Financial Statement Analysis
Apple, Hewlett-Packard, and Dell
The Bad Debtors: Nick Davis, Madeline Nauyokas, Jeslyn Thompson
Table of Contents:
Table of Contents ……………………………………………..1
Vertical Analysis: AAPL 2010-2012………………………….2
Vertical Analysis: AAPL, HPQ, DELL 2012………………...3
Ratio Analysis: AAPL 2011-2012…………………………….5
Ratio Analysis Comparison: AAPL, HPQ, DELL 2012…….7
Footnote Analysis: AAPL 2012……………………………...13
Appendix A: Financial Statement Data…………………….14
Appendix B: Calculations…………………………………...17
1 | Financial Statement Analysis
Vertical Analysis:
Apple 2010-2012
Apple’s Expenses as a Percentage of Net Sales
Apple 2012
Cost of Sales
Apple 2011
Apple 2010
56.13%
59.52%
60.62%
Research and Development
2.16%
2.24%
2.73%
Selling, General, and
Administrative
6.42%
7.02%
8.46%
Interest
0.00%
0.00%
0.00%
Income Taxes
8.96%
7.65%
6.94%
26.67%
23.95%
21.48%
Net Income
AAPL’s profit margin increased every year from 2010 to 2012. This growth is a reflection
of AAPL’s ability to improve its cost structure through the control of expenses.
•
The percentage of sales going towards the cost of goods sold was highest in 2010 and
decreased during each subsequent year by a total of 4.49%. This progressive change
suggests that AAPL is either getting lower prices from its suppliers or marking up its
products more effectively.
•
Operating expenses decreased every year during the period given. The percentage of
sales going towards research and development and selling, general, and administrative
expenses decreased 0.57% and 2.04%, respectively. These changes were likely caused by
a lower amount of funds being allocated to wages, utilities, and related costs.
•
Income tax was the only expense to increase in comparison to net sales every year from
2010 to 2012. However, it is evident that this 2.02% change did not have a major
influence on AAPL’s profit generation because net income and tax expense were the
highest during the same year.
2 | Financial Statement Analysis
Vertical Analysis:
Apple, Hewlett-Packard, and Dell 2012
AAPL, DELL, and HPQ have three distinct cost structures based upon the sources of their
expenses.
2012 Cost Structure Comparison
Apple 2012
Cost of Sales
Apple 2011
Apple 2010
56.13%
78.60%
76.50%
Research and Development
2.16%
1.88%
2.82%
Selling, General, and
Administrative
6.42%
14.23%
11.22%
Other Operating Expenses
0.00%
0.00%
3.67%
Goodwill
0.00%
0.00%
14.98%
Interest
0.00%
0.30%
0.73%
Income Taxes
8.96%
0.82%
0.60%
26.67%
4.17%
-10.51%
Net Income
•
The cost of goods sold is the largest expense by percentage for each company. AAPL’s
expense in this category is significantly lower than that of DELL or HPQ. This shows
that AAPL has a superior ability to either get low prices from manufacturers or markup
merchandise. Keeping this cost low contributes to AAPL’s higher profitability and allows
for funds to be invested elsewhere.
•
Research and development accounts for approximately two percent of the companies’ net
sales revenue. This is the only cost that is the same for all three corporations, and
therefore, has no influence on the differences in profitability.
•
The three companies vary greatly in their funding of selling, general, and administrative
expenses. AAPL attributes the lowest costs to these expenditures, followed by HPQ then
DELL. DELL’s expense is nearly twice that of AAPL, indicating that DELL needs to reevaluate how much it spends on costs associated with running the company.
3 | Financial Statement Analysis
Vertical Analysis (Continued):
Apple, Hewlett-Packard, and Dell 2012
•
All three companies record interest expenses, however AAPL’s is negligible. This is
because only DELL and HPQ have a substantial amount of liabilities to lenders that
require interest payments in addition to the principal.
•
AAPL pays significantly more in income taxes than DELL or HPQ. Both DELL and
HPQ pay less than one percent, and AAPL pays almost nine percent. AAPL should
examine why it is paying such high rates and determine if any of its actions have tax
expenses that exceed the revenue being produced.
•
HPQ has massive costs attributed to goodwill that neither AAPL nor DELL has. This is
the primary cause for HPQ’s negative net income, and without it, HPQ would have a
profit margin similar to that of DELL. If the goodwill is due to a major acquisition that
will generate revenue in the future, then experiencing losses of income in the short-term
may be worth it. However, having such low profits is taking on a great risk.
4 | Financial Statement Analysis
Ratio Analysis:
Apple 2011-2012
Profitability Ratios:
Apple 2012
Apple 2011
Return on Assets
0.29
0.27
Asset Turnover
1.07
1.13
Return on Sales
0.27
0.24
Return on Common
Shareholder’s Equity
0.43
0.34
AAPL’s increase from 2011 to 2012 in return on assets shows it has improved its ability to use
assets to generate profit. Because AAPL’s return on common shareholder’s equity is greater than
the return on assets, AAPL is using leverage to benefit its shareholders. An increase on AAPL’s
return on common shareholder’s equity means it is now able to give more on the dollar back to
shareholders for every dollar that is invested compares to 2011. A decrease in asset turnover
shows that AAPL’s ability to generate revenue has decreased. However, the increased return on
sales means they were better able to control costs.
Short-Term Liquidity Ratios:
Apple 2012
Apple 2011
Current Ratio
1.50
1.61
Quick Ratio
1.04
1.12
Cash Ratio
0.76
0.93
Cash Flow from Operations
to Current Liabilities
1.53
1.54
AAPL’s current, quick, and cash ratios have decreased in the last two years showing a decrease
in the company’s liquidity. However, AAPL still has more assets than liabilities which is
favorable. AAPL’s cash flow ratio has increased, meaning AAPL has improved its ability to
generate cash through operating activities.
5 | Financial Statement Analysis
Ratio Analysis (Continued):
Apple 2011-2012
Working Capital Management Ratios:
Apple 2012
Days Accounts Receivable
18.75
18.09
3.21
5.10
73.37
74.44
-51.41
-51.25
Days Inventory
Days Payable
Net Conversion Cycle
Apple 2011
AAPL’s ability to control its working capital has increased mostly due to the decrease in days of
inventory. There was a slight increase in days accounts receivable and a decrease in days
payable, but overall, AAPL improved. The decrease in the net conversion cycle is beneficial. A
negative net conversion cycle means that AAPL is able to pay suppliers after they receive
payment from customers.
Long-Term Solvency Ratios:
Apple 2012
Times Interest Earned
Debt to Equity
Apple 2011
392.79
2854.71
0.49
0.52
The decrease in times interest earned shows that AAPL’s ability to generate income to meet their
interest payments has also decreased. However, AAPL is financed less by debt and more by
equity than in 2011 which is a positive change.
Shareholder Ratios:
Apple 2012
Price to Earnings
Apple 2011
15.11
14.61
Dividend Yield
0.00
0.00
Dividend Payout
0.06
0.00
AAPL has become even more favorable to shareholders by slightly increasing the yield on their
investment, and also paying out a higher dividend. In relation to stock price, the return has
decreased, so an investor paid more for their earnings in 2012 as shown by the increase in the
price earnings ratio.
6 | Financial Statement Analysis
Ratio Analysis Comparison:
Apple, Hewlett-Packard, and Dell 2012
AAPL is the most profitable corporation, followed by DELL and then HPQ.
Apple 2012
Dell 2012
Hewlett-Packard 2012
Return on Assets
0.29
0.05
-0.10
Asset Turnover
1.07
1.24
1.01
Return on Sales
0.27
0.04
-0.10
Return on Common
Shareholder’s Equity
0.43
0.24
-0.41
•
AAPL has the highest return on sales, showing that it can control its costs and turn sales
into income. AAPL also has the highest return on assets, showing that it is able to
effectively utilize its resources to generate income. However, AAPL does not have a
strong asset turnover. In 2012, this ratio was in its third year of decline and was lower
than that of DELL and HPQ. AAPL is turning both sales and assets into income, but
based on the corporation’s amount of assets, it has the potential to generate a greater
number of sales.
•
DELL has the second highest profitability with the second highest values for return on
assets and return on sales. As seen in its positive ratios, DELL is making a profit;
however, AAPL’s profit is greater due to higher ratios. DELL has a stronger asset
turnover, showing that the corporation is successful in turning assets into sales.
•
HPQ is the least profitable with values less than zero for return on sales and return on
assets. This is a reflection of HPQ’s inability to control costs resulting in a negative net
income. These problems carry over into asset turnover, which is also the lowest of the
three companies. The ratio’s value is barely above one, showing that assets are not being
used to generate a high level of sales.
7 | Financial Statement Analysis
Ratio Analysis Comparison (Continued):
Apple, Hewlett-Packard, and Dell 2012
AAPL and DELL use leverage to benefit their shareholders. HPQ fails to do so.
Apple 2012
Dell 2012
Hewlett-Packard 2012
Return on Assets
0.29
0.05
-0.10
Return on Common
Shareholder’s Equity
0.43
0.24
-0.41
•
The return on common shareholders’ equity exceeds return on assets for both AAPL and
DELL. DELL is slightly better at using leverage than AAPL because it has a greater
difference between the two ratios previously stated. The companies are effectively
utilizing funds from investors and lenders to purchase productive assets that generate
income. This benefits shareholders by strengthening the company, thus increasing stock
prices and allowing for previously determined dividends to be paid.
•
HPQ’s return on assets is greater than its return on common shareholders’ equity. The
negative ratio values denote that HPQ is not making a profit, and the relationship
between them shows that the corporation’s position is not improving through use of
equity.
8 | Financial Statement Analysis
Ratio Analysis Comparison (Continued):
Apple, Hewlett-Packard, and Dell 2012
AAPL is the best short-term loan candidate. DELL is the second most attractive candidate
to lenders, and HPQ is the third.
Apple 2012
Hewlett-Packard
2012
Dell 2012
Current Ratio
1.50
1.19
1.09
Quick Ratio
1.04
0.97
0.66
Cash Ratio
0.76
0.55
0.24
Cash Flow from
Operations
to Current Liabilities
1.53
0.14
0.22
•
AAPL has current ratio of 1.50, which indicates that current assets exceed current
liabilities. Because AAPL has more assets than liabilities, it has enough resources to
repay its current and future debts. This makes the company a reliable venture.
Furthermore, AAPL has a quick ratio of 1.04 and a cash ratio of 0.76. These numbers
show that AAPL is extremely liquid, with the majority of its current assets being cash and
accounts receivable. Lenders will not have to wait for AAPL to sell its inventory to
receive their payment, because AAPL already has the funds to pay them back.
•
DELL has a current ratio of 1.19. This means that, while DELL does not have as much
security as AAPL, its current assets still exceed its current liabilities. DELL will be able
to cover both old and new debts. DELL’s quick ratio of 0.97 and cash ratio of 0.55 show
that the company is liquid enough to make timely payments.
•
HPQ’s current ratio of 1.09 is lower than that of the other two companies and shows that
the amount of assets and liabilities is almost equal. The company cannot take on many
loans before its liabilities become greater than its assets. In addition, with a quick ratio of
0.66 and a cash ratio of 0.22, HPQ is less liquid than the other two companies. These
factors make HPQ a significantly more risky loan candidate than either AAPL or DELL.
9 | Financial Statement Analysis
Ratio Analysis Comparison (Continued):
Apple, Hewlett-Packard, and Dell 2012
AAPL is the best at managing its working capital accounts, followed by DELL and finally
HPQ.
Apple 2012
Days Account Receivable
Days Inventory
Days Payable
Net Conversion Cycle
Hewlett-Packard
2012
Dell 2012
18.75
41.43
51.79
3.21
11.21
26.99
73.37
93.45
54.94
-51.41
-40.82
23.85
•
AAPL has the most efficient conversion cycle overall because it has the lowest days
accounts receivable and days inventory. This means that the company’s strength lies in its
ability to turn inventory into sales and then quickly turn the inflow of receivables from
sales into cash.
•
DELL has the highest days accounts payable and is also successful in terms of days
accounts receivable and days inventory. Although DELL is not more efficient than AAPL
overall, it is better at prolonging it accounts payable. This gives the corporation more
opportunities to invest borrowed funds.
•
HPQ is the worst in every category of the working capital breakdown, and subsequently,
has the highest net conversion cycle. HPQ has too much capital tied up in inventory and
uncollected receivables.
10 | Financial Statement Analysis
Ratio Analysis Comparison (Continued):
Apple, Hewlett-Packard, and Dell 2012
AAPL is the most attractive candidate to long-term lenders. DELL is the second best, and
HPQ is the third.
Apple 2012
Times Interest Earned
Debt to Equity
Hewlett-Packard
2012
Dell 2012
392.79
17.61
-12.82
0.49
3.44
3.76
•
AAPL has the highest times interest earned, showing that it has the greatest ability to pay
back the interest owed on the principal of its loans. It also has a debt-to-equity ratio less
than one, which means that AAPL gets most of its finances from investors as opposed to
creditors. Potential lenders can rely upon receiving payments because there are not many
liabilities to be paid back prior to theirs.
•
DELL has a positive times interest earned, which means that it can pay back the interest
on all of the loans it currently has outstanding in addition to interest on future liabilities.
Unfortunately, DELL has a high debt-to-equity ratio, signaling that it has excessive loans
outstanding.
•
HPQ has poor times interest earned and debt-to-equity ratios. At this point, HPQ does not
have adequate funds to pay interest on the liabilities it already has, and taking out
additional loans will only worsen this problem. Unlike AAPL and DELL, HPQ cannot be
relied upon to make payments of interest or principal.
11 | Financial Statement Analysis
Ratio Analysis Comparison (Continued):
Apple, Hewlett-Packard, and Dell 2012
DELL is the most attractive company for stockholders, followed by AAPL, then HPQ.
Apple 2012
Price to Earnings
Hewlett-Packard
2012
Dell 2012
15.11
10.10
-2.16
Dividend Yield
0.00
0.01
0.04
Dividend Payout 0.06 0.12 -­‐0.08 •
Based on the price to earnings ratio, DELL is the least expensive stock compared to its
earnings. To investors, this means that every dollar spent, they are earning more. Second
to DELL is AAPL with a more expensive stock relative to earnings. While the stock may
be more expensive, investors might see this as potential for growth. HPQ is last because
investors would be losing money by purchasing this company’s stock.
•
HPQ has the greatest dividend yield, followed by DELL, and then by AAPL which has
almost no dividend yield at all. Investors prefer a high dividend yield because if a stock
price was held constant, the return on their investment comes from the dividend yield.
•
If an investor was buying stocks for dividends, then Dell would be the most attractive
company, followed by HPQ, and then AAPL. HPQ’s Dividend Payout Ratio is negative
which means that even though the company has negative earnings, they are still paying
out dividends. For every dollar earned per share, DELL paid out 12 cents, HPQ paid 8
cents, and AAPL paid 6 cents.
12 | Financial Statement Analysis
Footnote Analysis:
Apple 2012
Accounts Receivable: AAPL analyzes the accounts receivable to determine the allowance for
doubtful accounts. Factors such as the age of the accounts, the economy, the customers’ credit,
and the company’s previous experiences are considered when determining the amount. In 2012,
AAPL had a considerable amount of trade receivables from third parties. Iinvestors must pay
attention to the amount of receivables especially in more risky international markets
Inventories: AAPL uses the FIFO method and makes the assumption that the oldest inventory
will be sold first. If the cost of inventory is continuing to rise, the balance sheet will reflect this
method through higher inventory and a lower cash amount due to taxes. Because of a lower cost
of goods sold, the income statement will have a higher net income. In looking at profitability
ratios, investors must realize that a high net income can result in higher ratios for return on assets
and return on sales.
Property, Plant and Equipment: It is important for shareholders to look at the age of an asset
and the life assigned to it. AAPL gives buildings a lifespan of 30 years. Machinery and
equipment get a useful life of two to five years and three to five years for internal software. A
longer life leads to a lower depreciation expense, leading to higher net income and assets. In
2012, the depreciation and amortization expense for property, plant and equipment was $2.6
billion. A shareholder can use this information to see when AAPL will need to invest in new
property, plant and equipment. In 2012, AAPL spent $8.3billion on new property, plant and
equipment
Long-term Debt: AAPL classifies any debt that is due in greater than 12 months as long-term.
AAPL did not have any long-term debt in 2009 or the five years before, therefore they had no
related interest expenses. To a potential lender, this would mean that if you invested in AAPL,
you would be first on the list to be repaid.
Stockholders’ Equity: AAPL announced an authorization plan to buyback $10 billion in
common stock. Potential investors could see an increase in the earnings per share due the fact
that when a company buys back stock, the total number of shares decreases. AAPL sometimes
uses share-based compensation to pay employees and outstanding liabilities which increases
equity and causes a tax benefit. There are also five million shares of preferred stock that could be
issued which would decrease the earnings per share.
13 | Financial Statement Analysis
Appendix A:
Apple Financial Statement Data
2012
Accounts Payable
Accounts Receivable
Cash and Cash Equivalents
Cash Flow from Operating Activities
Current Assets
Current Liabilities
Cost of Sales
Interest
Inventory
Marketable Securities
Net Income
Net Sales
Provision for Income Tax
Research and Development
Selling, General, and Administrative
Total Assets
Total Liabilities
Total Shareholders’ Equity
Dividends per Share
Earnings per Share (Diluted)
Preferred Dividends
Stock Price
$21,175
$10,930
$10,746
$50,856
$57,653
$38,542
$87,846
$140
$791
$18,383
$41,733
$156,508
$14,030
$3,381
$10,040
$176,064
$57,854
$118,210
$2.65
$44.15
$0.00
$667.10
2011
2010
$14,632
$12,015
$5,369
$5,510
$9,815
$37,529
$44,988
$27,970
$20,722
$64,431
$39,541
$14
$776
$1,051
$16,137
$25,922
$14,013
$108,249
$65,225
$8,283
$2,429
$1,782
$7,599
$5,517
$116,371
$75,183
$39,756
$76,615
$47,791
$0.00
$27.68
$0.00
$404.30
*Dollar amounts in millions, excluding stock data
Source Documents:
Statement of Financial Position: Accounts Payable; Accounts Receivable; Cash and Cash Equivalents;
Current Assets; Current Liabilities; Financing Receivables; Inventory; Marketable Securities
(Short-Term Investments); Total Assets; Total Liabilities; Total Shareholders’ Equity
Footnotes: Preferred Dividends
Statement of Cash Flows: Cash Flow from Operating Activities
Statement of Income: Cost of Sales (Cost of Products + Cost of Services); Interest; Net Income; Net
Sales (Total Net Revenue); Provision for Income Taxes; Research and Development; Selling,
General, and Administrative; Dividends Per Share; Earnings Per Share
Yahoo Finance: Stock Price
14 | Financial Statement Analysis
Appendix A (Continued):
Dell Financial Statement Data
2012
Accounts Payable
Accounts Receivable
Cash and Cash Equivalents
Cash Flow from Operating Activities
Current Assets
Current Liabilities
Cost of Sales
Financing Receivables
Interest
Inventory
Marketable Securities
Net Income
Net Sales
Provision for Income Tax
Research and Development
Selling, General, and Administrative
Total Assets
Total Liabilities
Total Shareholders’ Equity
Dividends per Share
Earnings per Share (Diluted)
Preferred Dividends
Stock Price
*Dollar amounts in millions, excluding stock data
2011
$11,579
$6,629
$12,569
$3,283
$27,968
$23,439
$44,754
$3,213
$171
$1,382
$208
$2,372
$56,940
$469
$1,072
$8,102
$47,450
$36,839
$10,701
$0.16
$1.35
$0.00
$13.63
$11,656
$6,476
$22001
$1,404
$44,533
$8,917
Source Documents:
Statement of Financial Position: Accounts Payable; Accounts Receivable; Cash and Cash
Equivalents; Current Assets; Current Liabilities; Financing Receivables; Inventory; Marketable
Securities (Short-Term Investments); Total Assets; Total Liabilities; Total Shareholders’ Equity
Footnotes: Preferred Dividends
Statement of Cash Flows: Cash Flow from Operating Activities
Statement of Income: Cost of Sales (Cost of Products + Cost of Services); Interest; Net Income;
Net Sales (Total Net Revenue); Provision for Income Taxes; Research and Development; Selling,
General, and Administrative; Dividends Per Share; Earnings Per Share
Yahoo Finance: Stock Price
15 | Financial Statement Analysis
Appendix A (Continued):
Hewlett-Packard Financial Statement Data
2012
Accounts Payable
Accounts Receivable
Cash and Cash Equivalents
Cash Flow from Operating Activities
Current Assets
Current Liabilities
Cost of Sales
Financing Receivables
Goodwill
Interest
Inventory
Net Income
Net Sales
Other Expenses
Provision for Income Tax
Research and Development
Selling, General, and Administrative
Total Assets
Total Liabilities
Total Shareholders’ Equity
Dividends per Share
Earnings per Share (Diluted)
Preferred Dividends
Stock Price
*Dollar amounts in millions, excluding stock data
2011
$13,350
$16, 407
$11,301
$10,571
$50,637
$46,666
$92,068
$3,252
$18,035
$876
$1,382
-$12,650
$120,357
$4,412
$717
$1,072
$8,102
$108,768
$85,935
$22,833
$0.50
-$6.41
$0.00
$13.85
$14,750
$18,224
$22001
$1,404
$129,517
$39,004
Source Documents:
Balance Sheet: Accounts Payable; Accounts Receivable; Cash and Cash Equivalents; Current
Assets; Current Liabilities; Financing Receivables; Inventory; Total Assets; Total Liabilities;
Total Shareholders’ Equity
Footnotes: Preferred Dividends
Statement of Cash Flows: Cash Flow from Operating Activities
Statement of Earnings: Cost of Sales (Cost of Products + Cost of Sales); Financing Receivables;
Goodwill; Interest; Net Income; Net Sales (Total Net Revenue); Other Expenses (Financing
Interest + Amortization of Intangible Assets + Restructuring Charges + Acquisition Related
Charges); Provision for Income Taxes; Research and Development; Selling, General, and
Administrative; Dividends Per Share; Earnings Per Share
Yahoo Finance: Stock Price
16 | Financial Statement Analysis
Appendix B:
Calculations
*Dollar amounts in millions, excluding stock data
Apple Ratios 2011
Profitability Ratios
• Return on Common Shareholders Equity
(Net Income – Preferred Dividends) / Average Shareholders Equity
($25,922 – 0) / [($76,615 + $47,791) / 2] = 41.67%
• Asset Turnover
Net Sales / Average Assets
$108,249 / [($116,371 + $75,183) / 2] = 1.13
• Return on Sales
{Net Income + [Interest x (1 – Tax Rate)]} / Net Sales
{$25,922 + [$14 x (1 – 0.35)]} / $108,249 = 23.96%
• Return on Assets
{Net Income + [Interest x (1 – Tax Rate)]} / Average Assets
{$25,922 + [$14 x (1 – 0.35)]} / [($116,371 + $75,183) / 2] = 27.07%
Short Term Liquidity Ratios
• Current Ratio
Current Assets / Current Liabilities
$44,988 / $27,970 = 1.61
• Quick Ratio
(Cash + Accounts Receivable + Marketable Securities) / Current Liabilities
($9,815 + $5,369 + $16,137) / $27,970 = 1.12
• Cash Ratio
(Cash + Marketable Securities) / Current Liabilities
($9,815 + $16,137) / $27,970 = 0.93
• Operating Cash Flows to Current Liabilities
Cash Flow from Operating Activities / Average Current Liabilities
$37,529 / [($27,970 + $20,722) / 2] = 1.54
Working Capital Management Ratios
• Days Accounts Receivable
Net Sales / Average Accounts Receivable
$108,249 / [($5,369 + $5,510) / 2]
Accounts Receivable Turnover = 19.90
360 days / 19.90 = 18.09 days
17 | Financial Statement Analysis
•
•
•
Days Inventory
Cost of Sales / Average Inventory
$64,431 / [($776 + $1,051) / 2]
Inventory Turnover = 70.53
360 days / 70.53 = 5.10 days
Days Accounts Payable
Cost of Sales / Average Accounts Payable
$64,431 / [($14,632 + $12,015) / 2]
Accounts Payable Turnover = 4.84
360 days / 4.84 = 74.38 days
Net Days Working Capital
Days Accounts Receivable + Days Inventory – Days Accounts Payable
18.09 + 5.10 – 74.38 = -51.19 days
Long Term Solvency Ratios
• Debt to Equity Ratio
Total Liabilities / Total Shareholders’ Equity
$39,756 / $76,615 = 0.52
•
Times Interest Earned
(Net Income + Interest Expense + Taxes) / Interest Expense
($25,922 + $14 + $3,338) / $14 = 2091.00
Investor Ratios
• Price-Earnings Ratio
Stock Price / Earnings per Share (Diluted)
$404.30 / $27.68 = 14.61
• Dividend Yield
Dividends per Share / Stock Price
$0.00 / $404.30 = 0.00%
• Dividend Payout
Dividends per Share / Earnings per Share (Diluted)
$0.00 / $27.68 = 0.00%
Apple Ratios 2012
Profitability Ratios
• Return on Common Shareholders Equity
(Net Income – Preferred Dividends) / Average Shareholders Equity
($41,733 – 0) / [($118,210 + $76,615) / 2] = 42.84%
• Asset Turnover
Net Sales / Average Assets
$156,508 / [($176,064 + $116,371) / 2] = 1.07
18 | Financial Statement Analysis
•
•
Return on Sales
{Net Income + [Interest x (1 – Tax Rate)]} / Net Sales
{$41,733 + [$140 x (1 – 0.35)]} / $156,508 = 26.72%
Return on Assets
{Net Income + [Interest x (1 – Tax Rate)]} / Average Assets
{$41,733 + [$140 x (1 – 0.35)]} / [($176,064 + $116,371) / 2] = 28.60%
Short Term Liquidity Ratios
• Current Ratio
Current Assets / Current Liabilities
$57,653 / $38,542 = 1.50
• Quick Ratio
(Cash + Accounts Receivable + Marketable Securities) / Current Liabilities
($10,746 + $10,930 + $18,383) / $38,542 = 1.04
• Cash Ratio
(Cash + Marketable Securities) / Current Liabilities
($10,746 + $18,383) / $38,542 = 0.76
• Operating Cash Flows to Current Liabilities
Cash Flow from Operating Activities / Average Current Liabilities
$50,856 / [($38,542 + $27,970) / 2] = 1.53
Working Capital Management Ratios
• Days Accounts Receivable
Net Sales / Average Accounts Receivable
$156,508 / [($10,930 + $5,369) / 2]
Accounts Receivable Turnover = 19.20
360 days / 19.20 = 18.75 days
• Days Inventory
Cost of Sales / Average Inventory
$87,846 / [($791 + $776) / 2]
Inventory Turnover = 112.12
360 days / 112.12 = 3.21 days
• Days Accounts Payable
Cost of Sales / Average Accounts Payable
$87,846 / [($21,175 + $14,632) / 2]
Accounts Payable Turnover = 4.91
360 days / 4.91 = 73.32 days
• Net Days Working Capital
Days Accounts Receivable + Days Inventory – Days Accounts Payable
18.75 + 3.21 – 73.32 = -51.36 days
Long Term Solvency Ratios
• Debt to Equity Ratio
Total Liabilities / Total Shareholders’ Equity
$57,854 / $118,210 = 0.49
19 | Financial Statement Analysis
•
Times Interest Earned
(Net Income + Interest Expense + Taxes) / Interest Expense
($41,733 + $140 + $7,682) / $140 = 353.96
Investor Ratios
• Price-Earnings Ratio
Stock Price / Earnings per Share (Diluted)
$667.10 / $44.15 = 15.11
• Dividend Yield
Dividends per Share / Stock Price
$2.65 / $667.10 = 0.40%
• Dividend Payout
Dividends per Share / Earnings per Share (Diluted)
$2.65 / $44.15 = 6.00%
Dell Ratios 2012
Profitability Ratios
• Return on Common Shareholders Equity
(Net Income – Preferred Dividends) / Average Shareholders Equity
($2,372 – 0) / [($10,701 + $8,917) / 2] = 24.18%
• Asset Turnover
Net Sales / Average Assets
$56,940 / [($47,450 + $44,533) / 2] = 1.24
• Return on Sales
{Net Income + [Interest x (1 – Tax Rate)]} / Net Sales
{$2,372 + [$171 x (1 – 0.35)]} / $56,940 = 4.36%
• Return on Assets
{Net Income + [Interest x (1 – Tax Rate)]} / Average Assets
{$2,372 + [$171 x (1 – 0.35)]} / [($47,450 + $44,533) / 2] = 5.40%
Short Term Liquidity Ratios
• Current Ratio
Current Assets / Current Liabilities
$27,968 / $23,439 = 1.19
• Quick Ratio
(Cash + Accounts Receivable + Marketable Securities) / Current Liabilities
($12,569 + $6,629 + $208 + $3,213) / $23,439 = 0.97
• Cash Ratio
(Cash + Marketable Securities) / Current Liabilities
($12,569 + $208) / $23,439 = 0.55
• Operating Cash Flows to Current Liabilities
Cash Flow from Operating Activities / Average Current Liabilities
$3,283 / [($23,439 + $22,001) / 2] = 0.14
20 | Financial Statement Analysis
Working Capital Management Ratios
• Days Accounts Receivable
Net Sales / Average Accounts Receivable
$56,940 / [($6,629 + $6,476) / 2]
Accounts Receivable Turnover = 8.69
360 days / 8.69 = 41.43 days
• Days Inventory
Cost of Sales / Average Inventory
$44,754 / [($1,382 + $1,404) / 2]
Inventory Turnover = 32.13
360 days / 32.13 = 11.21 days
• Days Accounts Payable
Cost of Sales / Average Accounts Payable
$44,754 / [($11,579 + $11,656) / 2]
Accounts Payable Turnover = 3.85
360 days / 3.85 = 93.51 days
• Net Days Working Capital
Days Accounts Receivable + Days Inventory – Days Accounts Payable
41.43 + 11.21 – 93.51 = -40.88 days
Long Term Solvency Ratios
• Debt to Equity Ratio
Total Liabilities / Total Shareholders’ Equity
$36,839 / $10,701 = 3.44
• Times Interest Earned
(Net Income + Interest Expense + Taxes) / Interest Expense
($2,372 + $171 + $469) / $171 = 17.61
Investor Ratios
• Price-Earnings Ratio
Stock Price / Earnings per Share (Diluted)
$13.63 / $1.35 = 10.10
• Dividend Yield
Dividends per Share / Stock Price
$0.16 / $13.63 = 1.17%
• Dividend Payout
Dividends per Share / Earnings per Share (Diluted)
$0.16 / $1.35 = 11.85%
Hewlett-Packard Ratios 2012
Profitability Ratios
• Return on Common Shareholders Equity
(Net Income – Preferred Dividends) / Average Shareholders Equity
(-$12,560 – 0) / [($22,833 + $39,004) / 2] = -40.62%
21 | Financial Statement Analysis
•
•
•
Asset Turnover
Net Sales / Average Assets
$120,357 / [($108,768 + $129,517) / 2] = 1.01
Return on Sales
{Net Income + [Interest x (1 – Tax Rate)]} / Net Sales
{-$12,560 + [$876 x (1 – 0.35)]} / $120,357 = -9.96%
Return on Assets
{Net Income + [Interest x (1 – Tax Rate)]} / Average Assets
{-$12,560 + [$876 x (1 – 0.35)]} / [($108,768 + $129,517) / 2] = -10.06%
Short Term Liquidity Ratios
• Current Ratio
Current Assets / Current Liabilities
$50,637 / $46,666 = 1.09
• Quick Ratio
(Cash + Accounts Receivable + Marketable Securities) / Current Liabilities
($11,301 + $16,407 + $3,252 + 0) / $46,666 = 0.66
• Cash Ratio
(Cash + Marketable Securities) / Current Liabilities
($11,301 + $0) / $46,666 = 0.24
• Operating Cash Flows to Current Liabilities
Cash Flow from Operating Activities / Average Current Liabilities
$10,571 / [($46,666 + $50,442) / 2] = 0.22
Working Capital Management Ratios
• Days Accounts Receivable
Net Sales / Average Accounts Receivable
$120,357 / [($16,407 + $18,224) / 2]
Accounts Receivable Turnover = 6.95
360 days / 6.95 = 51.80 days
• Days Inventory
Cost of Sales / Average Inventory
$92,068 / [($6,317 + $7,490) / 2]
Inventory Turnover = 13.34
360 days / 13.34 = 26.99 days
• Days Accounts Payable
Cost of Sales / Average Accounts Payable
$92,068 / [($13,350 + $14,750) / 2]
Accounts Payable Turnover = 6.55
360 days / 6.55 = 54.96 days
• Net Days Working Capital
Days Accounts Receivable + Days Inventory – Days Accounts Payable
51.80 + 26.99 – 54.96 = 23.83 days
22 | Financial Statement Analysis
Long Term Solvency Ratios
• Debt to Equity Ratio
Total Liabilities / Total Shareholders’ Equity
$85,935 / $22,833 = 3.76
•
Times Interest Earned
(Net Income + Interest Expense + Taxes) / Interest Expense
(-$12,560 + $876 + $717) / $876 = -12.52
Investor Ratios
• Price-Earnings Ratio
Stock Price / Earnings per Share (Diluted)
$13.85 / -$6.41 = -2.16
• Dividend Yield
Dividends per Share / Stock Price
$0.50 / $13.85 = 3.61%
• Dividend Payout
Dividends per Share / Earnings per Share (Diluted)
$0.50 / -$6.41 = -7.80%
Apple Vertical Analysis 2010
•
•
•
•
Product Expenses
Cost of Sales / Net Sales
$39,541 / $65,225 = 60.62%
Operating Expenses
Research and Development / Net Sales
$1,782 / $65,225 = 2.73%
Selling, General, and Administrative / Net Sales
$5,517 / $65,225 = 8.46%
Interest / Net Sales
-$43 / $65,225 = -0.00%
Tax Expenses
Provision for Income Tax / Net Sales
$4,572 / $65,225 = 6.94%
Profit Margin
Net Income / Net Sales
$14,013 / $65,225 = 21.48%
Apple Vertical Analysis 2010
•
Product Expenses
Cost of Sales / Net Sales
$64,431 / $108,249 = 59.52%
23 | Financial Statement Analysis
•
•
•
Operating Expenses
Research and Development / Net Sales
$2,429 / $108,249 = 2.24%
Selling, General, and Administrative / Net Sales
$7,599 / $108,249 = 7.02%
Interest / Net Sales
$14 / $108,249 = 0.00%
Tax Expenses
Provision for Income Tax / Net Sales
$8,283 / $108,249 = 7.65%
Profit Margin
Net Income / Net Sales
$25,922 / $108,249 = 23.95%
Apple Vertical Analysis 2012
•
•
•
•
Product Expenses
Cost of Sales / Net Sales
$87,846 / $156,508 = 56.13%
Operating Expenses
Research and Development / Net Sales
$3,381 / $156,508 = 2.16%
Selling, General, and Administrative / Net Sales
$10,040 / $156,508 = 6.42%
Interest / Net Sales
$140 / $156,508 = 0.00%
Tax Expenses
Provision for Income Tax / Net Sales
$14,030 / $156,508 = 8.96%
Profit Margin
Net Income / Net Sales
$41,733 / $156,508 = 26.67%
Dell Vertical Analysis 2012
•
•
Product Expenses
Cost of Sales / Net Sales
$44,754 / $56,940 = 78.60%
Operating Expenses
Research and Development / Net Sales
$1,072 / $56,940 = 1.88%
Selling, General, and Administrative / Net Sales
$8,102 / $56,940 = 14.23%
Interest / Net Sales
$171 / $56,940 = 0.30%
24 | Financial Statement Analysis
•
•
Tax Expenses
Provision for Income Tax / Net Sales
$469 / $56,940 = 0.82%
Profit Margin
Net Income / Net Sales
$2,372 / $56,940 = 4.17%
Hewlett-Packard Vertical Analysis 2012
•
•
•
•
Product Expenses
Cost of Sales / Net Sales
$92,068 / $120,357 = 76.50%
Operating Expenses
Research and Development / Net Sales
$3,399 / $120,357 = 2.82%
Selling, General, and Administrative / Net Sales
$13,500 / $120,357 = 11.22%
Interest / Net Sales
$876 / $120,357 = 0.73%
Other / Net Sales
$4,412 / $120,357 = 3.67%
Tax Expenses
Provision for Income Tax / Net Sales
$717 / $120,357 = 0.60%
Profit Margin
Net Income / Net Sales
-$12,650 / $120,357 = -10.51%
25 | Financial Statement Analysis