APPLE Inc. (AAPL)

Accounting and Financial Profile

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Name

Sachitanand Karnakote
Choong Chee Lai
Lei Qiu
Alcides Santopietro
Denisa Voicu

September 2008

Contents

Introduction 2
The company and its activities 2
Industry & Competition 2
Recommendation 3
Accounting choices and Quality of Earnings 4
Ratios analysis 6
Liquidity: 6
Solvency: 7
Profitability: 8
Market: 8
Relevant Disclosures 9
Risks 9
Analysis of Apple Inc. corporate strategy 10

Introduction

Our group decided to analyse the company Apple Inc., listed on Nasdaq Market as AAPL. The analysis was mainly based on the annual financial report of the company for the fiscal year ended on September 29th 2007. Apple Inc. is today one of the most …show more content…

|Table 3 |2007 |2006 |2005 |
|Cash and cash equivalents (millions) |9,352 |6,392 |3,491 |
|Change |46% |83% |- |

From the cash flow statement, we can see that the principal components of this net increase were cash generated by operating activities of $5.5B. It is clear that Apple has a strong ability to generate cash from its core businesses. $8.84B of CCE’s are short-term investments such as securities maturing in 3 months or less. We believe that part of this cash is used as a hedge in supply negotiations to ensure favorable prices and in sufficient quantities. As stated in its 10-K, Apple has prepaid $1.25B for NAND flash memory in 2006. In 2007, it has utilized $208M of this prepayment. Note that the prepayment has been recorded as Other Assets (OA’s) and this explains the large amount for OA’s. The cash can also be used to ensure adequate R&D funding.
From 2006 to 2007, the Average Collection Period (days) of Receivables (ACPR) has increased slightly from 23.66 days to 24.90 days while the Average Number of Days of Inventory On Hand (Avg.IOH) also increased from 7.18 to 7.97. This could be a result of strong growth in sales (24%), A/R’s (31%) and Inventories (28%) in 2007. However, Apple is still better in these aspects than its main competitors such as Hewlett-Packard, which