Apple Inc. (AAPL) (Case Study Sample)

Apple Inc. (AAPL) Name Course Date Apple Inc. (AAPL) Company Overview Apple Inc. has, in recent years, established itself as a leading brand in the global market, primarily offering technology solutions and products to its customer base. The aspect is notable because the company operates in thirty-nine countries, with the primary activities being on online platforms (Hiremath & Gupta, 2022). Primarily, due to its leadership in adopting the latest technology and communications, the multinational has built a great brand that appeals to wealthy clients (Pan, 2024). Apple has significantly established its success through constant product and service change. Significant key drivers have led to the company's success amid stiff competition from companies like Samsung Electronics, Nokia, Sony Mobile and Motorola. A notable success driver is the company has a diverse product line catering to a wide range of customers (Almeida et al., 2021). The company’s product line includes iPhones, iPads, Apple Watches and Airpods (Li, 2021). In recent years, strategic partnerships have been critical success drivers for Apple. Notably, the firm has partnered with other multinational companies like Hermes, Nike, and IMB, which have strong brands in the market (Hai, 2023). The strategic move has enabled the company to expand its product line while successfully tapping into new markets (Almeida et al., 2021). For instance, the strategic partnership with Nike resulted in the development of the Apple Watch Nike+, which specifically targets athletes. Primarily, Apple has adopted the use of Simultaneous Multiple Strategic Thrusts (SMsT), an action a company takes to achieve a goal for multiple stakeholders such as partners, suppliers and customers (Pan, 2024). The process is achieved through international collaboration and efficiency, flexibility in local operations, and international innovation and training (Tashanova et al., 2020). Notably, the multinational has significant evidence of SMsT, specifically through value, collaboration, innovation and product differentiation (Taneja & Sharma, 2023). Apple's most important issue is its control over customers and suppliers, a significant component of its stakeholders. Most importantly, standardising has acted as one of Apple's international techniques, requiring the global cooperation of its suppliers, a step that allows the firm to keep its costs low (Chen, Liu & Gong, 2021, December). Primarily, in addition to replacing customer electronics in line with national regulations, the company's products excel in foreign markets, reducing costs and exploring international markets (Legun & Burch, 2021). Such success will be replicated once the company explores new markets in Africa. Finally, an overview of the company’s annual reports indicates that Apple has thrived over its competitors (Yahoo Finance, 2023). Currently, the company consistently generates billions of dollars in revenues. Besides, the company's stock prices have soared over the years, making Apple one of the best-performing firms in the global sphere (Tashanova et al., 2020). Research and development activities have enabled Apple to analyse its market and successfully compete with its major rivals (Kliestik et al., 2020). Ratio Analysis (All the figures are in million US dollars apart from the data in the answers) Liquidity Ratios Liquidity ratios determine how effectively and quickly a firm can convert its existing assets and settle dues when they arise (Podolny & Hansen, 2020). Current Ratio The current ratio is among the most valuable ratios in financial analysis because it helps the management gauge a company's liquidity position. The ratio aids management in assessing the company's ability to convert its assets into cash to pay off short-term liabilities when they fall due (Kliestik et al., 2020). Notably, the company has lower current ratio which is equal to the one set for consumer electronics companies industry has set (1.7) (Yahoo Finance, 2023). Notably, current ratios that are higher than 1.00 indicate that the company is highly liquid, and that the available assets can cover the liabilities when they become due. The ratios declined from 2021 to 2022 because the company acquired more liabilities. However, the ratio improved from 2022 to 2023, which is a sign that Apple had cut down its external borrowing activities. Quick Ratio Quick ratio calculation is essential to a company because lenders check it before advancing a loan to a company. The ratio will show lenders whether the company can pay off its debts by converting assets into cash (Husain & Sunardi, 2020). Notably, in the case of Apple Inc., the quick ratio of 1.02 generated is lower than the 1.12 which is the industry standard. The aspect shows that the company is solvent in the short run because it can effectively settle its short-term liabilities when they become due or payable. Most importantly, there were fluctuations from 2021 to 2023 (Yahoo Finance, 2023). The ratio decreased in 2022 due to an increase in short-term liabilities but increased significantly in 2023. The management has done an excellent job of avoiding short-term liabilities that affect a company's liquidity. Solvency Ratios Debt to Asset Ratio The ratio tends to show how much the company has used debt to finance assets. In the case of Apple, the company did not rely too much on liabilities to fund its investments. The aspect is shown by the fact that 0.79 is significantly lower than 1.11, which is the industry-set standard for the consumer electronics (Avi, 2023). Notably, the value for 2023 is a significant improvement from 2022 and 2021, when the company posted high ratios due to overreliance on eternal sources of finances (Yahoo Finance, 2023). Debt to Equity Ratio The equity ratio is necessary for a company because investors and lenders will review before deciding whether to buy the company's shares for the case of investors. Lenders will also review it before deciding whether to advance a loan to the company. A large debt-equity ratio will show whether the company has relied mainly on borrowing to finance its operations (Ginting, 2021). The industry set standard debt to equity ratio is 0.549, which shows that the company’s ratio is higher that the set limit. The case differs from 2021 and 2022, where the firm used more debt than equity to fund operations (Yahoo Finance, 2023). Hence, the lower the ratio, the less the company relies on external borrowing to finance the purchase of long-term investments like assets. Leverage Ratios Equity ratio The ratio primarily measures the proportion of the owner's funds to the total funds employed in the business. Notably, a high equity ratio shows lower risk within the company because most of the funds invested in assets emanate from the finances the stockholders availed (Arsyad et al., 2021). In the case of Apple, the ratio is 1.00 which is lower than the industry set standard of 1.7. However, the risk was considerably lower in 2021 and 2022 as compared to 2023 (Yahoo Finance, 2023). The element shows that the company is more exposed to risks in 2023 than in the preceding two years. Debt to EBITDA In such a case, it can be noted that the company has not performed well in converting its inventory into income to settle its debts. I should be noted that the industry set standards for consumer electronics is 0.33, and hence Apple Inc. did not perform well in this case. Such a ratio is higher than reported in 2021 and 2022 (Yahoo Finance, 2023). The lower ratios in 2021 and 2022 show that the company generated more earnings than the debts accrued, which is a good performance for the firm (Ginting, 2021). However, the trend is not good in this category over the past three years. Efficiency Ratios Inventory Turnover Ratio Apple Inc. has had significantly high ratios in this category in the past few years. Such a high ratio indicates that the company has efficiently converted inventory into receivables (Rafid et al., 2021). In this case, the ratio of 37.98 is relatively higher than the industry set range of 5-10. The company's stock is fast moving owing to the high demand for quality products. The ratios for the three years, 2021, 2022, and 2023, are significantly high, showing that the company has not held its inventory over the years (Yahoo Finance, 2023). Total Assets Turnover Ratio The total assets turnover ratio measurement plays a critical role because management will utilise the value of Apple's sales relative to the average assets. Notably, the aspect will show the company’s efficiency in converting assets into revenue. The company's ratio of 0.24 is relatively lower than the industry's 0.25 (Markonah, Salim & Franciska, 2020). The value generated in the computation implies that for every $1 of assets, the company generates 0.24 in sales revenue, which is relatively low. However, in 2021 and 2022, it can be noted that the ratios were higher than in the case of 2023 (Yahoo Finance, 2023). It should also be noted that in the consumer electronics industry, the standard set ratio is 0.71. Based on that case, it can be noted that Apple did not meet that threshold in 2023. Profitability Ratios Profit Margin (Net Margin) Ratio The ratio is essential to the company because it assists management in gaining insight into the business's records regarding sales and revenues (Almeida et al., 2021). The profit margin above means that for each $1 of revenue, Apple earned $0.25 in net profit in the financial year (Kadim, Sunardi & Husain, 2020). The value of 25 is relatively lower than the industry's set standard which is 29.1 for consumer electronics. The profit margins in 2021 and 2022 were higher than in 2023 because the firm generated more income (Yahoo Finance, 2023). Return on Assets Ratio The metric generated in this computation indicates the firm's profitability relative to the total assets at ...