Apple: Ratio and SWOT Analysis Financial Trend Comparison

Ratio Category: Liquidity Ratios

In basic terms, liquidity ratios demonstrate a company's ability to settle its obligations (short-term) if and when they fall due. To begin with, from the computations, it is clear that Apple's current ratio has consistently been less than the industry average. Hence for short-term creditors, this could be an issue of concern as the trend increases their risk. Further, a look at the company's cash ratio shows that the firm could have difficulties settling its current obligations if payment for the same was demanded immediately. Generally, most (if not all) the company's relevant liquidity ratios fall below the industry average. Hence going forward, the company could find it hard accessing short-term-credit from creditors.

Ratio Category: Asset Ratios

Asset turnover ratios are basically used as pointers of a company's level of efficiency when it comes to asset utilization. Apple's inventory turnover ratio by far surpasses industry average and hence is an indicator of strong sales. The other asset ratios including asset to equity ratio, total assets ratio and fixed assets turnover ratio fall below the industry average. This is an indicator of challenges on the part of Apple when it comes to the generation of revenues on assets.

Ratio Category: Profitability Ratios

Profitability ratios measure an entity's prowess when it comes to profit generation. Again, in this case, most of the company's ratios fall below industry average. Apple's return on assets for the year which is captured as 0.26 against the industry's average of 2.00 means that in comparison to other firms in the industry, the company is less efficient in the generation of profits using its assets. This could impact negatively on the company's profitability going forward. The company's shareholders in this case could also voice their dissatisfaction in future with the company's performance in regard to how much they are getting for every dollar invested as highlighted by the firm's return on equity.

Ratio Category: Debt Ratios

Debt ratios come in handy in the determination of an entity's solvency in the long-term. Two ratios which could help us chart Apple's financial health going forward include the total debt ratio and the debt to equity ratio. Apple's total debt ratio which stands at 0.34 indicates that the company has more assets than debt. On the other hand, the company's debt to equity ratio shows that the company is using very little debt to finance its growth. This basically protects Apple from volatile earnings going forward.

Ratio Category: Market Ratios

Basically, market ratios are critical for the analysis of a firm's viability as an investment. Considered an important ratio in this category, earnings per share shows how much profit is allocated to each common stock of Apple. As an indicator of the profitability of the company, Apple's EPS comes across as being rather impressive. In all instances, it surpasses the industry average effectively meaning that Apple's stock is a viable and attractive investment option for most investors in comparison to the stocks of the other firms operating in the same industry. Hence the company's prospects for future growth are not in any way threatened as the company could easily raise its level of retained earnings to fuel future growth and expansion. Further, looking at the company's price to earnings ratio, it is clear that investors are optimistic of higher earnings growth going forward. This assertion is based on Apple's relatively high price to earnings ratio in comparison to that of other companies in the same industry. The company's low payout ratio in relation to its peers in the same market could be constructed to mean that Apple is more interested on earnings retention as opposed to dividend payment. This could result in higher earnings in the future if the company is putting retained earnings to good use.

Section C: Apple's Comparative Financial Analysis Compared to Industry Performance

Based on the analysis of the four ratio categories, it is clear that Apple's performance in comparison...

On the profitability front, apple is doing much better than its peers based on its relatively impressive market ratios. Further, it can be noted that when compared to other players in the industry, Apple could be said to be utilizing its assets effectively when it comes to the generation of earnings. Also, when it comes to the management of debt, the company does relatively well in comparison to the industry average. Hence on this front, Apple appears to be more protected that its peers from earnings volatility.
Section D: Comparative SWOT Analysis

Some of Apple's main competitors include HP, Research in Motion and Google (Yahoo Finance, 2011). In comparison to its main competitors, Apple comes across as being rather successful in some distinct segments.

Strengths

To begin with, in comparison to its competitors, Apple scores highly when it comes to innovation (Morris et al. 2010). In the recent past, the company has been churning out innovative products that click with consumers including but not limited to the iPhone, iPod and the hugely popular iPad. Secondly, the company develops most of its hardware and software giving it the much needed flexibility. Further, the company is well diversified with quite a number of portfolios including consumer electronics, software and personal computers.

Weaknesses

In comparison to its peers in the personal computers industry, the company's brands seem to be more expensive. Secondly, in comparison to some of its competitors like HP and Dell, the research and development costs of the company appear to be a tad too high.

Opportunities

When it comes to opportunities, it can be noted that based on the company's impressive reputation on the innovation front, it could command higher sales than its peers going forward. Secondly, further improvements in technology could see the company lower its production costs. Also, the company could seek to embrace a cost leadership strategy so as to cement its market share. Emerging markets also present the company with unexploited growth opportunities.

Threats

Currently, apple faces significant competition on the smart phone segment and this could see it lose a significant chunk of its market share. Further, the personal computers marketplace has quite a number of players who can be considered strong competitors for Apple. Also, it can be noted that apple's presence in a number of developing countries exposes it to adverse currency fluctuations/changeability. Prevalent price wars that shape the industry are yet another threat that apple has to contend with.

Section E: Ethics Analysis

Apple has in place a detailed and concise code of ethics. The code of conduct dubbed "Business Conduct: The Way we Do Business Worldwide" details the company's commitment to not only comply with all relevant regulations but it also does highlight the ethical position of the company in terms of business ethics and honesty (Apple, 2010). However, apart from this detailed code of ethics, there is no evidence of repeated or sustained emphasis of the relevance of ethical conduct to the company by either the CEO or BOD. According to Apple (2010), any individual wishing to report an ethical lapse may call the business conduct helpline given by the company. Available, 24 hours a day, this helpline serves those with queries touching on business conduct issues as well as compliance concerns. In that regard, the company pledges to keep the information of the inquirer confidential. Further, those who may deem if fit to do so may anonymously contact the helpline (Apple 2010).

Section F: Conclusions and Decisions

Decision 1

Personally, I would not place a deposit of one million dollars or more in Apple's publicly traded stock. One reason for this is because the company's return on equity is not high enough. For instance, given that the company's return on equity lags behind the industry average, I would better-off investing in another company in the same industry which rakes in more earnings for every dollar invested. It can be noted that while Apple's return…