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Targeted Company: Apple Incorporation
The targeted company for this exercise is Apple Incorporation. The company is publicly traded on the NASDAQ Stock Market. Apple Incorporation’s ticker symbol is NASDAQ: AAPL. Apple Incorporation is currently “one of the leading producers and marketers of personal computers and consumer electronics” (Apple, 2015, para. 2). The firm operates in the information technology industry. The company’s major products “include hardware devices, consumer software, and online services” (Apple, 2015, para. 2). The “major hardware products marketed by Apple Incorporation include the iPhone, the iPad, the iPod, the Apple Watch, and the Mac personal computer” (Apple, 2015, para. 4). Apple’s major “software products include iOS and OS-X” (Apple, 2015, para. 4).
Financial Health of Apple Incorporation
Several ratios can be used to determine the financial health of an organization. The first essential financial ratio is profit margin. Apple’s profit margin ratio increased from 22 percent in 2014 to 23 percent in 2015 (AAPL Company Financials, 2015). The ratio stood at 22 percent in 2013. The second important ratio is Return on Equity (RoE). This “RoE ratio portrays the amount of net income returned by a company as a percentage of shareholders’ equity” (Fridson & Alvarez, 2011, 63).
Apple’s RoE has increased steadily within the past three years. The recorded RoE in 2013 was 30.64 percent. The RoE increased to 46.25 percent in 2014. The current RoE is 46.25 percent. The other important ratio is the Return on Invested Capital (ROIC). The 10k statement indicates clearly that Apple’s ROIC has been increasing steadily for the last four years. The firm’s ROIC was recorded at 26.2 percent in 2013 and 31.32 in 2014 (AAPL Company Financials, 2015). Apple’s current ROIC is 31.32 percent.
Analyzing the Above Trend
The above three ratios show clearly that Apple has remained profitable within the last few years. The trend supports the fact that Apple Incorporation has been performing positively in the information technology industry. The current RoE explains how Apple uses its investments to generate income and support. A “RoE above 22 percent indicates that a company is performing excellently” (Fridson & Alvarez, 2011, p. 64).
Apple’s profit margin has increased within the past few years. This trend can be used to describe why the firm has been performing well in the industry. The current percentage means that Apple earns new income from every single dollar invested. The ROIC ratio is “used by financial experts to determine whether a company is turning its assets and capital into profits” (Fridson & Alvarez, 2011, p. 72). Apple’s ROIC is healthy and acceptable. The current ROIC trend explains how Apple earns profits from its capital.
Recommendation
The above analysis portrays Apple Incorporation as one of the most successful companies in the information technology industry. It is agreeable that Apple’s business operations and financial statements are healthy. Apple’s stockholders should smile because the company is performing well. Apple Incorporation’s positive performance is expected to continue for the next few years. Those who have invested in the company should hold their stock for the next few years. The current trend explains why Apple Inc. will remain profitable in the future (Apple, 2015). As well, more individuals can buy the firm’s stock. This is the case because Apple Inc. has been successful in the market. This move will make it easier for the stockholders to earn more profits.
Reference List
AAPL Company Financials. (2015). Web.
Apple. (2015). Web.
Fridson, M., & Alvarez, F. (2011). Financial Statement Analysis: A Practitioner’s Guide. New York, NY: Wiley.
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