Investor Information Financial Statements Are the Primary

Investor Information

Financial statements are the primary way for an investor, creditor, and other financial statement users to evaluate a company's financial performance, financial stability, profitability, and net worth to determine whether putting investments in the company would provide profitability and adequate return on investments (Way, 2013). Financial statements are also a way for managers to communicate achievements in performance to potential investors and creditors. The various statements brings various information components in the determination of evaluating companies for potential investments.

In evaluating Apple, Inc., the Income Statement shows net income for 2012 at $41,733 million (Form 10-K, 2012), up from $25,922 million in 2011. The income statement reports sales, expenses, and profits or losses. This is important to an investor because it shows results from operations in how profitable a company has been for the particular period. By evaluating present results against past performance, investors can assess for uncertainty in cash flows. It also helps an investor evaluate for changes in operations, what caused the changes, and whether changes were justified.

Apple's stockholder's equity for 2012 ended at $118,210 million, up from $76,615 million in 2011 (Form 10-K, 2012). The stockholder's equity is the net worth of the company. Apple, Inc. is showing an increase in net worth from 2011 to 2012. This information is particularly useful to a labor union because it shows that Apple, Inc. has the ability to give adequate raises every year and ensure payment of benefits to labor union employees at Apple, Inc. A labor union may use this information to advocate for more benefits and higher pay for union employees employed at Apple, Inc.

Apple, Inc. is showing total assets for 2012 at $176,064 million, up from $116,371 million for 2011 (Form 10-K, 2012). This information is particularly useful to creditors because it shows the liquidity of Apple, Inc. The liquidity shows the ability of the company to pay its obligations in the event of bankruptcy. Where Apple, Inc. is showing growth in assets, this is a good sign that the company can pay its obligations. This information is used to determine the amount of credit that Apple, Inc. could safely be provided. This also shows whether investments in Apple, Inc. are safe and would be profitable for an investor. It allows the investor to evaluate and understand their relative position if they invest in the company.

Apple, Inc. shows cash flow from operations at $50,856 million for 2012, which also increased from 2011 (Form 10-K, 2012). The statement of cash flows shows cash inflows and outflows from operating, investing, and financing activities. It shows how money was spent, managed, how investors are paid back, and determines the company's ability to meet obligations as they become due. This is most important for creditors because it determines how money is managed and spent, whether the company would pay its debts when they are due. The cash flows show how the management of the operations is performed and whether it is adequate or not. How the cash flow is managed tells the credibility of the management team.