Introduction
Apple business is an international company in the United States of America established in the month of April 1976 in the state of California However, it waited until its incorporation in 1977 to start its operations. The business main activity is designing and marketing of electronics. In addition, it designs computer software as well as manufacturing of personal computers.
Some of its famous products include Macintosh computers, iPad, iPod, and iPhone. Apple business has significantly distinguished itself through its distinctive and appropriate advertisement c and its philosophy that aims at promoting comprehensive designs of aesthetics. Due to these strategies, Apple’s reputation has been unique in the industry.
Company’s Financial Statements
Based on the financial analysis of the financial years from 2007 to 2010, it is evident that year after the other the company experiences a positive financial growth. Emphatically focusing on the financial year ended on 26 September 2009 and that ended on 25 September 2010, it is evident that the financial trend of the company indicates an impressive growth.
The revenue, for instance, grew from $42.9billion to $65.2billion between 2009 and 2010, which represents a 51% rise in revenue. The profits rose to $25684.0 from $17,220 in the same year, which translates to 49% increase in profits. A significant notable move is the company’s ability to reduce the sales expenses.
In fact, the company reduced income tax related expenses from 8.9% to 6.9% within the same period. This eventually contributed to increased net income growth to $14.0 billion from $8.2 billion, which was quite impressive for the company.
Looking into the Balance sheet, the company is experiencing very little debt on capital. This means that, the company may have less financial risks than the overall aggregate of electronic industry. There is however notable inefficiency on the receivables due to the company’s inability to collect its debts in time. The company’s inventory management is also wanting as indicated by the 6.93 days of value of goods sold within the inventories.
On the company’s cash flow, it is satisfying as there is withholding of accountability of cash. There is sufficient support for utilization of this cash; hence, there is no likelihood of unaccounted funds. Operational Cash also shows an increasing trend with a good example being the increase from $10,159 in 2009 financial year to $18,595 in the year 2010 financial year.
It is also notable that the company is using the cash-out to purchase capital, thereby contributing to the expansion of the company’s operations. Finally, it is also clear that net cash after deductions of cash out is positive except that of year 2009, which the company recovered in more than double in the following year.
Areas of concern
In the company’s balance sheet, there is an area of concern. The concern is on the high amounts of net receivables. This implies that the company uses inefficient methods of debt collection. This would at times make the company unable to have adequate finances to cater for its bills.
Another area of concern is on inventory management where the stock ties much of the value of sold goods for considerably a long period of time, almost a week.
The principle should be that once the company sells some goods, then it should deduct its value from the existing unsold inventory and initiate supply plans for those goods immediately. The final concern is on dividend payments. From these financial statements, it is true that Apple Company does not have a policy governing the payment of dividends or a program for the reinvestment of dividends.
How management can use the information in moving forward
The management of Apple company would use the information above to seal the loopholes, which if not timely addressed would affect the performance of the company in the end. The company can use the information in improving its operations in the following ways:
a) To enhance the efficiency of debt collection mechanism, the company should minimize its receivables. The management of Apple Company may for instance, introduce cash discounts to encourage the debtors to pay in time. By the fact that it is an electronic company, it can adopt online stores and establish retail stores, which would ensure that debtors make their payments immediately thus minimizing chances of much receivables in the company.
b) To improve inventory management system-This information would signal to the management of Apple Company on the presence of loopholes in its inventory/stock management. The management would ensure appropriate coordination of production and sales of its electronics. This would in turn ensure that the stock does not run out at any one time.
c) The company can also use this information to initiate a dividend payment policy. This would increase shareholders morale to invest more into the company and hence increase their share. This would consequently lead to considerable expansion of the company due to huge capital base.
Apple Company’s financial health
Out of the analysis of the company’s financial statements, Apple is a financially successful corporation with a current profit of about US$ 14.01 billion. Economists and analysts may attribute this to customer’s loyalty to its brand that has increased the Macintosh’s computer sales.
The last revenue reported was US$65.23billion, operating income of US$18.39 billion, total asset of US$75.18 billion and total equity amounting to US$47.79 billion. This clearly shows that it has a sound financial health.
When compared to other companies from America such as Microsoft and Dell companies, it turns out that Apple is a highly competitive company in the US and the rest of the world. In fact, it competes closely with industry giant, Microsoft Company, whose revenue, profit, operating income, and total assets are higher with a very small margin. However, when it comes to total equity, Apple Company has a stride ahead since it has total equity of US$47.79 billion compared to Microsoft’s US$46.175 billion.
Comparing Apple Company financial health with Dell’s financial health, it turns out that they are almost incomparable. The reasons for such incomparability arises due to the fact that, Dell’s company revenue, operating income, profits, total assets and total equity are relatively lower amounting to US$ 61.49 billion, US$3.43 billion, US$2.63 billion,US$38.59billion and US$5.64 billion respectively.
Technology
Apple Company is among the pioneer companies in the technology industry (Mcgirt, 2011, p.66). The company has used technology to gain competitive advantage in the IT market. Its original products were computer hardware and accessories. It has been manufacturing computer brands such as Macintosh among others.
The company has used its technological knowhow not only to make computer software and hardware, but also entertainment products such iTunes and iPod. This has made it a world leader in this industry. Although the company was lagging behind in terms market share a few years ago, it has managed to compete favorably with its rivals such as Microsoft and Dell companies. Over the years, the company has managed to build a name for its brands in the market.
It controls a considerable portion of the market. Despite the increased competition from rival IT companies, Apple Company has continued to produce products of high quality, which have not only attracted new customers, but also retained many customers. The company has continued to lead other IT companies when it comes to creation and adoption of new technologies.
There is daily emergence of novel technologies in the industry and the company has strategically placed itself to advance its products and services in line with these technologies. Apple Company adjusts its products with new technology in order to keep them up to date and relevant to the market in the 21st century. For instance, the company has upgraded its music player and iTunes to match the current technological advancement.
Through research and development, the company has continued to come up with new products that are in line with new technology. The company allocates large amount of money to research and development in its annual budget to enhance innovation of new products to meet its customers’ needs.
Through innovation, the company has managed to change its products such DAT, CD, and Vinyl a few years ago to MP3 and iPod, which widely enjoy high demand. This innovation has enabled to company to compete favorably with its main rivals, Microsoft, and Dell companies, in the world of technology.
Effects of globalization on the company
Being a technological company, Apple company has experienced great effects of globalization than many other companies in different industries. The emergence of borderless world has created a wider market for the company. It can therefore sell its products to all parts of the world through technology.
Globalization has made the company to change its business strategies. In the era of globalization, the company has to adopt strategies geared towards creation of goods and services that meet the global needs of the customers. Technology is core in the post-modern world and many people in all parts of the world are adopting new technologies in all their operations.
Increased adoption of new technology is creating new potential markets as people use computers and different software in their offices, home and in businesses. As a result, the company is focusing more on the new markets where there is high demand for its products. For instance, the company has shifted its focus to developing countries where demand for computers is relatively higher to that of the developed countries.
Again, globalization has compelled the company to change its marketing and selling strategies. Currently, Apple uses online advertisement to market and sells most of its products and services. The company makes a lot of its product marketing through its website, which its potential customers can easily access from all parts of the world. This has increased sales and hence the profitability of the company.
Benchmarking analysis
Though critics have severely accused the company for not adhering to the best practices in its business operations, Apple Company is committed to carrying out its operations within the legal boundaries. Compared to Dell and Microsoft companies, Apple’s ranking Company may be slightly lower due to alleged accusations of evading taxes, unhealthy competition, and failure to take environmental responsibilities.
The government has charged Apple Company for its failure to use recyclable and toxic materials in manufacture of its products such as iphone among other products. In terms of operational processes and procedures, Apple Company uses a horizontal corporate culture, which involves every staff in making decisions of the company.
Over the years, many of its CEOs have encouraged casual lifestyle rather than the formal lifestyle. The company has a rewarding system that recognizes the hard work of employees. Reward motivates employees thus increasing their productivity (Lashinsky & Burke, 2011, p.125). This corporate culture is almost similar to that of rival companies, Dell and Microsoft, which use horizontal rather than vertical leadership style.
On comparison of products and services of Apple Company with those of Microsoft and Dell companies, it turns out that it offers more products and services. It deals with hardware, software, phones, music player, and other products that Dell and Microsoft Companies do not offer. Majority of its rivals, in fact, deal with computers.
Conclusion
From the preceding analysis of Apple’s financial statements, cash flow and balance sheet, it is evident that the company has a healthy financial position. The analysis reveals that the company’s revenue and profit increases every year.
Compared to rivals such as Microsoft and Dell Companies in terms of market share and profitability, analysis ranks the three companies almost at the same level though Dell is slightly lower. Despite this financial stability, there are areas of concern that the management need to address. These areas include debt collection, inventory management, and dividend payments. Critics have accused the company for using wrong procedures and practices such as evading tax, unhealthy competition among others in its operations.
The company has also used its technological knowhow to gain competitive advantage in the market. Globalization has also affected the marketing strategies of the company in many ways such as adoption of new advertising techniques and exploration of new markets in developing countries.
References
Lashinsky, A., & Burke, D. (2011). Inside Apple. Fortune, 163(7), 125-134.
Mcgirt, E. (2011). The world’s 50 most innovative companies. Fast Company, 153, 66- 125.