FINAL TERM REPORT

APPLE INC.

Report by: Marium Mansoor (20191-26098) and Muneeb ur Rehman

Submitted to: Taimoor Mushtaq

Course: Intermediate Financial Accounting

 TABLE OF CONTENTS
1. Executive Summary
2. Introduction
3. Financial Analysis:
 Analysis from Income Statements
 Analysis from Balance Sheets
 Dividend Analysis
 Earnings per share Analysis
 Financial Ratio Analysis
4. Non-Financial Analysis:
 SWOT Analysis
 BCG Matrix
 Market Segmentation
 Environmental policies
 Customer care policies
5. Recommendation
6. Conclusion
7. References

Executive Summary
This report contains the financial and non-financial analysis of Apple Inc. The financial analysis
has been done by checking the financial statements of Apple Inc. for the past 3 years. The
financial statements on the basis of which the analysis has been done are income statements
and balance sheets of the years 2017, 2018, and 2019. Further analysis has been done by
observing the financial ratios, earnings per share, and dividends. Overall, Apple Inc has been the
leader by having the highest market share as compared to its competitors. Compared to the
last three years, Apple Inc. had the highest net income and net sales in 2018, however, the
equities decreased the most in 2018. The earnings per share are the highest in the 4 th quarter.
The non-financial includes the SWOT analysis, BCG matrix, market segmentation,
environmental policies, and customer care policies of Apple Inc. Apple Inc. Has been working on
making their company more environmentally friendly. They have set up a Clean China Energy
Fund and they also plan to use renewable energy completely by 2020. Customer care policies
have also been updated in the past three years. A more detailed analysis has been done further
in the report.

Introduction:
Apple is a multinational company in America. it was founded on April 1, 1976. Apple
Headquarter is in Cupertino, California. Apple company has lots of products like iPad, iPod, Mac
personal computer, iWatch, TV, Macintosh, Garage band, and Home Pod. Apple also has
software including Mac OS, iOS, iTunes, and safari. It was founded by Steve Jobs, Steve
Woznick, Ronald Wayne. Apple has 500 retail stores (2018).  The net income of apple is
US$59.531 billion (2018). Apple's annual revenue worldwide in the year 2018 is $265 billion. In
the US Apple is the first company valued at over US $1 trillion. In the year 2020, Apple’s total
revenue is around $274.5 billion while Apple is the third-largest technology company in the
world just behind Samsung and Huawei. With 137000 employees and retail stores in more than
25 countries, 1.5 billion Apple products are being used worldwide as of now. Apple is also the
largest music retailer having iTunes as a go-to music partner for Apple users. Even with such
high prices, Apple has one of the most loyal customer bases and has been ranked as the world’s
most valuable brand. Apple Inc. releases its products every September, but this year some of
the products were delayed due to the global pandemic. They also end their fiscal year in
September.

Mission:
To bring the best user experience to its customers through its innovative hardware, software,
and services

Vision:
We believe that we are on the face of the earth to make great products and that’s not
changing.

Financial Analysis
The following part of the report contains the financial analysis of Apple Inc. for the past three years.
Apple Inc. Releases its financial statements through their press conference in September every year.
They are also available on their official website. This analysis has been done after reviewing the income
statements and balance sheets of Apple Inc. for the years 2017, 2018, and 2019.

Analysis from Income Statements:

Net sales:

The net sales of Apple include the amount of tax collected from the customers. The tax collected is
assessed by government authorities. This part does not include the tax that Apple has to pay to the
government.

In September 2017, Apple released that income statement reporting the net sales of $229,234 million.

In September 2018, the net sales of the fiscal year were reported to be $265,595 million.

In September 2019, the net sales of the fiscal year were reported to be $260,174 million.

It can be observed from the numbers that Apple Inc. had an increase of $36,361 million in 2018 as
compared to the previous year. However, it can also be seen that they had a decrease in their net sales
of $5421 million in 2019 as compared to the previous year.

Income before the taxes:

This is the amount that comes after subtracting the operational expenses from the gross margin. The tax
payable is also calculated on the basis of this income. It also includes any other income of the company.

In September 2017, the income before the taxes for the year ended was $64,089 million.

In September 2018, the income before the taxes for the year ended was $72,903 million.

In September 2019, the income before the taxes for the year ended was $65,737 million.

It can be analyzed from the given data that the income before taxes was increased by $8814 million in
2018 as compared to the previous year. In the year 2019, it decreased by $7166 million as compared to
the previous year. Overall, the income before taxes was highest in 2018 as compared to 2017 and 2019.

Net income:

This is the amount that gives the final amount from which we can analyze whether the company made
profits or they faced losses. This amount comes after subtracting the provisions for income taxes.

In September 2017, the net income reported was $ 48,351 million.

In September 2018, the net income reported was $59,531 million.

In September 2019, the net income reported was $55,256 million.

It can be analyzed from the given data that the net income of Apple Inc. was highest in 2018 as
compared to the years 2017 and 2019. It increased by $11,180 million (23.12%) in 2018 as compared to
the year 2017. It then had a slight decrease of $4275 million (7.18%) in 2019 as compared to the
previous year.

Apple Inc.

Consolidated Income Statements

Of the years 2017,2018 and 2019

Sep 28, 2019 Sep 29, 2018 Sep 30, 2017

Products 213,883 225,847 196,534
Services 46,291 39,748 32,700
Net sales (legacy) — — —
Net sales 260,174 265,595 229,234
Products (144,996) (148,164) (126,337)
Services (16,786) (15,592) (14,711)
Cost of sales (legacy) — — —
Cost of sales (161,782) (163,756) (141,048)
Gross margin 98,392 101,839 88,186
Research and development (16,217) (14,236) (11,581)
Selling, general and (18,245) (16,705) (15,261)
administrative
Operating expenses (34,462) (30,941) (26,842)
Operating income 63,930 70,898 61,344
Interest and dividend income 4,961 5,686 5,201
Interest expense (3,576) (3,240) (2,323)
Other income (expense), net 422 (441) (133)
Other income (expense), net 1,807 2,005 2,745
Income before provision for 65,737 72,903 64,089
income taxes
Provision for income taxes (10,481) (13,372) (15,738)
Net income 55,256 59,531 48,351

Analysis from Balance Sheets:

Balance Sheets show a complete analysis of the non-current and current assets of the organization. It
also shows the equity and liabilities of the company. The analysis from the balance sheets is of the years
2017,2018 and 2019 is given below.
Assets:

The assets part of the balance sheet of Apple Inc. includes the current, non-current, intangible, and
other assets. In 2017, the total assets were of $375,319 million. In 2018, they were of $365,725 million
and in 2019, they were of $338,516 million. After assessing this information, it can be analyzed that
there has been an increase of 16.67% in 2017, compared with 2016. Then there is a decline of 2.56% in
2018 as compared to 2017. The total assets further declined by 7.44% in 2019 in comparison with 2018.

Liabilities:

The liabilities include the current and non-current liabilities. The account was payable of Apple Inc.
Increased by 31.52% in 2017 as compared with 2016. It increased by 13.94% in 2018 as compared to
2017. It decreased by 17.27% in 2019 as compared to 2018. The total liabilities of Apple Inc. Increased
by 24.73% in 2017. Then they increased by 7.17% and then they decreased by 4.08% in 2019.
Equities:

The equities section includes the total earnings, gains/losses, other appropriated reserves, and incomes.
It can be analyzed from the balance sheet provided on their website that there was an increase of $5798
million in 2017 as compared to 2016, then there was a decrease of $26,900 in 2018 as compared to
2017 and lastly, there was a decrease of $16,659 million in 2019 as compared to 2018. Among the three
years, the most decrease in total equities occurred in 2017.
 Apple Inc.

Consolidated Balance Sheets

Of the years 2017,2018 and 2019

Period Ending: 2019 2018 2017
28/09 29/09 30/09
Total Current Assets 162819 131339 128645
Total Assets 338516 365725 375319
Total Current Liabilities 105718 115929 100814
Total Liabilities 248028 258578 241272
Total Equity 90488 107147 134047
Total Liabilities & Shareholders' Equity 338516 365725 375319

Dividend Analysis:
The dividends paid by Apple Inc. to their shareholders in 2017, $2.46 US dollars per share, then
the rate increased by $0.36 and became $2.82 US dollar in 2018. Furthermore, the rate again
increased by $0.22 and became $3.04 US dollars in 2019.

Earnings per share Analysis:

Apple Inc. reports its earnings per share quarterly.
 Years 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
2017 0.525 0.4175 0.5175 0.9725
2018 0.6825 0.585 0.7275 1.045
2019 0.615 0.545 0.7575 1.2475
th
Overall, it can be interpreted by the data given about that by the 4 quarter the EPS increases.
The EPS seems to decrease in the 2nd quarter; however, it increases in the 3rd quarter.

Financial Ratio Analysis:

Ratios 2019 2018 2017

Current Ratios 1.54 1.13 1.27

Debt/Equity Ratios 1.19 1.06 0.86
Gross Margin 37.81 38.34 38.46
Asset Turnover 0.76 0.72 0.61
Net Profit Margin 21.23 22.41 21.09
Inventory Turnover Ratios 39.40 41.39 29.05

The current ratio is 2017 decreased by 5.92%, again decreased by 11.02% in 2018, and then
increased by 36.28% in 2019.

The debt/equity ratios in 2017 increased by 27.17%, again increased by 23.81% in 2018, and
then increased by 11.74% in 2019.

The gross margin ratios in 2017 decreased by 1.55%, decreased by 0.32% in 2018, and then
again decreased by 1.37% in 2019.

The asset turnover ratios in 2017 decreased by 8.87%, increased by 18.89% in 2018, and then
again increased by 5.83% in 2019.

The net profit margin in 2017 decreased by 0.44%, increased by 6.26% in 2018, and then
decreased by 5.24% in 2019.

The inventory turnover ratios in 2017 decreased by 52.85%, increased by 42.48%, and then
decreased by 4.81% in 2019.
 Non-financial Analysis:

SWOT Analysis:
Strengths:
1. Ability to bring uniqueness in design and reliability
2. Ability to make their products look more of a lifestyle trademark.
3. Strong customer loyalty

Weaknesses:
1. Costly merchandises
2. Difficult market penetration

Opportunities:
1. Apple Automobile
2. Technological Advancement
3. Rapid Market growth

Threats:
As a company, Apple does not face many threats while a great competition on its devices.

1. Android against IOS

2. Samsung, One-Plus, Xiaomi, and others against Apple Smartphones
3. Dell, Lenovo, HP against Apple’s Mac book.

BCG Matrix of Apple:

Cash Cow: Apple’s iTunes and MacBook have proved to be the cash cows of the company for
several years. MacBook for their high demand and iTunes being the most famous music retailer
can be categorized as Cash cows.

Stars: With the launch of a new iPhone every year, Apple’s sales start to shoot to a new record
which undoubtedly proves their iPhones to be the star product of BCG Matrix.
Question Mark: Apple TV can be called the Question mark product for the company as it has
still not reached its potential sales and faces problems in the ecosystem.

Dogs: Apple iPods were seen as the next big thing for the company but unfortunately due to
the high competition and difficult market penetration, they did not get to their potential and
can easily be placed in the Dogs category of the BCG Matrix.

Market Segmentation and Target:

The Market Segmentation and Targeting for Apple have been done based on the following
criteria.

Age Group: People aging between 18-50 years old

Gender: Applicable to all types of Gender

Income: Medium to high

Lifestyle: As per the income, lifestyle should be modern with lesser hustle

Behavior: People who rarely go for a change. Incredibly loyal to the brand per se ‘Once an Apple
user, always an Apple user”
 Environmental Policy:
“Clean Energy is no longer Optional”
Renewable Electricity:

About half of Apple's carbon comes from the electricity used in production, which makes it
very important to help their suppliers switch to renewable energy. Apple has also established
an investment of nearly $300 million in the China Clean Energy Fund to help develop
renewable energy projects. All this work is leading to a goal that all suppliers use renewable
energy by 2030.

Policy Action:

Clean technology helps not only suppliers but also whole power grids and countries in which
they work. Apple is strongly promoting government initiatives that price carbon and create
cost-effective clean energy markets for producers and their societies. Apple claims that
protecting the world through the transition to green energy needs everyone to act quickly
in legislation plays an instrumental role.
Zero Waste Program
In 2015, Apple unveiled the Zero Waste Initiative for Manufacturers, which offers on-site
assistance for waste removal from landfills by diversion, re-use, and recycling. The goal is to
divert 100% of the waste from landfill sites. Apple began by concentrating on our biggest
waste producers: the final assembly plant. In 2018, this helped them gain 100% zero waste
certification across all final assembly facilities across iPhone, iPad, Mac, Apple Watch,
AirPods, etc. In 2019, Apple increased the spectrum of the initiative by adding Apple TV final
assembly sites. They aim to continue addressing waste in their other facilities before they
meet their global zero goal.

Customer Care Policy:

Apple runs through a defined policy structure to save itself and its customers from the hurdles.
From Refund and Sales to Legal policies, everything has been made plain and simple to
understand by Apple whether it is a user reading it or somebody from a business perspective.
While the local customer support of Apple comprises of live chat and its website, it is quite
strange to find countless bad reviews about Apple’s customer service especially in countries
where Apple’s market share rises every financial year.
Training:

Apple has launched a course for IT professionals to master the art of managing Apple devices
named the Apple Deployment essentials which is a 2-day course, employees would learn the
expertise, equipment, and information required to launch Apple products. Interactive conversations
and hands-on activities lead them through the setup and maintenance of Apple products. They will
work through real-world experiences to test and improve your experience and skills.

Employee Benefits:

Apple provides a range of comprehensive medical plans to protect both physical and mental wellbeing.
Besides, workers can contact medical practitioners from nearly everywhere and obtain free
confidential advice.

Apple makes sure women earn the same as men performing similar work. Any employee there still has
the potential to become an Apple shareholder, so they are all eligible for equity grants and discounts
when buying Apple shares. To support employees, plan for retirement, Apple's 401(k) matching will
help them meet their savings expectations. And to help employees brace for the unexpected, they
have the security of several forms of income insurance.

Moreover, According to Glassdoor,

 Apple staff earns an annual 25% discount when buying an iPod, device, or iPad. Every
three years, staff will get $250 off the iPad or $500 off the Mac. Apple app is 50% off.
The company also provides exclusive discounts for relatives and friends based on the
product.
 Apple allows mothers to take 4 weeks of paid leave before giving birth and 14 weeks
after giving birth. Non-birth parents, according to TIME, have six weeks of paid time off.
 Employees are treated to free beer and appetizers at the company's beer bashes -- not
to mention some of the biggest names in music. Stevie Wonder, Demi Lovato, and
OneRepublic have all performed at these semi-regular events.
 Apple employees also get gym credit worth of $300.
 Recommendations:
With modern implications in the electronic market and the rapid growth of the smartphone
industry, Apple must sort out a way to create a better position in the market. While the
consumers these days are more aware than ever and there are companies like Xiaomi,
Samsung, and Huawei offering the Smartphones with more options and higher capacity at
lower prices it might get harder for Apple to retain its current position in the market.
Meanwhile, it has been seen that Apple has been saving up on its complementary accessories
whether it is their MacBook or iPhones which gives their competitors an edge in marketing their
products. While there’s much that can be done but considering that Apple is a brand for its
brand imagery more than the product itself makes Apple a brand for the elites.

Conclusion:
With the above analysis, it can be concluded that in terms of income and sales i.e., net sales
and net income; 2018 proved to be the best fiscal year for Apple when compared to the other
two years. Both net sales and net income display an increase in the year 2018 as compared to
2017, while a decrease in 2019. In terms of assets, the company faces a decrease as time passes
as in 2017 the company possesses the highest value of assets while a decrease in the year 2018
and furthermore in 2019. While the equity ties down experiencing a huge decrease in 2018,
however, liabilities experience a decrease in the year 2019, henceforth, benefitting the
company. Earnings per share can be concluded with the increase in the fourth quadrant as its
value lapses to a new height.
 References:
https://www.apple.com/

https://www.inc.com/business-insider/

https://www.macrotrends.net/stocks/charts/AAPL/apple/financial-ratios

https://www.stock-analysis-on.net/NASDAQ/Company/Apple-Inc/Financial-
Statement/Income-Statement

https://tradingeconomics.com/aapl:us:eps

https://www.wikipedia.com/

https://www.wsj.com/market-data/quotes/AAPL/research-ratings