Apple
Analysis of Nominal and Common Size Statements
In terms of nominal figures, Apple's financial statements indicate that the company has experienced an exceptional run of success. In the past three years, the company's revenues have increased by 152%, from $42.9 billion in 2009 to $108.2 billion in 2011. This rapid escalation in revenue derives primarily from two products, the iPhone and the iPad, both of which have sold tens of millions of units in the past three years and driven the phenomenal growth in the company.
The growth in other line items on the income statement has mirrored the growth in revenue. Cost of goods sold has increased from $25.6 billion in 2009 to $64.4 billion in 2011. Selling, general and administrative expense has increased from $4.1 billion in 2009 to $7.6 billion in 2011. Research and development expense has increased from $1.3 billion to $2.4 billion over the same period. The company's bottom line has increased from $8.2 billion in net profit in 2009 to $25.9 billion in 2011, an increase of 214%. It is worth noting that the increase in net income is much higher than the increase in the revenue over the same period. Earnings per share have increased from $9.22 to $28.05 in that span, driving a massive increase in the value of the company's stock.
This dramatic improvement in the company's income statement has created some interesting...
For example while the company is kicking off cash at a tremendous rate, the actual cash holdings have only increased 11% in the past three years, from $23.4 billion to $26 billion. It appears that Apple has targeted this as a comfortable level to keep in cash and short-term investments. The rest of the free cash flow that Apple has generated in the past three years has been put into long-term investments. These have increased from $10.5 billion in 2009 to $55.6 billion in 2011.
Operating line items within the balance sheet have increased more in line with the increase in revenue. For example, total receivables have increased from $5 billion in 2009 to $11.7 billion in 2011. Inventory, however, has not followed the linear growth trajectory that other line items on its financial statements have followed. Inventory increased in 2010 from $455 million to $1.05 billion, but then declined in 2011 to $776 million. Apple appears to not only have a low level of inventory relative to its sales, indicating probably that it sells most of what it makes, but also that the company works hard to manage its inventory levels. This is something that the company does not need to do, given its financial condition, but it is encouraging from an asset management standpoint that Apple continues to monitor inventory levels even when there is little need to -- it is not losing…
