So . . . .what is required . . . . 1. Your chosen company (financial r

QUESTION

So . . .
.what is required . . . .
1.
Your
chosen company (financial ratios and trend analysis)
a.
Using
the data provided at the Yahoo! Finance site, use the ratios in the textbook
and determine the status of your chosen company based on those ratios.Also, identify any trends you notice and what
the impact might be if those trends continue.
The ratios you will be reviewing are the same ratios as you will find in
chapter 3, page 57 of the text.Note
that some of these ratios may not be applicable to your company.Some ratios are specific to certain types of
firms.Not all firms carry significant
accounts receivable as an example.
2.
A
competitor in the same industry (financial ratios and trend analysis)
a.
Using
the data provided at the site, use the ratios in the textbook and determine the
status of your chosen competitor based on those ratios.Also, identify any trends you notice and what
the impact might be if those trends continue.
3.
The
industry as a whole; how does your chosen company compare and what evaluations
can you make (predict) for future financial success?
a.
Review
industry data and determine where these two companies fit within that
industry.Are they
leaders/followers?What does the future
hold for this industry?
4.
Using
your chosen company and the current conditions in the financial markets, assume
the firm needs to raise a large amount of cash.
Compare the choices of raising these funds in the capital market
(selling new shares of stock) versus the bond market (debt financing), and make
a decision as to what is best and why.
5.
Take
one of the following positions and justify your decision:
a.
You
are a banker who has been approached by this company to borrow a sum of money
(you decide how much, and why).Based on
the companys financials and its future business prospects, would you loan the
money?Why or why not.
You are an investor with a large sum of money (or a
company looking for an investment), and buying either the company or shares of
stockSubmit your detailed question here¦
Introduction Apple INC
is one of the leading business houses which designs, creates and markets smart
phones, personal computers, digital music players and related services and
software. Apple is the company driven by innovation; its major revenue source
is from sales of smart phones. Apple has around 17 percent market share in
worlds Smartphone market which is second highest in one of the fastest growing
industry. It is leader in sharing industry profit taking around 57% of industry
profit. Ratio and trend Analysis of Apple its Competitor and Industry as a whole One of method to judge financial health of the
company is through Du Pont analysis. It provides over data for over all return
on equity to investors based on return on assets, equity multiplier, and net
profit margin. Net profit Margin It
gives the profitability of a company and is most sought after ratio by
investors who are looking for dividend and returns Apples
net profit margin is 22% which is highest in smart phone industry which makes
it leader in profit sharing of entire industry. Although profit margin of Apple
has declined from 27% in 2012 to 22% in 2013 but it is still well above industry
average of 16%.which indicates company is force to reduce its earning margin
due to competition from other players. Gross profit Margin Apple is not
leader in sharing the gross profit in industry. Its gross profit has declined
to 38% in 2013 from 44% in 2012 from this indicates that rising operational
costs are reducing¦

its operational efficiency. Although its gross profit is
almost similar to industry benchmark but being innovator in smart phone market
Apple needs to improve its gross profit margin. Reducing gross profit margin
can also be attributed to the fact that company is facing tough competition. Debt Equity ratio Debt
to Equity is also known as leverage. It is a solvency ratio which determines
companys ability to meet its long term debt. Each industry has a different
bench mark for Debt to Equity ratio. This
data shows company has much lower debt than industry average and is free from
financial distress which comes along with debt. It also indicates that company
is operating at good solvency levels. Earlier in 2012 and 2013 company it was a
zero debt company which has not increased to the accepted levels of 14%. This
is good indicator because accepted level of debt helps in reducing the cost of
capital of company. Current Ratio Current
ratio calculates companys liquidity position in short term. Its important to
maintain short term liquidity to increase operational efficiency and reduce wastage. This ratio also helps in making financing decisions. Different
companies with in an industry have widely different current ratio. Data
indicates Apple Inc has just sufficient liquidity to manage its operations.
Although the liquidity of the company has increased in 2013 from 2012 but company
is operating at Current ratio of 1.68 which way below industry benchmark of
2.46 hence Apple needs to increase its liquidity. Since this ratio for Apple is
way below industry benchmark we look at another liquidity ratio. Quick Ratio This
ratio is also known as acid test for determining the liquidity of the company.
It measures companys highly liquid assets against its current liabilities. Data for quick ratio also indicates
apple needs to increase its liquidity in comparison to industry benchmark. One
of the reasons for low liquidity is since Apple has high bargaining power over
its suppliers and customers so its accounts payable turnover in days exceeds
accounts receivables which impacts current and quick ratio. Asset Turnover Asset
turnover is a measure of asset utilization of a company. It indicates
efficiently is company making use of its assets. Asset
turnover ratio of apple is well above the industry benchmark which indicates
that company is efficiently utilizing its assets. HP is the leader in asset
utilization in electronics good industry. Return on Asset It is a
measure of overall efficiency of operations. Data for return on
assets shows that although the operational efficiency of Apple is above
industry standards but its return on assets has declined in comparison to 2012.
This implies that company should check that its return on assets should not
decline further in coming years. Return on Equity It is a
measure of return which company has provided to its investors. Apple
has provided very high return on equity to the investors in the industry which
makes it a attractive destination for all sort of investors. Altamas Z score It is a measure
of credit worthiness of a firm. Based on various defined parameters it
calculates the credit risk associated with the company. Firms having score of
-.25 and below have very high credit risk where as firms with score of 4.25 and
above have very low credit risk associated with them. Apple has an
Altamas Z score of 6.61 which above industry average of 4.48 hence it has very
low credit risk associated with it. Apples score has declined in comparison to
past years which could be attributed to debt which company has taken to reduce
its cost of capital. Review of Industry data Smartphone
industry has competitiveness on two scales, one is platform to support device
and other one is smart phone device itself. Googles android is leader in
platform segment while Samsung has highest market share in making Smartphone
device. Apples IOS and Apples smart phone device are having second highest
market share in both platform and smart phone device segment. Concord
Genuity report summarizes the dominance of android in smart phone platform
segment Smart
phone device industry is still in growth phase with growth rate of around 40
percent on year on year basis which is still increasing and thus provides
incentive to analyze Apple INC before investing. BCG Analysis is one way to look at positions of companys in industry BCG matrix was developed by Boston Consulting
Group which judges the position of a company from growth prospects as well as
market share. In BCG matrix companies are classified into four categories named
as Stars (high growth and high market Share which provides good opportunity to
invest), Cash cow (high market share but low growth), Question (low market
share and high growth could be risky investment but provides very good returns
and Dog (low market share low growth not so good for investment). Hence with above analysis we can conclude that Aplle is among leaders in smartphone device segment where as Google is leader in platform segment. Financing Decision Apple and Google both the companies have very less debt in their capital structure . In capital structure if there very less debt in a company cost of debt is much lower than cost of equity so both companies should use debt as a source of Financing it will help them in reducing their overall weighted average cost of capital. Debt Financing As discussed above Apple is company based on innovation and has very high growth prospects. Apple has very high Altmas Z score which establishes that company is highly creditworthy . Also it has very small debt which implies that company is free from financial distress. So as a banker it would be good decision to loan such company. Return Analysis Descriptive Stats of Apples return Percentage Data Mean 1.751343679 Standard Error 1.333464533 Median 0.282526855 Mode #N/A Standard Deviation 7.775367548 Sample Variance 60.4563405 Kurtosis -0.023586783 Skewness 0.165021794 Range 33.23998451 As apple Inc has provided average monthly return
of 1.75 percent with standard deviation of 7.7 percent and this indicates that stock
is not highly volatile and is appropriate for long term investments.so as a Equity investor Apple is attractive destination for investment.

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