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Resources: Appendix A of Financial Accounting: Tools for Business Decision Making
Note: This is a two part assignment.
Part 1
Answer questions A-F in problem CT12-1 in Financial Accounting (p. 640).
Provide an 875-word analysis of your findings.
Include conclusions concerning the management of the company's cash.
Part 2
Complete a 1,050-word summary of findings and recommendations from the following questions:
- What is the par or stated value per share of Apple's common stock?
- What percentage of Apple's authorized common stock was issued at September 27, 2014?
- How many shares of common stock were outstanding at September 28, 2013, and at September 27, 2014?
- Calculate the payout ratio, earnings per share, and return on common stockholders' equity for 2014.
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Explanation & Answer
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Running Head: FINANCIAL ANALYSIS OF APPLE INC.
PART 1: FINANCIAL ANALYSIS OF APPLE INC.
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FINANCIAL ANALYSIS OF APPLE INC.
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FINANCIAL ANALYSIS OF APPLE INC.
Net Cash from Operating Activities
The value of net cash provided by operating activities on September 27, 2014, was
$59,713 million and $53,666 million for September 28, 2013. The amount of net cash flows from
operating activities for the two accounting periods are positive meaning that the company has
been performing well when it comes to generating cash from its operations. Since cash flows
from operating activities measure the level of cash that a company generates from its routine
business activities, a positive net cash flow on the part of Apple Inc. for the two consecutive
periods, is an indication that the company can generate sufficient cash flows to finance its
operations and support its growth activities (Rich, 2012). Since the fiscal year 2012, the net cash
flows from operating activities have been increasing, and this positive trend is a sign that Apple
Inc. is managing its normal business activities efficiently.
Value of increase or Decrease in Cash Equivalent
From the consolidated statement of cash flows, it can be seen that the amount of increase
or decrease in cash and cash equivalent is $415 million. From the financial results evident in the
balance sheet, this value was a decrease because on September 28, 2013, Apple Inc. reported
cash and cash equivalent of $14,259 million, the value decreased to $13,844 on September 27,
2014. Cash and cash equivalents are basically the current assets of a company that are most
liquid or the idle cash temporarily tied to short-term commitments, hence can be converted easily
into cash (Rich, 2012). Since this value was a decrease, it means that Apple reduced the amount
of idle cash that was tied up in its short-term commitments and was channeling it towards its
operations.
FINANCIAL ANALYSIS OF APPLE INC.
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Method of Computing for the Net Cash Provided by Operating Activities
Apple’s uses an indirect method to compute for the net cash provided by operating
activities. The indirect method of computing for cash flows from operating activities entail using
the net income obtained from the income statement to calculate the net cash from operating
activities (Rich, 2012). Necessary adjustments are made to the net income by subtracting the
non-cash items that do not involve actual cash spending (Wahlen, Jones & Pagach, 2017). This is
evident from Apple’s statement of cash flows which shows a reconciliation of the net income to
the cash obtained from operating activities.
Changes in Accounts Receivable, Inventories and Accou...
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