Dupont Analysis

Data Source: Hoovers and Thomson

The DuPont model and the time series of Apple’s performance show that Apple Inc. ROE has improved over time. However due to the global financial crisis Apple’s ROE dropped by 1% in 2008 from 24% to 23% and dropped by 3% in 2009 from 23% to 20%. After the financial crisis, Apple’s ROE rose up and improved over time. While Apple’s ROE has been very high, it has been on a downward trajectory over the last three years (2012-2014). In 2013, Apple’s Net profit margin dropped by 5% from 26.67% to 21.67% causing the Return on Equity in 2013 to drop from 35% to 30%. This is due to Apple’s change in pricing strategy. In 2013, Apple Inc. launched the iPhone 5s and lowered the price prices of the older phones. The older iPhones reduced the average selling price of the iPhone and contributed to Apple's lower profit margin in 2013, which caused a lower ROE. Apple Inc. was able to improve its ROE in 2014 and 2015.

By comparing other tech companies (Microsoft Corporation, HP Inc., Blackberry Limited, and Lenovo Group Limited) ROE, Apple Inc. has the strongest Return on Equity. This indicates how profitable Apple Inc. is compared to its competitors. Apple Inc. shareholders earn more for their investment in the company compared to its competitors.

There is no big difference between the ratios such as quick ratio, current ratio and net profit margin. The difference is slightly small for the Asset turnover. Apple Inc. has a slightly high net profit margin compared to its industry showing Apple Inc. is converting higher profits out of its sales in comparison to its industry. Apple’s Return on Equity is higher than its industry showing that Apple Inc. shareholders earn more for their investment in the company compared to its industry. Apple Inc. also has a higher Inventory turnover compared to its industry. Based on the Inventory turnover, Apple Inc. can get rid of its inventory faster than its industry.