Financial Statement Analysis

1
Financial Statement Analysis

• Apple Computer Corporation

2
Products and Services

• Apple Corp. designs, distributes, and markets
  personal computers, portable music players, and
  other electronics.

3
Key People

• Steve Jobs, CEO
• Peter Oppenheimer, CFO
• Timothy D. Cook, COO
• Bill Campbell, Chairman of the Board

4
Market Information

• Apple is traded on the NASDAQ (AAPL)
• Closing share price (29 Sept, 2007) 153.47

5
Corporate Office

• The corporate office is located in Silicon Valley
  (Cupertino, CA)

6
Audit

• The financial statements of Apple Corp. are
  audited by KKMG LLPP.
• Apple received an unqualified opinion.

7
Major Asset Accounts

• Cash/cash equivalents
• Short-term investments
• Property
• Plant equipment
• Accounts receivable

8
Major Liability Accounts

• Accounts payable
• Accrued expenses

9
FY 2007

• Assets increased during fiscal year 2007, from
  17,205 million to 25,347 million.
• Apple is remaining profitable by introducing new
  products and improving existing products.

10
FY 2007

• Total liabilities increased from 7,221 million
  to 10,815 million.
• Since Apple is doing well, this indicates that
  management is effective in employing debt to
  increase revenue.

11
Financial Leverage Ratio

• Average Total Assets / Average Stockholders
  Equity Financial Leverage Ratio
• (25,34717,205)/2 / (14,5329,984)/2
  Financial Leverage Ratio
• 21,276/12,258 1.74

12
Change in revenue FY2006 vs. FY2007

• 2007 revenue was 24 greater than 2006 revenue.
• According to management, this was due to
  double-digit growth in revenue across iPod,
  iPhone, peripheral sales, and the iTunes store,
  which sells music-related products.

13
Change in income FY2006 vs. FY2007

• Income increased at a level exceeding the rate of
  inflation in 2007. It follows that Apple Corp.
  has experienced steady growth in the last fiscal
  year.

14
Asset Turnover Ratio

• Sales (or Operating) Revenues / Average Total
  Assets Total Asset Turnover Ratio
• 24,006/(25,34717,205)/2
• 24,006/21,276 1.13
• The low turnover ratio indicates
  less-than-optimum management efficiency.

15
Revenue Recognition Policy

• The Company recognizes revenue when persuasive
  evidence of an arrangement exists, delivery has
  occurred, the sales price is fixed or
  determinable, and collection is probable. Product
  is considered delivered to the customer once it
  has been shipped, and title and risk of loss have
  been transferred. For most of the Company's
  product sales, these criteria are met at the time
  the product is shipped. For online sales to
  individuals, for some sales to education
  customers in the U.S., and for certain other
  sales, the Company defers revenue until the
  customer receives the product because the Company
  retains a portion of the risk of loss on these
  sales during transit.

16
Basic earnings per share

• 4.04 (taken from annual report)
• At 153.47 per share, the companys stock is a
  moderate return on investment given the current
  market conditions.

17
Net Profit Margin

• Net Income / Net Sales (or Operating Revenues)
  Net Profit Margin
• 3,496/24006 0.1456 (14.56)
• This indicates that the company has efficient
  management of sales and expenses.

18
Accrued Expenses

• Deferred revenue
• Deferred margin on component sales
• Accrued tax liabilities
• Accrued marketing and distribution
• Accrued compensation/employee benefits
• Accrued warranty and related costs
• All other current liabilities

19
Cash flow

• Cash flow from operating activities, financing
  activities, and investing activities totaled
  2,960 million.
• The most significant cash flows in were maturity
  of short-term investments (6,483 million),
  proceeds from sale of investments (

20
Inventory costing

• Apple Corp. uses first-in, first-out (FIFO)
  inventory costing.
• The inventory turnover ratio is 51.47, reflecting
  a rapid production-to-customer flow.