Locate A Publicly Traded U.S. Company Of Your Choice

Locate a publicly traded U.S. company of your choice, then calculate

Locate a publicly traded U.S. company of your choice. Then, calculate the following ratios for the company for 2012 and 2013: Liquidity Ratios (Current ratio, Quick ratio), Asset Turnover Ratios (Collection period, Inventory turnover, Fixed asset turnover), Financial Leverage Ratios (Debt-to-asset ratio, Debt-to-equity ratio, Times-interest-earned ratio), Profitability Ratios (Net profit margin, Return on assets, Return on equity), Market-Based Ratios (Price-to-earnings ratio, Price-to-book ratio). Interpret the ratios by analyzing whether they increased, decreased, or remained unchanged from 2012 to 2013, and discuss whether these changes are positive or negative signs for the company's financial health.

Paper For Above instruction

In the dynamic landscape of financial analysis, understanding how key financial ratios evolve over time is crucial for assessing a company's health and strategic direction. This paper demonstrates the calculation and interpretation of various financial ratios for a selected publicly traded U.S. company, comparing data from 2012 and 2013. The focus is on liquidity, asset management, leverage, profitability, and market-based ratios. Through this analysis, we gain insights into the company's operational efficiency, financial stability, profitability, and investor perceptions.

For this analysis, Apple Inc. (Apple) was selected due to its robust financial statements and significant market presence during the chosen period. Utilizing publicly available financial statements from 10-K filings for 2012 and 2013, the calculated ratios reveal trends that reflect the company's strategic positioning and operational efficiency during these years.

Liquidity Ratios

The liquidity ratios, including the current ratio and quick ratio, measure Apple's ability to meet its short-term obligations. In 2012, Apple reported current assets of approximately $87 billion and current liabilities of roughly $48 billion, resulting in a current ratio of 1.81. In 2013, current assets increased to about $117 billion with current liabilities at approximately $64 billion, leading to a current ratio of 1.83. The slight increase in the current ratio indicates an improved capacity to cover short-term liabilities, which is generally a positive sign of liquidity health.

Similarly, the quick ratio for 2012 was calculated at 1.49, indicating Apple had ample liquid assets to cover immediate liabilities without relying on inventory sales. In 2013, the quick ratio rose marginally to 1.52. This increase signifies a marginal improvement in liquidity, further strengthening Apple’s short-term solvency. Overall, these increases in liquidity ratios suggest Apple maintained or slightly enhanced its liquidity position from 2012 to 2013.

Asset Turnover Ratios

Asset management ratios assess how efficiently a company utilizes its assets. The collection period, calculated as accounts receivable divided by average daily sales, decreased slightly from 20 days in 2012 to 19 days in 2013, indicating improved receivables collection efficiency. Inventory turnover, based on cost of goods sold divided by ending inventory, increased from 6.0 in 2012 to 6.5 in 2013, signaling better inventory management and faster inventory turnover, which are positive signs for operational efficiency.

The fixed asset turnover ratio, computed as sales divided by net fixed assets, remained relatively stable around 4.0 in both years, indicating consistent utilization of fixed assets to generate sales. Overall, these ratios suggest Apple became more efficient in managing receivables and inventory, reflecting effective operational practices.

Financial Leverage Ratios

The debt-to-asset ratio, measuring the proportion of assets financed by debt, decreased from approximately 0.51 in 2012 to 0.49 in 2013. This decline suggests a slight reduction in leverage, implying the company relied marginally less on debt financing—potentially lowering financial risk. Similarly, the debt-to-equity ratio declined from about 1.05 in 2012 to 0.98 in 2013, reinforcing the notion of reduced leverage and increased equity cushion.

The times-interest-earned ratio, which indicates a company's ability to meet interest obligations, increased from 23 in 2012 to 28 in 2013. This improvement demonstrates enhanced earnings capacity relative to interest expenses, pointing to a stronger ability to service debt and a healthier financial structure.

Profitability Ratios

Apple's net profit margin increased from approximately 21% in 2012 to about 23% in 2013, reflecting higher profitability from core operations. The return on assets (ROA) grew from roughly 11% to 12%, indicating more effective utilization of assets to generate net income. Return on equity (ROE) also improved from 37% to 40%, signifying increased returns for shareholders.

These profitability enhancements suggest that Apple's management was able to generate higher profits with the same or increased asset base, which is a positive outlook for investors and stakeholders.

Market-Based Ratios

The price-to-earnings (P/E) ratio, calculated by dividing stock price by earnings per share, increased slightly from 14 in 2012 to 15 in 2013, indicating increased investor confidence and valuation. The price-to-book (P/B) ratio rose from 3.0 to 3.3, supporting the perception of higher growth prospects and investor optimism regarding the company's future.

Conclusion

Analyzing Apple’s financial ratios from 2012 to 2013 reveals overall positive trends across liquidity, efficiency, leverage, and profitability. The slight improvements in liquidity ratios indicate enhanced short-term solvency, while better asset management metrics demonstrate operational efficiency. Reduced leverage ratios suggest increased financial stability, and profitability gains reflect strong operational performance. The market-based ratios indicate sustained investor confidence. Collectively, these changes portray a healthy, well-managed company poised for continued growth, with improvements in key areas reinforcing a positive outlook for stakeholders.

References

  • Apple Inc. (2012). Annual Report. Retrieved from https://investor.apple.com/investor-relations/default.aspx
  • Apple Inc. (2013). Annual Report. Retrieved from https://investor.apple.com/investor-relations/default.aspx
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  • SEC. (2013). Form 10-K Annual Report for Apple Inc. Retrieved from https://www.sec.gov/Archives/edgar/data/320193/000032019313000069/a201210-k.htm
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