and 2016 respectively is as follows:

2015: Gross Profit Margin = $84,263/$233,715 Million * 100% = 36.05%

2016: Gross Profit Margin = $93,626/$215,639 Million * 100% = 43.41%

The data depicts that the company’s profit margin flopped to an average of 7.36% between the two years, showing that either sales performed poorly or the company’s expenses increased. As such, the change had a negative impact on the company’s operations. Notably, the resulting shares of profits were all affected by the shift.

Net Profit Margin

Silverstein et al., (2013) explain that the net profit margin is the net income of a company less any deductions from taxes, which is divided by the total revenues of a company expressed as a percentage. For both 2015 and 2016, the net profit margins of the company are as follows:

2015: $53,394/$233,715 Million * 100% = 22.84%

2016: $45,687/$215,639 Million * 100% = 21.86%

The data indicate that the net profit margins decreased by 0.98% between the fiscal year 2015 and 2016. The drop shows that the company’s profitability reduced, and has a negative impact on the sustainability of the business.

Return on Assets

According to Wahlen, Baginski and Bradshaw (2014) returns on assets is a ratio between net profit and the total average assets of a company. It shows the rate of return for both the investors and creditors of a company.

2015: ROA = $53,394/$290,479 Million = 0.18

2016: ROA = $45,687/$321,686 Million = 0.14

The ROA for Apple Inc. has reduced in the two years, thereby depicting a reduction in the net profits that otherwise cater for returns received by the investors and creditors. This indicates a negative effect as the company is unable to meet these requirements.

Liquidity Ratios

Current Ratio

Wahlen et al., (2014) argue that current ratio describes the measure of a company’s ability to cater for their long and short-term liabilities through consideration of total current assets of a company relative to total current liabilities.

2015: $89,378/ $80,610 Million = 1.108

2016: $106,869 / $79,006 Million = 1.35

The Current ratio has increased since the year 2015 to the Fiscal year 2016 with 0.24, showing that the company’s liabilities have reduced in the year 2016. This indicates a positive future for the company as it can meet its obligations for any period.

Market Ratios

Earnings per Share

The earnings per share refer to a company’s portion of profit allocated to the outstanding common stock shared by the firm.

2015: $53,394/$5,579 Million = 9.6

2016: $45,687/$5,336 Million = 8.6

The earnings per share have reduced with one over the two years. The reduction indicated that each of the shared common stock was allocated less in 2016 as compared to 2015. Wahlen et al., (2014) outline that this is a cynical venture, and the company may face challenges concerning sustainability.

Price to Earnings Ratio

Price to earnings ratio is a market stock analysis ratio of a company’s stock to the earnings per share of the firm.

2015: $114.97/9.6 = 11.98

2016: $112.71/8.6 = 13.11

The price to earnings ratio increased in the two years, indicating decent stock prices and suggesting adequate sustainability for the company.

Debt Measures

Debt to Asset Ratio

The debt to asset ratio refers to the ratio of the total short-term and long-term debts of a company to the total assets of the firm.

2015: $290,479/ $171,124 Million = 1.70

2016: $321,686/ $193,437 Million = 1.68

Despite the 0.02 decrease in the debt to asset ratio, the company still has many activities financed by creditors as compared to the ones funded by stockholders. Thus, the company is in a negative liability and must strategize towards lowering the value to below One.

Sustainable Growth Rate for Apple Inc.

It is evident from the Financial Analysis of Apple Inc. that the company’s sustainability is maintained and accounted for. The current ratio, total assets, liabilities, net income and revenues received by the firm project a sustainable future for the company. Wahlen et al., (2014) point out that Apple Inc.’s financial growth has occurred since its conception and will continue growing and sustaining the company in future. Similarly, the financial statements suggest that the company only needs to adjust their liabilities and reduce activates funded by debtors to increase firm’s sustainability and ensure steady continuation.

Summary and Reflection on the Future of Apple Inc.

Wahlen et al., (2014) assert that Apple Company has a better future in the Industry due following several reasons. The first is the revenue gained by the company. Apart from the slight drop in revenues received between 2015 and 2016, the company has shown growth in revenue over the over the years. Predictably, Apple will have better revenues in 2017 and the consecutive years. Another reason indicating a better future for Apple Inc. is total assets available to the company. The firm possessions shows that Apple is sustainable and can finance their activities from such items. Similarly, the firm’s market share is significantly higher relative to that of other companies. According to Silverstein, Samuel et al., (2013), the company’s stock market prices have been high over time. The market share, therefore, is significantly higher and the product prices reflect the scenario (Wahlen et al., 2014). Therefore, the company’s future is brighter and sustainable.

References

Silverstein, D., Samuel, P., & DeCarlo, N. (2013). The innovator’s toolkit: 50+ techniques for predictable and sustainable organic growth. John Wiley & Sons.

Wahlen, J., Baginski, S., & Bradshaw, M. (2014). Financial reporting, financial statement analysis, and valuation. Nelson Education. From http://www.academia.edu/download/45739949/Financial_Reporting__Financial_Statement_Analysis__and_Valuation_Ebook.pdf