Stocks and bonds are critical financial instruments, which aim to have an influence on the company’s situation in the market. Nonetheless, stock implies the ownership of a particular part of the organization while having rights for a share of the corporate earnings (Brigham & Ehrhardt, 2014). Meanwhile, bonds are economic tools aimed at supporting the activities financially while promising the return of the full payment to the purchaser with the inclusion of the interest rate within the set timeframe (Brigham & Ehrhardt, 2014).
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In this case, Apple’s stocks and bonds were evaluated, and the stocks tended to start with $30 per share in 1981 and increased to $108 while experiencing insignificant fluctuations in value (Investing.com, 2016). Meanwhile, Apple also utilized bonds to assure the payments to the shareholders, and the value of this financial instrument was declining for an extended period (Investing.com, 2016; Fernandes, 2014).
The changes in Apple’s stocks are reasonable, as the stocks have a tendency to rise due to the presence of the intensified competition and the escalating stock values of the primary adversaries (Brigham & Ehrhardt, 2014). Alternatively, the rising popularity of the company and a rapidly increasing share of the market also could be viewed as the potential driver for the escalation of price. As for the bonds, this security’s dissimilar nature determine the decline in the potential value.
While playing the role of the possible source of the current cash flow, the prices were set at a lower range than the competitors’ ones to assure the possibility of the quick increase of the revenues (Fernandes, 2014). In this case, the income from the recently sold bonds has a high interdependence with the stocks, as they are used to proceed with the payment of the interest to the company’s shareholders.
Based on the information above, the optimal resolution has to be aimed at the optimization of the current value of the corporation while maximizing its cash flows and implying the increase in the revenues (Brigham & Ehrhardt, 2014). In this case, Apple has to monitor the stock values of the competitors and rapidly modify it to the changes to ensure the maximal profitability for the stock exchange (Brigham & Ehrhardt, 2014). Additionally, the company can try the role of the market leader like the current intensity of the competition contributes to the rise of stocks.
Speaking of bonds, the organization has to set reasonable prices for these securities and interest rates to assure its profitability in the future and select a suitable period for the repayment. Meanwhile, it is relevant to maintain the current prices at a low level due to intensified sales. As the increase of the bonds’ prices will have an adverse effect on the company’s cash flow, as greater volumes of financial resources have to be returned to the purchasers, respectively (Brigham & Ehrhardt, 2014).
In the end, based on the findings provided above, bonds and stocks have a substantial influence on the company’s profitability and can be utilized as financial instruments for value creation. They have a tendency to provide a reflection of the company’s image in the market and its popularity among the investors. As for Apple, the fluctuation in the values of stocks and bonds is logical and can be explained by the rising competition and the reputation of the company among the potential shareholders. From the financial perspective, Apple’s current revenue can be improved by the continuous monitoring of the stock values of the competitors, being a pioneer in stock exchange fluctuations, and lowering the value of the current bonds and interests to minimize the necessary payment in the future.
Brigham, E., & Ehrhardt, M. (2014). Financial management: Theory and practice. Mason, OH: Cengage Learning.
Fernandes, N. (2014). Finance for executives: A practical guide for managers. London, UK: NPV Publishing.
Investing.com: Apple, Inc. (2016). Web.