Essay on Financial Analysis of Apple, Inc.

Decent Essays
When looking at the financial performance of a company, it is important to examine the financial ratios. There are several different classifications of financial ratios. Profitability ratios show the profitability of the company. Liquidity ratios deal with the current assets and current liabilities of the company, and they determine how the company is performing with their liquid finances. Leverage ratios deal with the company’s debt, and how they affect performance. Activity ratios deal with a company’s inventory and collection period, determining how well a company is able to turn over inventory and collect debts. The other important measures of financial performance include information on dividends, common stock, and cash flows (**Use…show more content…
As before, the trend should be upward, and the higher the value, the better (**Book). Apple’s ratio for the past three years has been: 25.73% for 2010, 29.32% for 2011, and 30.35% for 2012 (Apple financials). While these values are not very high, the trend has been increasing over the time period. Therefore, the ratio shows positive growth for the company. Earnings per share shows the earnings for each share of common stock outstanding. The bigger the value, the better, and the trend should always be increasing (**Book). For Apple, this ratio shows positive growth, although the values are very small. In 2010, the company showed a ratio of $0.02. The trend shows a positive increase in 2011, and again in 2012, with a ratio of $0.03 and $0.04, respectively (Apple financials). Liquidity Ratios The liquidity ratios for Apple also show that the company is doing well. The current ratio shows the ability of a company to pay their current liabilities with their current assets. The ratio should be at least one in order to be considered good. Anything less than one means that a company cannot pay its current liabilities with its current assets. Anything over one is considered desirable, and anything over two is better yet. The trend should be increasing (**Book). For Apple, the ratio over the last three years has been 2.01 in 2010, 1.61 in 2011, and 1.50 in 2012 (Apple financials). Although the trend is
Get Access