Annual Report Analysis of Apple, Inc.

Annual Report Analysis of Apple, Inc.

Apple, Inc. is a company that designs, manufactures, and sells electronics; it has experienced substantial growth over the past several years and obtained increasing recognition by consumers. As Apple products have become more incorporated into and better compatible with other electronics sources (namely, PC’s), Apple Company has come to be known as a viable, alternative source of not only computers, but of such products as system software, phones, MP3 players, and other electronics-related items for home and commercial use.

The following analysis uses financial ratios, capital structure and management information, and financial history to determine whether Apple is a company worth investing in, or if it has areas in which it is deficient that cause it to be unfit for investment at this time. Please note that all monetary figures in the following calculations are in millions, unless otherwise stated.

Performance Ratios

Financial analysts use ratios as a fast and effective way of evaluating a firm’s performance. The current ratio and quick ratio measure a firm’s liquidity, or its ability to liquidate its current assets in order to meet near-term obligations (Moyer, McGuigan, & Rao, 2007). Apple’s current ratio for 2006 was $14,509/$6,443=2.25 times, meaning that Apple possesses $2.25 in current assets for every $1.00 in near-term obligations. According to the Dun and Bradstreet Key Business Ratios table for the Electronic Computers industry, the industry standard for current ratio in 2006 was 1.9 times (2007). Apple exceeded the industry standard. In 2007, Apple’s current ratio was $21,956,000,000/$9,299,000,000=2.361 times, which was above the 2007 industry standard of 1.9 times. This shows that Apple has good liquidity and may be less risky when considering an investment.

The quick ratio also measures liquidity, but in a stricter manner by using only the most liquid assets of a firm. In 2006, Apple’s quick ratio...