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Apple Inc.

Autor:   •  October 13, 2018  •  2,635 Words (11 Pages)  •  731 Views

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Based on my findings and after carefully reviewing both company’s income statements and balance sheets its evident that Google is experiencing the most growth. Although they are neck in neck when it comes to revenue Google has more than $2,985 billion assets than its competitor Apple. This growth is mainly stimulated from online advertising one of the sectors Google is thriving in and also proceeds gained from installing software on its electronics line in respect with its partnerships/affiliations with others.

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Vertical Analysis

Part I: Income Statement

A vertical analysis as defined per accounting tools as the proportional analysis of a financial statement where each line item on a financial statement is listed as a percentage of another item. Vertical analysis is useful when trying to find which account holds what weight compared to the other, also when analyzing company measurements. Accounts that will be reviewed in this case analysis in regards to vertical analysis are: revenue, COGS, operating expense, interest expense, income tax expense, and net income.

For the current year (2015) revenue for Google is a follows: Google websites (68%), Google electronics (25%), other revenues (10%). While Apples revenues comprise from: iPhone (52%), iPad (23%), iMac (6%), and services (10%). Cost of goods sold for Google topped $26,897 million and Apple listed in at $140,089 million. Inclusive in the 2015 year is operating expense for Google currently is operating at 30% for its expenses and Apple operates not too far behind at 37%.

Taking a look at interest expense, when debt is use, debt has an implicit or explicit interest rate a borrower must pay for using such funds. The interest in the occurred in different periods thus leading to an interest expense. Apples interest expense is substantially low with 0% interest and similarly Google’s is low as well with 0% also.

Additionally, income tax expense is a tax imposed and governed by the government. When big corporations such as Apple and Google pay income its normally higher than others due their high profit margin; taxes help society because it pays back income it generates which requires a higher tax. Apples income tax for 2015 was $15,987 million equating to 7% of Apples sales while Google’s income that comes in at $10,752; I feel apple’s is higher because of its product lineup.

Net income represents the amount of money left over after all operating expenses, interest, taxes and preferred stock. In regards to Apple net income was reported as $53,394 million while Google is $3,931 as you can see when it comes to income Apple unquestionably surpasses Google. This doesn’t surprise me due to the fact of Apple’s extensive products that are provided although Google makes great money within advertising it doesn’t stand a chance next to Apple.

Part II: Balance Sheet

Now we will review the remaining financial statements that include reports detailing the balance sheet. Total assets are used as the base to obtain percentages for all remaining asset accounts. To start current assets accounted for Google were $84,164 million while Apple current assets for 2015 amounted to $89,378 million; that equates to an approximate $5 billion difference.

As defined by accounting tools property, plant, and equipment (PPE) are tangible items that are expected to be used in more than one period; and of which are used in production, for rental, or for administration. Property, plant, and equipment for Apple was $22,471 million while Google’s PPE is $28,388 million; Googles fixed asset are leading in revenue streams.

In relation to all other assets Apple leads the margin with $3,449 million more than Google which falls short at $2,107 million. In correspondence with assets both companies are experiencing financial growth with Apples assets totaling $89,378 million and Google who trails behind with $84,164 million. This analysis gives an idea of how each company invests on various liquidation levels. One of the key factors that helps Apple thrive is its ability to invest in the right mid to long term assets.

In order to purchase assets companies will accumulate debt which in return gives them a liability that must be fulfilled. All liabilities vary and can last for different periods of time both Apple and Google currently have significant liabilities. Apples current liabilities are $80,610 million while Googles is substantially lower coming in at $17,362 million; as demonstrated apples liabilities are almost quadrupled to that of Google. Total liabilities for Apple once again is more than its competitor with Google being $27,042 million and Apple being $171,124 million, Apple by far exceeds Google in risk and liabilities. Lastly, Apple recorded stockholder’s equity at $119,355 million whereas $111,783 million.

Based upon my findings after researching the vertical analysis I can conclude that overall Apple has more acquisitions than Google. Although Apples liabilities are much larger than Google its evident that Apple has a larger income scale; its revenue surpasses Google.

Ratio Analysis

Ratio analysis is used to evaluate various aspects of a company’s operating and financial performance such as its efficiency, liquidity, profitability, and solvency. This helps to determine whether a company’s performance is improving or deteriorating. The ratios that I will further go in depth with in respect to this analysis are: liquidity, asset management, debt management, profitability, and market or valuation. All of which are used by potential investors, potential and current creditors, and shareholders.

To begin with liquidity deals with the ability of a company to pay its debt to creditors. There are two ways this analysis can be done, one being from a quick ratio and other being current ratio. In order to figure out the current ratio you must look at what’s included in the ratios some of its components are: inventory, cash equivalents, accounts receivables in conjunction with its current liabilities. After computations I was able to determine that Apple’s current ratio was 111% for the 2015 year and Google’s was 4.77%. Quick ratios for Apple during 2015 was 108% versus 4.47% for Google which happened to be the same for current ratio.

Asset management deals with but not limited to, inventory turnover, fixed asset and total asset turnover; this shows how the company’s being driven. Inventory turnover looks at how many exchanges were made with inventory during an operating cycle.

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