Analyze Information Contained in the Apple Inc. Balance Sheet

Analyze Information Contained in the Apple Inc. Balance Sheet

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Analyze Information Contained in the Apple Inc. Balance Sheet

The total assets of Apple Inc. as indicated in the most recent annual financial report of the year ending September 29, 2013 is $ 176,064,000,000 (nasdaq.com, 2013). Calculating the total assets of a business is very important because it indicates the financial health of the firm. In addition, they are used in assessing the efficiency of a company in generating revenue and profits for the shareholders, as well as its ability to meet debts amongst other uses. The most fundamental purpose is indicating the worth of the business as a whole. When acquisitions and mergers are taking place, assets are the main thing assessed to determine the value of a company. They also give the firm credit worthiness since banks and other financial lending institutions determine the amount they can lend to a company by assessing their assets.

Assets are also used in assessing efficiency by calculating several financial ratios where. For instance, calculating the ability of assets to generate sales is calculated by dividing the net sales by total assets. The ratio derived from this formula indicates how much sales each unit of asset generates. When it is low, the assets are generating minimal sales while a high ratio indicates bigger revenue creation. When the ratio is low, it indicates the possibility of some of the assets constituting total assets such as inventory, receivables, fixed assets and cash. For instance, if a firm is holding too much inventory and selling little of it, it will result in a low ratio that indicates poor performance from total assets. In this case, the total asset turnover ratio for the annual period ending September 29, 2013 is calculated by dividing the net sales $68,662,000,000 with total assets, 176,064,000,000 that results to 0.38. Although this seems low, it has to be compared with the industry historical data to determine whether sales are slow or quick. In general, assets represent the worth of the firm while still serving as sources of sales considering their main purpose includes turning them into revenue and indicating performance of the business.

The total assets of the previous year to the latest annual financial period ending September 29, 2012 were $116,371,000,000. This shows that total assets in 2012 have increased by $ 59,693,000,000 (nasdaq.com, 2013). All categories of assets increased over that year. This increase shows growth, although it could indicate other issues. In addition, increase in assets means an increase in owner’s equity. This is evident in the balance sheet where common stock, retained earnings and other equity increased. For Apple Inc., it seems that asset management is reasonable considering all assets increased by a small margin. Each asset has a cost. To assess whether an increase was positive for the business, financial ratios are required. Total asset turnover ratio for the year ending September 24, 2011 is 0.37, which means the increase in assets has contributed to a positive impact on sales.

Apple’s total current liabilities for the year ending September 29, 2012 are $38,542,000,000 (nasdaq.com, 2013). These liabilities constitute accounts payables and other current liabilities. The incorporation does not have any short-term debts to pay. This means the firm is generating enough profits to continue funding its operations. The same way assets are important to a business and in the balance sheet, so are liabilities. Current liabilities are any amount of money payable within the short-term period, mostly one year. Current liabilities are also important for analyzing performance of the business through ratios. An example is the current ratio calculated by diving total current assets by current liabilities. This ratio indicates how liquid a company is. It is important in showing how fast a company can pay its current liabilities. In Apple’s case, the current ratio for the year ending September 29, 2012 is 1.5, which means the corporation can pay up its current liabilities one and a half times.

 

Reference

Nasdaq.com. (2013). AAPL Company Financials. Retrieved from http://www.nasdaq.com/symbol/aapl/financials?query=balance-sheet

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