Apple is one of the leading technology companies, being a major player in a wide range of industries including mobile communication, personal computing, and software apps. One may be tempted to assume the company is in strong financial position but the objective analysis cannot be done without financial statements. Apple’s financial statements from the year 2010 and 2012 not only allow us to look at the company’s annual performance and financial position in that particular year but it also helps us evaluate the company’s performance over time.
As far as the balance sheet is concerned, Apple’s cash reserves declined from $11.26 billion in 2010 to $10.75 billion in 2012. But the company’s accounts receivables account almost doubled from $5.51 billion in 2010 to $10.93 billion in 2012. The company’s total asset base more than doubled from being $75.18 billion in 2010 to $176 billion 2012 and much of the rise was due to long-term marketable securities which rose from $25.39 billion to $92.12 billion during the period. The company’s property, plant & equipment base also rose from $4.77 billion in 2010 to $15.45 billion in 2012. These changes provide us with valuable insights into Apple’s strategies and the nature of the competition over the period. First of all, the significant rise in accounts receivables point towards rising intensity of competition which may have forced the company to offer more generous credit terms to its customers to boost sales. Similarly, the huge increase in long-term marketable securities may mean the company is finding it hard to invest its huge cash reserves profitably which may be why it has invested them in long-term marketable securities for the time being. The increase in property, plant & equipment tells us the company is taking greater control of its operations including manufacturing and may be reducing its reliance on third parties. We also see increase in accounts payable from $12.02 billion in 2010 to $21.18 billion which shows the competition might have risen but the company’s sales have also increased and we indeed confirm it in the income statement,
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The income statements from the year 2010 and 2012 reveal that sales increased from $65.23 billion to $156.51 billion. As can be expected from rising intensity of competition, Apple also increased its research expenditures from $1.78 billion to $3.38 billion during the period. An increase in research expenditure was to be expected because Apple competes on the basis of quality and innovative products and rising competition only increases the importance of product differentiation. While company’s sales more than doubled, the selling, general, and administrative expenses rose by a lower proportion from $5.52 billion to $10.04 billion during the period. The company’s net income almost grew threefold from $14.01 billion to $41.73 billion. The income statement paints quite an impressive picture. First of all, despite the rising intensity of competition, the company’s profitability has continued to grow. Apple has also been focusing on achieving greater operating efficiency to reduce average costs which has significantly helped its bottom line.
The fact that Apple has significantly improved its operating efficiency is confirmed by cash flow statement as cash flow from operating activities improved from $18.6 billion in 2010 to $50.86 billion in 2012. The investing activities section confirms company has been investing in long-term securities to make better use of its huge cash reserves.
- Apple Inc. 2010. Form 10-K. Cupertino, Ca.
