Dell and Apple Comparison

1046 Words Dec 20th, 2008 5 Pages
Profitability Ratios

Profit Margin

Profit Margin is a measure of the percentage of each dollar of sales that results in net income. You can find a company’s profit margin by dividing net income into net sales. Based on the chart below we can see that Apple in between 2006 and 2007 had a 4% profit margin increase. This was likely due to the popularity of IPOD’s and the MAC computers. Between 2006 and 2007, they stayed consistent. Based off these data, the next few years the company will most likely stay in the 14% range. On the other hand, Dell’s profit margin was much lower than Apple’s to begin with. Also, Dell took a fall between 2006 and 2007, the same year that Apple’s profit margin rose over 4%. They did make a small
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It is computed by dividing total debt by total assets. It indicates the company’s degree of leverage and it’s ability to withstand losses without impairing creditors’ interests. The higher the percentage of debt to total assets, the greater the risk that the company may be unable to meet its maturity obligations. The creditors desire that the debt to total assets ratio be low because it gives them a higher equity buffer.
There is a high difference in the ratios of the two companies. A ratio of 86.45% shows that creditors have provided 86.45% of Dell’s total assets. That’s way above Apple’s 46.86%. That means Apple is more appealing to creditors and investors, having a higher debt-paying ability (which makes Apple more solvent then Dell).

Times Interest Earned
Often referred to as "interest coverage ratio" or "fixed-charged coverage", this ratio measures company’s ability to meet interest payments as they come due. It is computed by dividing income before interest expense and income taxes by interest expense. Failing to meet interest obligations could force a company into bankruptcy. Ensuring interest payments to debt holders and preventing bankruptcy depends mainly on a company 's ability to sustain earnings. However, a high ratio can indicate that a company has an undesirable lack of debt or is paying
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