Financial Statements Analysis

Financial Statement - Apple Inc

Introduction

The ability to analyze financial statements is one of the main tools for the business success. It is the main way to convey the financial performance and information to the company's employees and its stakeholders. There are many ways to analysis financial performance of the company and one of them is using ratio analysis and comparative industry data. This paper will focus on Apple VS something Microsoft and their performance within the industry.

Discussion

Financial Statements Comparison

The reason for selecting these companies is due to the highest generating revenue in their industry and customers preferences.

Ratios Analysis

Profitability Ratios

The profitability trend of the Apple is steadily increasing while Microsoft profitability trend is somewhat partially increasingly. ROA of Apple Inc in 2011 is 27.13 while previously it was showing value of 21.78. Hence, company is managing to overcome their weakness. This is a strong point of the Apple While ROA of Microsoft it has increased from 22.88 in 2010 to 23.77 in 2011. Apple and Microsoft ROE have shown improvement. Apple profitability reflecting a degree of efficiency that use of material, labour and financial resources, and natural resources. This carries a monetary unit. Comparing this with Microsoft, their profitability is not reflecting any efficient use of their resources (www.mergentonline.com).

Liquidity Ratios

Comparing the liquidity of the Apple with Microsoft, we can analyze that Apple is less liquid than Microsoft as their liquidity is 1% more than Apple. However, the trend of both the company is increasing but Microsoft recently had stock split which is to convert existing shares into a larger number of new shares with a lower nominal value, due to which it is assumed that this will has a positive effect on the liquidity of shares, often at the expense of attracting investment to the large number of small players in the stock market (Apple Annual report 2011).

The trend of current and quick ratio of Apple fall in 2011 with 1.35, it is expected that company will managed to overcome their downfall, as Apple has ability to bounce back from their crisis. As far as Microsoft is concern their current and quick ratio is enhancing in 2011 along with their quick ratios. Hence, both the companies showed the absolute solvency of the company and constant equality between assets and liabilities on the total amount and time of onset (www.mergentonline.com).

Debt Management

The Debt Ratio measures the intensity of the ...