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Apple Computer Inc. Samuel Doyle ACG 2021 SEC 002.

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Presentation on theme: "Apple Computer Inc. Samuel Doyle ACG 2021 SEC 002."— Presentation transcript:

1 Apple Computer Inc. Samuel Doyle ACG 2021 SEC 002

2 Executive Summary Apple has been a booming company for the past year, their earnings in 2005 were astounding. These results were primarily due to the success the iPOD. Though the days of the iPOD may be numbered, it is still a good time to be an owner of any Apple Stock. ir.net/media_files/irol/10/107357/reports/10 K_FY2005.pdf ir.net/media_files/irol/10/107357/reports/10 K_FY2005.pdf

3 Part A. Introduction Steve Jobs, CEO Steve Jobs, CEO 1 Infinite Loop MS 301-4IR Cupertino, CA Infinite Loop MS 301-4IR Cupertino, CA September 24, 2005 was ending date of latest fiscal year. September 24, 2005 was ending date of latest fiscal year. The company designs, manufactures, and markets personal computers and related software. The company designs, manufactures, and markets personal computers and related software. Most of Apple’s operations are focused in North America. Most of Apple’s operations are focused in North America.

4 Part A. Audit Report KPMG LLP KPMG LLP Apple is a very healthy company, after a two- for-one stock split to shareholders in February 2005, the company has continued to maintain a steady increase in net sales and income. Apple is a very healthy company, after a two- for-one stock split to shareholders in February 2005, the company has continued to maintain a steady increase in net sales and income. Apple follows the First In, First out method or market. Apple follows the First In, First out method or market.

5 Part A. Stock Market Information $67.72 $67.72 $53.81-$18.42 $53.81-$18.42 Two for One Stock Split Two for One Stock Split March 3, 2006 March 3, 2006 I would recommend selling at the current date, because of the limits on the technology of iPod and overflow that is occurring in the market right now. I would recommend selling at the current date, because of the limits on the technology of iPod and overflow that is occurring in the market right now. Though Apple has plans for a partnership with Intel, it would be very unlikely to see numbers like this much longer. Though Apple has plans for a partnership with Intel, it would be very unlikely to see numbers like this much longer.

6 Part B. Industry Situation and Company Plans Apple is a very strong company right now, but the industry of technology tends to be very fickle. This is primarily because of the rapid advances in technology, and the consistent market demand for the “next big thing”. Apple seems to be in talks with Europe for a new campaign to sell television shows through itunes which would help exceed its current popularity. (http://www.appleinsider.com/article.php?id=1571) Production of a new ipod peripheral speaker system also seems to be a hit with the current markets because of its ease of use and quality of sound. (http://www.appleinsider.com/article.php?id=1563) Though some concern is arising in the markets as to how long Apple can maintain this level of success, it is understood that if they continue branching off from the ipod in new directions and adding to their personal computer background they will surely have a very dominant place in the stock market.

7 Part C. Income Statement (In Millions) Gross Profit Income from Operations Net Income Year 2005 $4,043$2,535$1,335 Year 2004 $2,259$934$276

8 Part C. Income Statement The income statement is in Multi- Step format. The income statement is in Multi- Step format. The increases in all areas were very substantial, each area doubled at least once, with no decreases to be seen in analyzing this chart. It would appear that this company is on the ball, and going strong. The increases in all areas were very substantial, each area doubled at least once, with no decreases to be seen in analyzing this chart. It would appear that this company is on the ball, and going strong.

9 Part C. Balance Sheet (In Millions) Assets =Liabilities Share Holder’s Equity Year 2005 $11,551 =$4,085$7,466 Year 2004 $8,050 =$2,974$5,076

10 Part C. Balance Sheet The balance sheets look very promising for stockholder’s. The assets tripled over the liabilities, and the stockholder’s equity doubled over the liabilities. The balance sheets look very promising for stockholder’s. The assets tripled over the liabilities, and the stockholder’s equity doubled over the liabilities. And no matter what business you are in, low liabilities are good liabilities. And for Apple they just keep looking good. And no matter what business you are in, low liabilities are good liabilities. And for Apple they just keep looking good.

11 Part C. Statement of Cash Flows Cash flow from operations have been more than net income for the past three years, and in 2005 were 1,200,000,000, more than Net Income. Cash flow from operations have been more than net income for the past three years, and in 2005 were 1,200,000,000, more than Net Income. The company is growing in size but losing cash in these investing activities. The company is growing in size but losing cash in these investing activities. The primary source of financing is through proceeds from the Issuance of Common Stock. The primary source of financing is through proceeds from the Issuance of Common Stock. Cash has increased about $100,000,000 since Cash has increased about $100,000,000 since 2003.

12 Part D. Accounting Policies Revenue Recognition:Revenue Recognition: The company recognizes revenue when evidence of an arrangement exists, delivery has occurred, the sales price is fixed, and collection is probable. Cash, Short-term Investments:Cash, Short-term Investments: When evaluating the investments, the Company reviews factors such as the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer, and the Company’s ability and intent to hold the investment for a period of time which may be sufficient for anticipated recovery in market value. Property and Equipment:Property and Equipment: Depreciation is computed by use of the straight-line method over the estimated useful lives of the assets, which are 30 years for buildings, up to 5 years for equipment, and the shorter of lease terms or 10 years for leasehold improvements. Inventories:Inventories: Inventories are stated at the lower of cost, computed using the first-in, first- out method, or market. If the cost of the inventories exceeds their market value, provisions are made currently for the difference between the cost and the market value.

13 Part D. Accounting Policies Topics of Financial Statement Notes: Topics of Financial Statement Notes: Significant Accounting Policies Financial Instruments Consolidated Financial Statement Details Good and Intangible Assets Restructuring Charges Income Taxes Shareholder’s Equity Employee Benefit Plans Stock-Based Compensation Commitments and Contingencies Segment Information and Geographic Data Related Party Transactions and Certain Other Transactions Selected Quarterly Financial Information

14 Part E. Financial Analysis Liquidity Ratios Working Capital: 2005=$1, =$1,518 Working Capital: 2005=$1, =$1,518 Though the increase was small, the increase was still solid, preventing a huge rise in liabilities. Current Ratio: 2005= =2.05 Current Ratio: 2005= =2.05 There was a slight increase in liabilities over assets in 2005 versus Receivable turnover: 2005=16.7 times2004=10.7 times Receivable turnover: 2005=16.7 times2004=10.7 times There is a higher rate of turnover in the company for receivables, meaning they received cash sooner in 2005 than in Average days’ sales uncollected: 2005=22 days2004=34 days Average days’ sales uncollected: 2005=22 days2004=34 days Once again, this ratio examines how long it takes on average for payment to be received. Inventory turnover: 2005=74.34 times2004=76.68 Inventory turnover: 2005=74.34 times2004=76.68 Here the inventory rotated times a year over 76.78, which shows a decline in inventory rotation. Average days’ inventory on hand: 2005=4.91 days2004=4.76 days Average days’ inventory on hand: 2005=4.91 days2004=4.76 days About every 5 days the inventory is rotated which in the world of technology is not very important for a high turnover but this does illustrate the success of Apple.

15 Part E. Financial Analysis Profitability Ratios Profit margin: 2005=9.5%2004=3.3% Profit margin: 2005=9.5%2004=3.3% Here the profit margin nearly tripled in a year, illustrating that net sales went up with cost of sales going down. Asset turnover: 2005=1.4 times2004=1.11 times Asset turnover: 2005=1.4 times2004=1.11 times Here the Assets were turned 1.4 times thus were more efficient than the previous year. Return on assets: 2005=13.6%2004=3.7% Return on assets: 2005=13.6%2004=3.7% In 2005, Apple now makes 13 cents on every dollar versus 3 cents. They have become more efficient with their assets. Return on equity: 2005=21.2%2004=5.9% Return on equity: 2005=21.2%2004=5.9% In 2005, Apple made 21 cents on every stockholder’s dollar versus 5 cents. Apple has also become efficient in spending investor’s money.

16 Part E. Financial Analysis Solvency Ratio Debt to equity: Debt to equity:2005=54.7%2004=58.6% At this point the banks and creditors actually own more of the company than the stockholder’s which is not a good thing, because now the creditors can become the owners. No matter how successful a company is, it doesn’t matter unless your liabilities are lower than your stockholder’s equity and assets.

17 Part E. Financial Analysis Market Strength Ratios Price/earnings per share Price/earnings per share 2005=34 times 2004=54 times The ratio between price and earnings shrank meaning the earnings on the stock went up in relation to the price. This means a higher level of efficiency in the company. Dividend yield: There were no dividends given out this year, the company instead went for a two-for-one split of stocks. Dividend yield: There were no dividends given out this year, the company instead went for a two-for-one split of stocks.


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