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 Table of Contents

INTRODUCTION:......................................................................................................................... 1
SECTION: A................................................................................................................................ 1
1.1 First Development: Economic recession and High inflation rates................................................1
1.2 Second Development: Fintech expansion....................................................................................2
Section B: Dividend Policy and Sources of Finance....................................................................3
1.2 Dividend policy............................................................................................................................3
1.3 Sources of Finance...................................................................................................................5
Equity – Negative Equity.....................................................................................................................6
Section C: Ratio Analysis................................................................................................................ 9
Financial Ratio Analysis:.........................................................................................................................9
RETURN ON CAPITAL EMPLOYED (ROCE):...............................................................................9
OPERATING PROFIT MARGIN (OPM):........................................................................................10
GROSS PROFIT MARGIN (GPM):.....................................................................................................11
Efficiency Ratios:..................................................................................................................................12
Inventory turnover days:....................................................................................................................12
Receivable Turnover Days:...............................................................................................................13
Liquidity Ratios:....................................................................................................................................13
Current Ratios: Current Assets/ Current Liabilities...............................................................................13
QUICK RATIO TEST/ ACID TEST: Current Assets- Inventory/ Current Liabilities.......................14
Gearing/ Leverage Ratio:.......................................................................................................................15
Interest Coverage Ratio.....................................................................................................................15
References................................................................................................................................ 16
Appendix.................................................................................................................................... 20

a
INTRODUCTION:
Apple Inc. is an American multinational company which is specialized in manufacturing and
selling digital and electronics consumer goods, especially its cutting-edge technology
smartphones, tablets, personal computers, laptops, and electronic accessories. Apple Inc. was
established on April 1, 1976, as Apple Computer Company by three men: Steve Wozniak, Steve
Jobs and Ronald Wayne to sell Wozniak’s personal computer named Apple I. However, after a
few weeks, Ronald Wayne decided to leave the company. The company made over $365.817
billion in revenue in 2021, which was 33.26% more than the revenue generated in 2020 and was
named as World’s most valuable brand by brand finance 500 in 2021 (Brand Finance, 2021).
Apple incorporation sells many well-known products under its brand names such as iPhone,
iPad, Mac, wearables; Home and Accessories. The company is also involved in the digital and
electronic service industry such as Apple-Care, Cloud services, Payment Services, and producing
digital content. The company is specialized in its unique software service “IOS” which is the
basic operating system of its all devices. Apple Inc. n is a world-leading tech company in terms
of its revenue compared to any of its competitors in 2021, and the leading brand in smart devices
makes them superior in form of its competitors (Steven Levy, 2022).
This reports entails discussing, analysing and interpreting the financial position of Apple Inc., for
the years 2020 and 2021. Furthermore, recent developments in the international financial
environment and their effect on the financial performance of Apple are discussed, including the
methodologies to manage the risk associated with its source of finance and dividend payouts.

SECTION: A
1.1 First Development: Economic recession and High inflation rates
There is an ongoing recession in the United kingdom due to rising general prices of goods and
services including (Arthi Nachiappan, 2022); food transportation and energy, inflation in the UK
surged to a 41-year high of 11.1% in October 2022. The inflation rates are globally surged due to
high instability in the international economic system (Elliot Smith, 2022).
The high inflation rates globally started with the surged price of energy goods and services into
the economic system due Russia-Ukraine War and hence affected the rest of the general prices of
goods and services within the economy of the UK as well as to the whole world economic
system. The rapid increase in inflation causes high inflation rates globally (Jess Ralston, 2022).
However its effects are far more affected UK than anyone else country in the world, hence
London is one of the financial capital of the world and it’s affected the rest of the world with
high inflation in general prices (Anjani Trivedi, 2022).
The effect of this economic crisis and high inflation are very intense and hurt the economy,
international finance environment as well as international business environment. Apple Inc. faces
huge costs on logistics, and salaries hike demand from different parts of the world as well facing
the Potential loss of its customer from its products and services due to the declining purchasing
power of the consumers.

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Operating costs for the quarter increased by over 19% year over year to $12.58 billion for March
2022.  And it will continue to grow with high inflation crises around the globe. The company
have achieved good numbers in terms of growth in revenue and net income but it’s not as good
as forecasted outcomes, a hike in inflation hit the prosperous growth of the company (Kif
Leswing, 2022).
Apple's business hasn't been affected by inflation in the past from the outcomes in 2022, as seen
by the fact that its gross margins increased by more than 4% in 2021 of 42% compared to the
gross margin in 2020 of 38%, with all inflationary pressure due to covid-19 and its after-effects
on the international financial environment in the past year. The company hasn't hiked prices in
reaction to inflation in the US. According to Cook CE0 of Apple Inc., we try to price our items
for the value we deliver, and inflationary pressure is constant. "I believe that everyone is feeling
the effects of inflationary pressure," he added remarks on his conversation that It cannot be
denied. From the Apple CEO's point of view, it’s clear that we will not compromise on the value
we deliver. The strategy to mitigate the inflationary pressure is mentioned by CEO Cook in his
statement above. The strategy of Apple Inc. is clear that we will no compromise on our value, by
cutting costs due to inflationary pressure, Therefore, simply we will make (rise) our prices
according to what we are delivering (Kif Leswing, 2022). Apple is considered a brand more than
a tech company so it’s an influential statement made by CEO Cook for the loyal customers of the
brand and all other stakeholders although it will affect Apple Inc. from achieving its targeted
goals.

1.2 Second Development: Fintech expansion

Fintech is an integration of technology and finance, financial institutions such as banking and
investment institutions use advanced technology to make their financial offerings. FinTech aims
to deliver better value in its financial offering with the use of the latest technology. Fintech help
financial institutions utilize advanced technology software, algorithm and artificial intelligence
to make operation to manage their financial operations, and process, more efficiently and
effectively in real-time (Julia Kagan, 2022).
Fintech finance has completely changed the financial environment in the last decade. The
adoption is towards digital currency is possible due to increases in online transactions, trading,
and investment which are regulated by credible government bodies that help gain trust, as well as
leverage the acceptance of digital currencies. Fintech and digital currencies are the future of
finance and commercial activities and will use in daily transactions. Digital currency will be
soon wipe out Fiat currency that’s why many technological companies grabbing this opportunity
and making entries into Fin-tech markets (Ankasha Arif, 2022).
Apple Inc. is already working on different applications associated with Fintech such as Apple
pay where he charges 0.15% as a fee in terms of revenue from the consumers. Apple Inc. also
offers Digital wallets of digital fiat currency to its users such as “WALLET”, and also a savings
Bank which is known as Apple Bank Mobile banking where its users can do digital banking with
its devices in real-time at their fingertips. The current revenue of Apple bank is $340.7 million in
2021, net income of $ 50 million, and manages around about $14 billion of deposits from apple
users (Apple Bank, 2022).

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Apple Inc. provides Apple cards to its users in shape virtual cards as well as tangible to pay daily
transitions. Apple provides versatile services to its customers. Apple also provides Stocks where
you can trade and invest in the stocks of the listed company in real-time. Apple Inc. provides
versatile services to its consumers from savings to investment (Chris Morris, 2022).
Apple Inc. introduced numerous new features in its app Wallet for Apple users that will compete
directly with other Fintech companies’ offerings, Companies such as PayPal and Affirm. Apple
also announced new policies with the release of IOS16: there are no fees on transactions, and
there will be no minimum balance requirement (Steve Kovach, 2022). Apple Inc. also introduced
new offerings to its users in its WALLET app that Apple Users can buy now and pay later with
its new offerings that provide easy instalments of up to four payments and can give time to pay
over six weeks (Chris Morris, 2022). Apple Inc. is enhancing its established applications for
apple users to make a better move with the Fintech expansion into the international financial
environment.

Section B: Dividend Policy and Sources of Finance

1.1 Dividend policy

The dividend irrelevance theory of Modigliani and Miller is applied in the current dividend
policy of Apple Inc. The irrelevance theory of suggesting that dividend payouts do not affect the
share value and its price as the Company will invest its earnings from retained earnings. The
investment will ultimately result in the growth of share price as well as it will be more associated
with Capital gain on share price rather than yield on the dividend. And possibly can result in
higher future dividends or capital gains. The most important determinants of this theory are
earnings and growth in earnings that can result in the future growth of the shares in terms of
price (capital gains) as well as Dividend payouts in future (Osakwe, 2019).
The revenue and earnings of Apple Inc. are growing each year and cash flows are positive. The
company has a Gross margin of 42% in 2021 4% higher than in 2020. Apple Inc. is an
established brand and it has a loyal customer base, as a result, there is a strong presence of the
brand in the stock market (10-K Apple Inc., 2021). The share price of Apple Inc. has had
exponential growth in a few decades compared to the dividends of the company which only
accounts for a 0.5% dividend yield in 2021 ( JAY WEI, 2022).
Over the past three years, Apple Inc. has consistently paid its dividends. According to (Nasdaq,
2019), Apple Inc. pays quarterly dividends four times a year. In 2019, Apple paid a dividend of
$0.75 per share. In 2020, Apple Inc. paid $0.795 in dividends, and in 2021, Apple paid $ 0.85.see
Figure 2 below. Apple paid different dividends in each quarter as presented in the below figure
(p.35) (Nasdaq, 2022).

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 Fig 1: Apple Inc. dividend paid between 2019-2021 (Nasdaq, 2022)

Fig 2: Annual dividend per share –(2019-2021) (10-K Apple Inc., 2021, p. 35)

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 Apple's annual distributions have been steadily rising because the firm began payments in 2012,
but its stock has increased at a much faster rate, possibly reducing the dividend yield's appeal to
dividend income investors. Although its increasing stock prices have an appeal attributed to the
investor who is much more interested in capital gain rather than dividend income.

 Three-year dividend growth rate: +13.3%

 Dividend per share(in Year 2021): $0.85
 Dividend yield (The year 2021): 0.50%

Apple Paying Dividends s has been paying regular and growing quarterly dividend payments on
its shares since 2012. However, Apple's dividend yield remains low as a result of the stock's
rapid growth in price. resulting in a low return on investment for every dollar put in. Apple
Shares price growth is a clear indicator of smart long-term investment and will result in capital
appreciation. The major reason for the low dividend policies of Apple Inc. is that company is so
much involved in innovations, future projects and ongoing investment that it must have to
reinvest its earnings into income.
The company has had overall consistent and growing dividends since 2012, which presents the
company as interested to pay dividends to its shareholders and wanting to attract the dividend
investors, Although the company has a good reputation with dividends it has low dividend
income compared to the other players in the industry. Apple Inc. has consistent, positive, and
growing earnings, and free cash flows as well as constant growth in its stock price, which is a
representation of good investment stock ( Zach Banning, 2022).
1.2 Sources of Finance
Sources of Finance are an act of financing the business activities such as Short-term working
capital, or investment in long terms assets from different resources available to finance (ÖCAL,
2022).
There are primarily two categories of finance. One is an internal source of finance where
companies source finance from their retained earnings and the second category is external
finance, there are two types of external finance one from raising equity such as selling equity
shares or raising capital, and the second one is debt financing where companies borrow debt in
the shape of loan from other corporates and bank or issue credit bonds to finance their operations
(ÖCAL, 2022). In this report, we will discuss the external sources of finance of Apple Inc.
Apple Inc. utilizes equity financing and debt financing as its external sources of finance, with
Apple Inc. shareholders’ equity of $63,090 million and $65,339 million for 2021 and 2020
respectively. In terms of debt, Boeing has both short-term liabilities and long-term liabilities. The
total liabilities were $287,912 million in 2021 and $258,549 million in 2020. and total current
liabilities were $125,481 million in 2021 and $105,392 in 2020. The non-current liabilities for
Apple Inc. account for $162,431 million, and $153,157 million in the year 2021 and 2020
respectively.

5
 2021 2020

Fig 4: Total Liabilities and shareholder equity of Apple Inc. 2021-2020 (10-K Apple Inc., 2021,
p. 34)
Apple Inc.'s external sources of finance are equity financing and loan financing, with
shareholders' equity of $63,090 million and $65,339 million for the years 2021 and year 2020,
respectively. has both short-term and long-term liabilities in terms of debt. In 2021, the total
liabilities were $287,912 million, up from $258,549 million in 2020. Total current liabilities in
2021 were $125,481 million, up from $105,392 in 2020. Apple Inc.'s noncurrent liabilities total
$162,431 million in 2021 and $153,157 million in 2020, respectively.
Equity – Negative Equity
The total number of Apple Inc.-issued shares is represented in the balance sheet in the equity
section, and the total equity shares issued is slightly less than 17 billion units. Which accounts
for $ 57,365 million in 2021, and $54,490 in 2021 including additional paid-in capital. The
additional paid-in capital. In 2020 the retained earnings of Apple Inc. accounts for $163 million
whereas in 2020 the company has negative retained earnings of 406 million which represents the

6
 company has faced a loss in some of its projects or subsidiaries that affected the retained
earnings as negative retained earnings.
The company had enjoys financial growth in exponential terms. In 2021 the company bought
back $ 85.5 billion worth of shares from the market which is its higher buy-back ever in a year.
In the last decade, Apple was involved in repurchasing $554 billion worth of shares. Apple Inc.
Aims to reduce its share count by around 35% following stock splits. The company was so
confident in deciding that because the financial results of Apple Inc. are hard to argue with: The
Sales of Apple Inc. have increased by over 150% over the last decade, providing nearly $240
billion in additional annual revenue. Whereas compare to the S&P 500 Index, Apple shares have
gained by raise of 740% over the last decade, surpassing the index which has only increased by
173%.
But in the comparing two the last years 2021 to 2020, the equity of Apple Inc has dropped by $
2.2 million, it's a clear indication of negative retained earnings in 2020 or also it can be an
aggressive move towards its expansion through debt financing.
Debt
The long-term debt/borrowing of Apple Inc. breakdown is represented in Figure 4 above which
includes debt securities, debt terms, commercial paper, and notes.
Gearing Ratio:
2021 2020 2019

Non-current liabilities x 100 162,43 x 100 153,157 x 100 142,310 x100

(Non-current liabilities + total equity) 162,431+(63,090) 153,157+ (65,339) (142,310 +
90,488)
Gearing Ratio: 72.02% 70.10% 61.13%

Calculating Apple Inc.'s gearing ratio for 2021, 2020, and 2019 reveals a very high level of debt
in Apple. The company is very careful about its capital structure, financing through equity would
cost less but it will result in a higher capital gain to Apple Inc. itself rather than investors.

According to the Calculation of the gearing ratio in the table above, debt is 72.02% in 2021,
70.10 % in 2020, & 61.13% in 2019. Apple Inc. has a high level of leverage because its
liabilities make up more than 70% of its capital structure. Over the previous three years, there
has been a sharp rise in debt levels. The company gives priority to the debt over equity in its
capital structure as well as the gradual increase in debt is a representation that Apple Inc, is
moving to leverage debt in its capital structure.
Apple issued its first bonds in the year 2013, a total worth of $64.46 billion in debt with a zero
interest rate policy (ZIRP). Apple made a decision, not a need for finance, but it just basically
was almost free of cost except for underwriting. Since several of Apple's bonds have nominal
interest rates below 3%, the actual yields on these investments just outperform inflation (CHASE
CARMICHAEL, 2022).

7
The extremely high levels of debt on Apple Inc.'s balance sheet serve as an example of how the
net income theory of capital structure can be applied. The Net Income Capital Structure was
proposed by David Durand in 1952. His hypothesis states that as financial leverage (debt level)
rises, the cost of capital falls, increasing the firm value as a high market capitalization (SEAN
ROSS, 2022).
Apple's capital structure has been significantly transformed by rising debt. Apple's current and
quick ratios have improved by 33% and 59%, respectively, over the last five years. Apple Inc's
long-term debt would rise from $73.55 billion at the end of 2016 to $106.62 billion by 2021
(CHASE CARMICHAEL, 2022).
Apple Inc, cash and cash equivalents are representing a declining trend from time series analysis
in 2021 Applice Inc have $35,929 million in the year 2021, $39,789 million in 2020, and $
50,224 million in 2019 in cash and cash in its cash flow statements, the Cash flow statements.
However, Apple Inc. has positive cash flow but it's rapidly declining compared to the prior fiscal
year (2019-2021) (10-K Apple Inc., 2021, p. 36). Whereas Apple's total current liabilities will
rise from $105,392 in 2020 to $125,481 in 2021. This is a representation of a decline in
Networking capital as the cash and equivalent cash assets are declining and the liabilities on the
other hand rising at a rapid pace. The inverse direction of growth in both accounts represents the
high negative growth of working capital.
Apple Inc.'s decline in working capital in 2021 was weakening the strength of Apple's
incorporation liquidity, and flexibility and affected its cash and working capital management.
The result in low performance of the company in its financial capabilities is a result of Covid-19
and its effect on the global business operations and supply chain. $60 billion. To cover such
maintenance costs, Apple Inc. needs approximately an operating cost of $40 billion cash in each
to manage its current accounts, $40 billion in securities with a maturity of less than a year, and
$140 billion in longer-term assets (between 1 year to 5 years). Longer-term bonds earn more than
shorter-term bonds, hence Apple favours them since they yield more on its inactive cash assets
(Ben Verschuere & Sam Strasse, 2021).
To effectively manage its working capital, the company needs a solid cash flow with constant
growth. To mitigate the consequences of continuously dropping cashflows, the company has
developed several strategies and initiatives, including a decrease in new product lines, or having
to consider downsizing.

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 Section C: Ratio Analysis
Financial Ratio Analysis:
Ratio analysis is a quantitative method that provides standards to assess the business
performance of any company. There are various kinds of financial ratios available depending on
the data provided. In this report, there are primarily four types of ratio measures discussed;
Liquidity, Profitability, Efficiency and Gearing ratios (Andrew Bloomenthal, 2020). Ratios are
useful in measuring the relationship among or between financial components of a business entity
through its financial statements, and are the most useful in the decision-making and evaluation
process, when compared periodically or as time series analysis (Karen Banks, 2018). The most
common ratios which are used in ratio analysis are liquidity ratios, profitability ratios, efficiency
of operations ratios, and solvency ratios of business entities.
Ratios are useful in measuring the relationship among or between financial components of a
business entity through its financial statements and are the most useful in the decision-making
and evaluation process when compared periodically as time series analysis (Karen Banks, 2018).

Profitability Ratios:
Profitability ratios are used to measure the profitability of any firm, how much a company is
capable of generating profitability from its operations, assets, equity, capital employed, and
revenue of the company. The profitability ratios for Apple Inc are calculated below: including
ROCE, operating profit margin, and gross profit margin.
RETURN ON CAPITAL EMPLOYED (ROCE):
The ROCE ratio provides a useful measure shape of ratio to understand the return earned
compared to the capital employed in the business.
    Formula   2021 2020
Operating Profit (PBIT) x 100 Operating 109,207 67,091
Capital employed profit (PBIT)
RETURN (Earnings
ON Capital employed = Total non-current from
CAPITAL liabilities + Total equity Operations)
EMPLOYED or
(ROCE) Capital employed = Total assets – Total Assets 351,002 323,888
Current liabilities Current 125,481 105,392
liabilities
  48.42% 30.70%
R.O.C.E=
=48% =31%

Explanation: AppleInc. has a ROCE of 48.42% in 2021 which was a rise compared to the
30.7% in 2020. The ROCE ratio of Apple Inc. indicates that it is highly efficient in generating
income from its Capital employed, and the Operating income is far more effective in returning
to the employed capital. This is a representation of: for every $100 that Apple Inc. Invested in its
capital it makes a return of $48.42 in 2021 and $30.7 in 2020.

9
The company has observed a rapid rise in its operating income has risen to 67% in 2021 from
2020. The operating income of Apple Inc. for the year 2021 was $109,207 million and for the
year 2020 $67,091 million in 2020. Whereas the debt of the company also rose 8% in 2021, with
a debt of $351,002 in 2021, and $323,888 in 2020. The debt has not increased at that pace as
compared to the Operating income, therefore there is a huge jump in the ROCE ratio. The
performance of the company in its employed capital is outstanding in terms of returns (10-K
Apple Inc., 2021, p. 34).
Apple's performance in ROCe is a clear indication of its brand growth each year, Apple breaks
its records by d reaching a new all-time high because of its ecosystem in the technology world,
amazing customer support, loyal customer base and pre-booked record-breaking sales. The rise
in the new year was caused by apple's strategy to launch a new innovative product in each
product line (Apple Newsroom, 2022).
OPERATING PROFIT MARGIN (OPM):
Operating Profit margin also known as Profit before interest and tax (PBIT), the Profit margin is
used to determine the operating profits a business entity is generating compare to or relative to its
revenue.
  Formula   2021 2020
Operating Operating Profit x 100 Operating profit 109,207 67,091
profit Total Revenue (Earnings from
margin Operations)
(OPM) Operating profit = PBIT Total Revenue 365,817 274,515
Operating profit in %   29.85% 24.44%
=30% =24%

Explanation: Apple Inc. has performed outstandingly in operating Profit margin in both years
with 24.4% in 2020 and 29.8% in the year 2021. This represents that the company has moved at
a rapid pace in its Operating income. The ratio represents that the company has performed well
in the operating income ratio, which is only with efficient production cost compared to revenue.
The operating profit for Apple Inc. has risen to 67% in 2021 compared to the financial year
2020, whereas the Revenue rose to 33% in the year 2021 compared to 2020. This indicates that
the operating profit rises 2x compared to the total revenue of Apple Inc., Therefore its clearly
understood that company has worked on its operating cost in 2021 and minimize it to achieve a
magnificent result in its operating income which is achieved by Apple inc. with the high,
consistent and rapid growth of operating income (10-K Apple Inc., 2021, p. 34).
The growing operating profit is the result of an increase in revenue due to the growing brand
value of Apple inc. as well as its efficient production process which has decreased the cost of

10
operating for Apple Inc. Combined these positive changes in Apple Inc. resulted in higher and
growing profit margins.

GROSS PROFIT MARGIN (GPM):

Gross Profit margin also known as gross income, the Profit margin is used to determine the gross
income the business or entity is generating compare to or relative to its Cost of goods sold.

  Formula   2021 2020

GROSS Gross Profit x 100 Gross Profit 152,836 104,956
PROFIT Total Revenue
MARGIN
(GPM) Total Revenue 365,817 274,515
Gross margin:   41.78% 38.23%
=42% =38%

Explanation: With a gross margin of 38.3% in 2020 and 41.8% in 2021, Apple Inc. has excelled
in both years. This illustrates how quickly the company's gross income has grown in just two
years. The ratio shows that the business has done well in terms of generating gross income,
which is only possible with low cost of goods sold production cost relative to revenue (10-K
Apple Inc., 2021, p. 34).
Apple Inc.'s gross profit increased to 46% in 2021 compared to the fiscal year 2020, while
revenue increased to 33% in 2021 compared to 2020. This implies that Apple Inc.'s operating
profit rises significantly faster than its sales. As a result, the company has worked on lowering its
cost of goods sold in 2021, which is achieved as a result of Apple Inc.'s high gross income (10-K
Apple Inc., 2021, p. 34).
The rapid boost in gross margin is the result of increased revenue due to Apple Inc.'s expanding
brand recognition and increase in demand for its products and services, as well as its efficient
production method, which has reduced the cost of items produced and sold for Apple Inc. Apple
Inc.'s favourable changes resulted in better and expanding gross profit margins (Apple
Newsroom, 2022).

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Efficiency Ratios:
Efficiency ratios evaluate the efficiency of a company in generating sales and maximizing profit
by using its assets and liabilities. Two efficiency ratios Inventory Turnover days and Receivable
Turnover days are calculated and analyzed in the following tables and paragraphs (WILL
KENTON, 2022).
Inventory turnover days:
Inventory turnover is one of the finest ratios to determine the efficiency of a business or entity.
The Inventory turnover days are calculated by dividing the cost of products sold by the average
inventory value during the period, and determines how effectively a company utilizes its
inventory ( JASON FERNANDO, 2022).

   Formula   2021 2020

INVENTORY Inventory * 365 Inventory 6580 4061
TURNOVER DAYS days
Cost of sales Cost of sales 212,981 169,559
  11.28 8.74
=11 days =9 days

Explanation: Apple Inc.'s inventory turnover days are 11.28 days in 2021 compared to 8.74
days in 2020. There is a visible rise in inventory turnover, which is a good indication of an
increase in sales of Apple Inc. The ratio represents that the company delivered its goods in 11.28
days in 2020 and 8.74 days in 2021. The company's revenues were larger than its cost of sales
and gradually increased over the previous year, according to the growth in inventory turnover
days ratios. The ratio demonstrates the company's outstanding inventory management
capabilities.
The increase in inventory as well as the increased revenue is the major reason for hiking the
turnover ratio, hence the increase in inventory days. This is indicating management's intention to
keep as less as possible of inventory to increase sales. As it will also result in low costs to the
company in the shape of no holding or warehousing cost of inventory.
Apple Inc. Is considered the biggest brand in the world, as well as its sales growth, is a true
indication of this statement. The growing revenue due to the effective branding is proof of Apple
Inc.'s ability to manage its operation effectively. Ultimately the revenue and inventory turnover
days were also affected and it represents Apple Inc.'s efficiency to manage its inventory and
sales.

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Receivable Turnover Days:
Receivable Turnover Days is one of the well-known ratios to find out the efficiency of a business
or entity. The Receivable Turnover Days ratio is calculated by dividing the Net credit sales by
the average amount of Accounts receivable and determines how efficiently a company utilizes its
accounts receivable to manage its networking capital;l(Brianna Blaney, 2022).
    Formula   2021 2020

Receivables 26278+2522 16120+21325

RECEIVABLE Receivables *365 8 =37445
TURNOVER Total Revenue =51506
DAYS Total Revenue 365,817 274,515
(sales)
  51.39 49.78
=51 days =50 days

Explanation: Apple inc. has a receivable turnover days ratio was 50 days in 2020 and
rise to 51 days in 2021. There is Slightly increase in the efficiency ratio as some of the
clients are taking one day more (average) to pay their debts to the company, as well as
the ratio is considered as high according to the general benchmark. Apple Inc has to
increase its Receivable Turnover Days ratio to be more efficient (CHRIS B. MURPHY,
2022).
The accounts receivable for Apple Inc. increased to 38%, while the company's sales
increase by up to 33%. However, the growth of receivables outpaces that of sales. This
demonstrates the company's inability to successfully recover payment from the
customer. The increase in the receivable days can mainly be due to two reasons:
There are possible reasons for the high receivable turnover days ratio company is still
facing problems in its logistics due to the disturbance of the global supply chain, or it
may be the high demand for products that leads local outlets to hold the inventory in
quantity for a long time of period. The current increasing demands for the products,
enforcing companies to offer their phones on credit to facilitate their low segment
customers. (Apple, 2022).

Liquidity Ratios:
Liquidity ratios are used to measure the liquidity and flexibility of a business entity by
utilizing liquidity ratios such as the current ratio, and Quick ratio to determine the
financial capability of the company to pay its short terms debtors through current assets
(Adam Hayes, 2022).

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Current Ratios: Current Assets/ Current Liabilities
The current ratio measures the strength in terms of liquidity, The ratio is used to
determine networking capital ability and short-term liquidity (less than one year) ability
to pay its current liabilities through its current assets (Adam Hayes, 2022).
   Formula   2021 2020
Current Current Asset 134,836 143,713
Ratio Current Asset
Current Liabilities Current Liabilities 125,481 105,392

    1.074:1 1.36:1

Explanation: Apple Inc.. has a current ratio of 1.074 in 2021 and its declining as
compared to the time series analysis the current ratio of Apple Inc. was 1.36 in 2020,
This ratio represents the Median Strength of its networking capital. Furthermore, it
indicates that current assets are efficient enough to pay current liabilities.
The current asset of Apple Inc has been delined to 6% in 2021 compared to 2020,
whereas the Current liabilities of the company increased by 19% in 2021 compared to
the year 2020. There is a clear financial reason that is determined by increasing short-
term debt and decreasing current assets which caused the current ratio to decline in the
year 2021.
The primary reason for this low current ratio is the massive usage of its current asset to
finance its day-to-day operation, the Apple company is much more involved in self-
financing for its operations rather than external sources of finance. This lead to a lower
current ratio.
QUICK RATIO TEST/ ACID TEST: Current Assets- Inventory/ Current Liabilities
The quick ratio is used to measure the ability of a business entity to pay its current
obligations with one's current assets after deducing the value of inventory is measured
by the Quick ratio, which is used to assess one's network capital and short-term liquidity
of business entity (less than one year) capacity (Adam Hayes, 2022).
Formula 2021 2020

Current Asset 134,836 143,713

QUICK (Current Asset - inventories)

RATIO Current Liabilities Inventories 6580 4061

Current Liabilities 125,481 105,392

1.022 1.325
=1.02 =1.33

14
Explanation: Apple Inc. has a Quick ratio of 1.02 in 2021, and 1.33 for the year 2020,
representing the medium strength in the Quick ratio and representing the declining trend
in the ratio in time series analysis. Furthermore, it indicates that current assets after the
deduction of Inventory are just adequate to pay the current liabilities of the company.
The results also revealed that the inventory is not as much contributing to the current
assets for Apple Inc. and the quick ratio is just fine to cover the short-term liabilities.
The decrease in the ratio is caused by the aggressive policies of Apple Inc. for
expansion and growth, Apple uses its current assets to finance its operations rather
than taking external finance for expansion plans this lead to the higher share price
growth as well it will also result in low liquidity.

Gearing/ Leverage Ratio:

Gearing ratios are used to measure the financial leverage of any business entity, by
comparing the debt and equity through which a company is financed. The ratio helps in
determining the degree of measurement that represents how its capital structure is
formed and business performs its operation from financing through the shareholders
and creditors (WILL KENTON, 2022).
Interest Coverage Ratio
The interest coverage ratio also known as times interest earned is used to measure the
capability of Interest on its debt. The interest coverage ratio is calculated by dividing the
operating income of the company by its interest expense in a given period (ADAM
HAYES, 2022).
   Formula:   2021 2020

Operating Profit Operating

109,207 67,091
(PBIT) profit
Interest Coverage
Interest on Loan Interest on
2,645 2873
(Finance costs) loan
  Interest Coverage= 41.29 23.35

Explanation: In 2021 and 2020, Apple Inc.'s interest coverage ratios are 41.29 and
23.35, respectively. The interest coverage ratio is rising quickly in 2021 compared to
2021 and shows a great performance of the company in this ratio.
Although the interest expense of Apple Inc. for 2021 also decreased by 8%, which also
plays a significant role in the rising of the interest coverage ratio, the operating profit of

15
Apple Inc. has been growing at a pace that is the reason behind the rapid pace of the
interest coverage ratio of Apple Inc.
The major reason behind the rising and excellent interest coverage ratio of Apple Inc is
Corporate expansion and brand recognition globally which led Applie Inc towards
massive financial gains such as revenue as well as profits.
Conclusions

Apple Inc. has entrenched itself as the market leader. The ratio study's overall findings suggested
that the company's successes were visible in its financial statements. According to the results of
the current and quick ratio calculations under liquidity ratio analysis, the firm can easily pay off
its short-term liabilities. It reflects a good financial situation and a corporation that can easily
manage its activities. Apple Inc., depends significantly on current assets rather than debt for day-
to-day operations, due to current Global inflationary pressure and high inflation rates. Profit
margins increased are increased due to the reduced cost in operational, manufacturing, and
selling activities. According to a profitability ratio analysis. Whereas Apple has a balanced
capital structure with equity and debt to meet the company's operational costs.

Apple successfully utilized its resources such as employed capital, Assets, equity, and debt to generate
profit as well as revenue. Since 2019. Apple's revenue and profits have been continually increasing at a
rapid pace. This indicates that Apple Inc. became more effective at turning its resources into revenue and
generating profits. Apple made excellent use of its resources to make money for the business. Apple is a
resource-efficient company with great financial status. This company also generates substantial profits for
shareholders. Shareholders might consequently suggest putting Apple's stocks in their portfolio due to
Given Apple's high potential for capital gain and revenue growth.

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19
 Appendix

      2021 2020
Profitability        

Operating profit
Operating Profit
(Earnings from 109,207 67,091
(PBIT) x 100
Operations)

Return on Capital
Employed
Total Asset - current
Total Assets 351,002 323,888
liabilities

  Current liabilities 125,481 105,392

    48.42% 30.71%
         
Operating profit
Operating Profit
(Earnings from 109,207 67091
Operating profit (PBIT) x 100
Operations)
margin Total Revenue Total Revenue 365,817 274,515
    29.85% 24.44%
         

Gross Profit x 100 Gross Profit 152,836 104,956

GROSS PROFIT
MARGIN

Total Revenue Total Revenue 365,817 274,515

Gross margin:   41.78% 38.23%
         
Liquidity Ratio        
Current Asset Current Asset 134,836 143,713
Current Liabilities Current Liabilities 125,481 105,392
Current Ratio
1.0 1.3
   
7 6

20
          

(Current Asset -
Current Asset 134,836 143,713
inventories)

Quick Ratio
Current Liabilities Inventories 6,580 4,061

  Current Liabilities 125,481 105,392

    1.022 1.325
         
Efficiency Ratios        
Average Inventory
Average inventory 6,580.00 4,061.00
x 365 days
Inventory
Cost of sales Cost of sales 212,981 169,559
Turnover Days
11.2 8.
   
8 74
         
Receivables x 365 Average
51506 37445
days receivables
Receivables
Total Revenue Total Revenue 365,817 274,515
turnover days
51.3 49.7
   
9 9
         
Gearing Ratios        
Operating Profit
(Earnings from Operating profit 109,207 67,091
Operations)
Interest Coverage
Interest on Loan
Interest on loan 2,645 2873
(Finance costs)
    41.29 23.35
         

Investment Ratio     Per share Per share

Net income (Profit for 94,680,000,00 57,411,000,00

Earnings per Share Net income
the Year) 0 0
Number of ordinary Number of 16,426,786,00 16,976,763,00
 
shares ordinary shares 0 0
      6 3

21