What Is Apple's Debt?

Interpretation: 53% of the total assets are financed through debts; the remaining 39% is financed through equity.

Debt to Equity Ratio of 1.23 more than 1 reveals that more than half of assets are financed by debt.

1.The Liabilities to Equity Ratio (ratio of what is “owed” to what is “owned” showed the same unfavorable change, due

First of which, is the current ratio. It has been rapidly declining since 2000. To me this indicates that there is a liquidity issue. Each year their trade debt increase exceeds the increase of net income for the company. As a result, the working capital has taken a nosedive from $58,650 in 2002 to only $5,466 in 2003.

Increase in current liabilities Substantial increase in current liabilities weakened the company’s liquidity position. Its current liabilities were US$2,063.94 million at the end of FY2010, a 48.09% increase compared to the previous year. However, its current assets recorded a marginal increase of 25.07% - from US$1,770.02 million at the end of FY2009 to US$2,213.72 million at the end of FY2010. Following this, the company’s current ratio declined from 1.27 at the end of the FY2009 to 1.07 at the end of FY2010. A lower current ratio indicates that the company is in a weak financial position, and it may find it difficult to meet its day-to-day obligations.

Return on Total Assets was 4.43% which is below five percent. That indicates that the company is not accurately converting its assets into profit. The total for Return on Stockholders’ Equity was 8.89%, however financial analysts prefer ROE to range between 15-20 %. The company’s low ROE indicates that the company is not generating profit with new investments. Lastly, Debt-to-Equity ratio for the company was 1.01 which indicates that investors and creditors are equally sharing assets. In the view of creditors, they see a high ratio as a risk factor because it can indicate that investors are not investing due to the company’s overall performance. The totals of these three ratios demonstrate that the company’s financial state is not as healthy as it should be.

Overall regards to liquidity ratios, the higher the number the better; however, a too high also indicates that the firms were not using their resources to their full potential. Current ratio of 1.0 or greater shows that a company can pay its current liabilities with its current assets. JWN’s ratio increased from 2.06 in 2007 to 2.57 in 2010, and slightly decreased to 2.16 in 2011. JWN’s cash ratio increased significantly from 22% in 2007 to 80% in 2010. JWN has a cash ratio of 73% in 2011, which is useful to creditors when deciding how much debt they would be willing to extend to JWN. In addition, JWN also has moderate CFO ratio of 46%, indicating the companies’ ability to pay off their short term liabilities with their operating cash

Market value proportions of: Debt = $1,147,200 / $4,897,200 = 23.4% Pref. Share = $1,250,000 / $4,897,200 = 25.5% Common equity = $2,500,000 / $4,897,200 = 51.1%

In 2007, total assets have increased significantly by 48% from 2006. Current assets are 86.62% of total assets in 2007, up from 84.33% in 2006. From the trend over the last 5 years (2003-2007), Cash and Cash Equivalents (CCE) have grown strongly by 175% while total current assets have grown significantly by 273% in the same period. This growth in current assets is also reflected in Apple’s Quick Ratio and Current Ratio which have improved marginally in 2007 to 1.83 and 2.36 respectively. Apple`s ratios are favorable compared to its competitors, e.g.

The Debt-Equity Ratio shows that most of the capital was in terms of ordinary shares and is becoming more reliant on Shareholders Equity than on debt to finance operations.

Apple, Inc. currently has a Price-to-Earnings ratio of 43.70, compared to the industry standard of 36.50, and the S&P 500 average of 20.73. This indicates that Apple has a lower amount of risk than other firms in the computer manufacturing industry and other firms in

If this ratio is high means company owns too many debts which may decrease their

Apple had nearly $137 billion of cash at the end of Dec 2012. Over the past few years, the Company had been highly successful with the launch of the iPhone 3G in 2008, and which was followed by the launch of iPad in 2010. The Company enjoyed high profitability, and was able to keep its costs at a minimum. The gross margin on the iPhone was between 49% and 58% from October 2010 to March 2012, and the gross margin on the iPad was between 23% and 32% in the same time period. Apple’s capital structure included no debt; hence, there was no outflow of cash for making interest payments.

The third ratio is the CFO/CL ratio (short-term debt coverage), which shows what part of the company’s short-term liabilities can be payed by its most liquid asset – cash. GSK’s average meaning of the CFO/CL was 0,64 This is a good showing, because it proves that GSK uses its cash effectively, since if the company’s cash ratio equals 1 it means that company has too much cash in reserves During years 2005-2007 the CFO/CL ratio changed very slightly, but in 2008 ratio increased to 0,72, probably because GSK has faced increase in derivative financial instruments, inventories and receivables, which happened due to the strengthening of overseas currencies In

Current ratio of Company X and Y is 1.80, and 2.55 respectively. This ratio presents the proportion of current assets to current liabilities. This ratio provided a measure of degree to which current assets cover current liabilities. Since both companies have excess of current assets over their current liabilities, they met basic requirement of safety margin against uncertainty in realization of current assets and funds flows. Generally, it is suggested that a firm should have neither a very high ratio nor a very low ratio. Very high ratio implies heavy investments in current assets reflecting under utilization of the resources. A very low ratio endangers the business in to risks of not being able to pay short term requirements. Normally, it is advocated to have the current ratio as 2:1 (Baker and Powell, 2009).