Experiencing Transition with a New Ceo

I choose Apple to evaluate because it is experiencing a transition with the new CEO and their recent shift from computer production toward diversified consumer electronics is a vast departure from how they built their company (2012). I used the assignment to calculate key ratios for three years including the quick ratio, accounts payable turnover, and inventory turnover. The following calculations are based on published information found in Yahoo finance for years 2009, 2010, and 2011. These three years show some dramatic changes in the amount of capital, their current ratio and inventory ratio. The accounts payable turnover was not significantly changed however it does show Apple has been slower to collect in 2011 than in previous years.

I used excel to make the calculations and have posted that file as a separate attachment. Below are the findings that I will use for discussion purposes. As you can see the current ratio changes is significant. According to Grossman a current ratio of less than 1 is bear minimum (2012). Apple’s 2011 current ratio of 1.1 is a dramatic change from 2.7 in 2009. The reasons why they have dropped are not clear. A possible reason is they are investing more in research and development.

Fiscal year

2011

2010

2009

Current Ratio

1.1316027

2.0112923

2.7424821

The quick ratio also shows a dramatic decrease indicating a significant decline. The question is where are their resources going? This decline is also during the roll out of their iPod and other innovations.

Fiscal year

2011

2010

2009

quick ratio

4.4

19.9

19.5

In looking at the inventory turnover they have vastly improved the turn around time. This may be a result of their production capacity being boosted in China where Apple is known to have skilled cheap labor (Washington Post, 2012).

Fiscal year

2011

2010

2009

Inventory Turnover

83

37

56

The exercise to common size Apple did not reveal very much. It has stayed the...