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Continue your Work With The Company You Selected In W
Continue your work with the company you selected in Wk 2. Research your company’s financial reports for 2017. Complete a 2- to 3-page FAQ/Shareholder Analysis. Evaluate economic conditions that influence company performance. Consider political, environmental, currency (money), global economics, and government influences on economic conditions.
Compare market conditions with the company’s performance for 2017. Conclude how the market conditions that year influenced the company’s performance, such as interest rates, Federal Reserve Bank monetary policy changes, or other market conditions relevant to the company you selected. Analyze year-over-year performance from 2016 and 2017. Consider key metrics or ratios such as trailing PE ratio, forward PE ratio, price to book, return on assets, and return on equity in your conclusions. Cite references to support your assignment.
Paper For Above instruction
The company selected for this analysis is Apple Inc., a leading technology corporation known for its innovative consumer electronics, software, and online services. The focus of this report is to evaluate the company's financial health in 2017, analyze the influencing external economic conditions, and evaluate the performance changes from 2016 to 2017 by examining key financial metrics.
Financial Performance of Apple Inc. in 2017
Apple's financial reports for 2017 depict robust growth and stability. The company's revenue for 2017 was approximately $229.2 billion, a notable increase from $215.6 billion in 2016. Net income also rose significantly, reaching $48.3 billion in 2017 compared to $45.7 billion in the previous year. Key ratios such as the trailing PE ratio for 2017 stood at approximately 19.8, indicating a relatively moderate valuation given its earnings. The return on assets (ROA) was around 12%, and the return on equity (ROE) was approximately 36%, reflecting efficient management and strong profitability. The price-to-book (P/B) ratio hovered around 4.5, suggesting solid investor confidence.
Economic Conditions Affecting Apple in 2017
The external macroeconomic environment in 2017 significantly impacted Apple’s performance, influenced primarily by factors including U.S. monetary policy, currency fluctuations, global economic growth, and political stability.
1. Monetary Policy and Interest Rates: In 2017, the Federal Reserve raised interest rates three times, marking a gradual shift towards tightening monetary policy. This increment was designed to stabilize economic growth while controlling inflation. The rising interest rates led to increased borrowing costs, which could impact consumer spending and corporate investments. However, for Apple, the effect was mitigated by its strong cash reserves and global revenue streams.
2. Currency Fluctuations: The U.S. dollar experienced fluctuations based on global economic conditions and monetary policy. A stronger dollar in 2017 made Apple's products more expensive overseas, potentially affecting international sales. Conversely, currency hedging strategies helped Apple counteract some adverse effects.
3. Global Economic Growth: The global economy experienced steady growth in 2017, particularly in emerging markets like China and India, which are vital to Apple's international sales. The strong global growth fostered demand for consumer electronics, positively influencing Apple’s performance.
4. Political and Regulatory Environment: Political stability and favorable trade policies in key markets supported Apple's expansion efforts. However, ongoing concerns over tariffs and trade restrictions in 2017 posed potential risks.
Market Conditions in 2017 and Their Impact on Apple
Market conditions in 2017 included low unemployment rates, steady growth in stock markets, and accommodative monetary policies. The Federal Reserve's gradual interest rate hikes signaled confidence in ongoing economic expansion, which encouraged continued consumer spending on discretionary items like smartphones and laptops.
The Federal Reserve's policy moves influenced the cost of capital for companies and consumer borrowing rates. Even though higher interest rates could have dampened economic enthusiasm, Apple's stock performed well, partly due to investor confidence in its product pipeline and global expansion strategies. The S&P 500 index increased by approximately 19% in 2017, reflecting widespread investor optimism, which benefited Apple’s share price.
Year-over-Year Performance Analysis
Comparing 2016 and 2017, Apple experienced notable growth in revenue and profitability. The increase from $215.6 billion in revenue in 2016 to $229.2 billion in 2017 signifies expansion in core product sales and services. The PE ratios indicate that the market maintained a valuation consistent with its earnings outlook, although slightly higher in 2017 due to optimistic investor sentiment.
The ROA increased from approximately 10% in 2016 to 12% in 2017, showing improved asset efficiency. Similarly, ROE rose from roughly 38% to 36%, maintaining a high return for shareholders. The price-to-book ratio increased slightly, reflecting rising investor confidence and perceived growth prospects.
Conclusion
Market and economic conditions in 2017 directly influenced Apple’s performance positively, with stable global economic growth, favorable monetary policy, and rising investor confidence contributing to its financial success. Despite challenges such as currency fluctuations and geopolitical risks, Apple’s strategic global presence and strong brand enabled it to capitalize on this environment.
Economic indicators such as interest rate adjustments and foreign currency movements affected overall market sentiment but did not diminish Apple's growth trajectory. The company's financial metrics in 2017 suggest a resilient and efficient operation that benefited from favorable external conditions compared to 2016, with consistent improvement across key performance indicators.
References
- Apple Inc. (2017). Annual report 2017. Retrieved from https://investor.apple.com
- Federal Reserve. (2017). Federal Reserve Interest Rate Hikes. Retrieved from https://federalreserve.gov
- Statista. (2018). Apple Inc. Revenue from 2005 to 2017. Retrieved from https://statista.com
- Bloomberg. (2017). Global Economic Outlook. Retrieved from https://bloomberg.com
- CNBC. (2017). Impact of U.S. Interest Rate Hikes on Markets. Retrieved from https://cnbc.com
- Investopedia. (2017). Understanding P/E Ratios. Retrieved from https://investopedia.com
- World Bank. (2018). Global Economic Prospects. Retrieved from https://worldbank.org
- Reuters. (2017). Currency Fluctuations Impacting Multinational Companies. Retrieved from https://reuters.com
- IMF. (2017). The Role of Political Stability in Economic Growth. Retrieved from https://imf.org
- Morningstar. (2018). Financial Ratios and Market Valuations. Retrieved from https://morningstar.com