Apple Inc.: Financial Statements

Subject: Business & Economics

1087 words

4 pages

April 3rd, 2022

Apple Inc. is a multinational corporation that manufactures and markets mobile and media communication devices, music players and computers all over the world. The company greatly values innovation, and to show this, it has a loyalty program that rewards employees’ creativity. The multinational company is a dealer of a range of computing products, which include hardware, software, accessories and support service. It uses iTunes as the platform for selling its digital contents to both medium and small sized consumers, as well as government, enterprise and education clients. Headquartered in California, the company was established in the year 1977 with a sole goal of developing computers, though it later aligned itself towards consumer electronics (Market Activity, 1997).

Forecasting Apple’s top line growth is critical is predicting how it is expected to perform in the coming financial years. Today, Apple Inc. is operating in a growth market because the demand for Smartphones is on the increase, and according to consumer behavior, a launch of a new product is likely to stimulate demand (Balmer & Spencer, 2002). Growth rate in the technology industry can be extremely unpredictable, and this is clearly demonstrated by the rate of growth that Apple Inc and Google have experienced in the past. Apple Inc’s market share is a big factor when it comes to future sales considering its market dominance. Though pricing of Apple product seem to be relatively higher compared to Samsung and Nokia products, the company has managed to maintain its top line. Considering that their products are unmatched, they have a competitive advantage over other market players. Apple has the pricing power because of its loyalty programs and brand recognition, and this gives it an upper hand in the market. Noticeably, the company’s product mix involves selling of higher end products, who mean selling price end up having a positive effect on revenue and sales (Adler, 1999).

Financial Statements

Table 1: Cash flow – Source NASDAQ Yahoo Finance.

Financial Year	2011	2012	2013
Net Income	25922000	41733000	37037000
Depreciation	1,814,000	3,277,000	6,757,000
Net Income Adjustments	4,036,000	6,145,000	3,394,000
Accounts Receivables Adjustments	1791000	6965000	1949000
Liabilities Adjustments	8,664,000	9,843,000	8,320,000
Changes In Inventories	275,000	15000	973000
Other Adjustments	1391000	3162000	1,080,000
Capital Expense	4260000	8295000	8165000
Investments	32464000	38427000	24042000
Other Investing Activities	3695000	1505000	1567000
Sub Total	40419000	48227000	33774000
Dividends	0	2,488,000	10564000
Purchase of Inventories	831,000	665,000	22330000
Loans	0	0	16,896,000
Other Financing Activities	520000	1226000	1082000
Sub Total	1,444,000	1698000	16379000
Cash and Cash Equivalents	1446000	931,000	3,513,000

Table 2: Income Statement- Source NASDAQ Yahoo Finance.

Financial Year	2011	2012	2013
Total Revenue	108,249,000	156508000	170910000
Cost of Revenue	64,431,000	87,846,000	106,606,000
Gross Profit	43,818,000	68,662,000	64,304,000
Research Development	2,429,000	3,381,000	4,475,000
Administrative Costs	7,599,000	10,040,000	10,830,000
Operating Income/Loss	33,790,000	55,241,000	48,999,000
Other Expenses and Income	415,000	522,000	1,156,000
Earnings Before Taxes	34,205,000	55,763,000	50,155,000
Interest Expense	0	0	0
Income Before Tax	34,205,000	55,763,000	50,155,000
Income Tax Expense	8,283,000	14,030,000	13,118,000
Net Income (Operations)	25,922,000	41,733,000	37,037,000
Net Income	25,922,000	41,733,000	37,037,000

Budgeting and Projections

To estimate Apple Inc’s cash outflow and inflows and for purposes of projecting the results of 2014 estimates, cash budget was developed. The main objective of this was to establish whether the company will have enough money to support its daily operations, as well as to ascertain whether cash is being put into the right use. To accomplish this, cash flow was used to project the estimates of the financial year ending September 2014. As table 3 demonstrates, the projections give an impression of performance is exceptional by Apple Inc. In the 2014 financial year, the company is expected to increase it Net Income by 60.9945 percent, which can assumedly be attributed to the revenue it expects to generate following the introduction of a number of products in the market (Market Activity, 1997). Averagely, the annual growth rate of the net income is 24.87105 percent, which demonstrates the financial position of the company. The accounts receivable is expected to increase by 288.88 percent, which is a good financial position especially when the company is in need of additional capital from lending institutions for purposes of investing in the latest technology (Norton, Diamond & Pagach, 2006).

Table 3: FY 2014 Cash Flow Projections.

Financial Year	2011/12 (% ∆)	2012/13 (% ∆)	Average	Projected 2014 Budget
Net Income	60.9945	-11.2524	24.87105	46248490.79
Depreciation	80.6504	106.1946	93.4225	13069558.33
Net Income Adjustments	52.2547	-44.7681	7.4866	3648095.204
Accounts Receivables	288.8888	-72.0172	108.4358	4062413.742
Liabilities Adjustments	13.608	-15.4729	-0.93245	8242420.16
Changes In Inventories	-95.5454	548.6666	226.5603	3177431.719
Other Adjustments	127.3184	-65.8444	30.737	11967554.81
Capital Expense	94.71	-1.5672	46.5714	11967554.81
Investments	6.0466	52.5541	29.30035	1411959.6
Other Investing Activities	-59.2692	4.1196	-27.5748	1134902.884
Sub Total	19.3176	-29.9668	-5.3246	31975669.6
Dividends	0	324.59	162.295	27708843.8
Purchase of Inventories	-20	3257.8947	1618.947	383840865.1
Loans	0	0	0	0
Other Financing Activities	13.57692	25.47985	19.52839	1293297.18
Sub Total	17.4272	864.6054	441.0387	88616728.67
Cash and Cash Equivalents	55.3168	277.3361	166.3265	9356049.945

Table 5: FY 2014 Profitability Projections.

Financial Year	2011/12 (% ∆)	2012/13 (% ∆)	Average	Projected Budget of 2014
Total Revenue	44.5815	9.202	26.8917	216,870,604.47
Cost of Revenue	36.3412	21.35	28.8456	137357140.3
Gross Profit	56.6981	-6.347	50.3511	98713713.44
Research Development	39.193	32.3572	35.7751	6075935.725
Administrative Costs	32.1226	78.6852	55.4039	16830242.37
Operating Income/Loss	63.4833	-11.3	26.0919	61783765.18
Other Expenses/Income	25.7831	121.456	73.6195	2007041.651
Earnings Before Taxes	63.0258	-10.057	26.4845	63438300.98
Interest Expense	0	0	0
Income Before Tax	63.0258	-10.057	26.4845	63438300.98
Income Tax Expense	69.383	-6.5003	31.4414	17242476.29
Net Income (Daily Operations)	60.9945	-11.252	24.7353	47167545.43
Net Income	60.9945	-11.252	24.7353	47167545.43

The flexible budget was used in estimating the diffident levels of expenditure with respect to changes in the revenue (Norton, Diamond & Pagach, 2006). Revenue was used as the input, and later employed to determine whether the company’s performance was favorable or not. The flexible budget was preferred because Apple Inc. expenditures are aligned with the daily operations. It is a good tool for measuring a company’s performance based on daily operations (Miller, 2005).

Table 6: Budgeting.

	Flexible Budget	Actual	Variance
Total Revenue	216,870,604.47	170910000	45,960,604.47	Favorable
Cost of Revenue	137,357,140.34	106,606,000
Gross Profit	98,713,713.44	64,304,000	73,053,140.30	Favorable
Research Development	6,075,935.73	4,475,000
Administrative Expenses	16,830,242.37	10,830,000	1,600,935.73	Favorable
Operating Income/Loss	61,783,765.18	48,999,000	12,784,765.18	Favorable
Other Net Expenses and Income	2,007,041.65	1,156,000	851,041.65	Favorable
Earnings Before Taxes	63,438,300.98	50,155,000	851,041.65	Favorable
Interest Expense	0.00	0.00	0.00	-0-
Income Before Tax	63,438,300.98	50,155,000	851,041.65	Favorable
Income Tax Expense	17,242,476.29	13,118,000	4,124,476.29	Favorable
Net Income (Operations)	47,167,545.43	37,037,000
Net Income	47,167,545.43	37,037,000	10,130,545.43	Favorable

References

Adler, R. W. (1999). Management accounting: making it world class.. Oxford: Butterworth-Heinemann.

Balmer, K. K., & Spencer, C. (2002). Basics of accounting & finance: what every practicing lawyer needs to know, Summer 2002. New York, NY: Practising Law Institute.

Miller, M. A. (2005). Miller’s comprehensive GAAS guide ; a comprehensive restatement of generally accepted auditing standards,. San Diego, Calif.: Harcourt Brace Jovanovich.

Norton, C. L., Diamond, M. A., & Pagach, D. P. (2006). Intermediate accounting: financial reporting and analysis. Boston: Houghton Mufflin.

Market Activity. (1997). NASDAQ.com. Web.