Apple Inc. Case Study

APPLE INC.

After analyzing and assessing Apple Inc. there are several factors to consider prior to making a decision in buying, selling, and holding Apple stock (symbol AAPL). Apple, known for its products such as iPhone, iPad, Mac, Apple TV, among others is one of the largest companies in the world by market capitalization. It trails Alphabet by just under $20 billion for the top spot.

        At the end of its fiscal year on September 27, 2014, Apple had issued 5,866,161 shares of common stock and had 6,294,494 shares outstanding. As for its balance sheet line items, Apple ended its fiscal year with assets of $231,839 million, liabilities of $120,292 million, and shareholders’ equity of $111,547 million. Apple’s largest asset is its Long-Term Marketable Securities, valued at $130,162 million. Its largest liability is its Accounts Payable, valued at $30,196 million.

        After careful analysis and evaluation, I believe Apple’s most valuable resources are its Long-Term Marketable Securities. This includes its ownership of money market funds, mutual funds, U.S. Treasury securities, commercial paper, corporate securities, among others. It can be found on the balance sheet as assets. This is Apple’s most valuable resource due to its ability to increase as markets increase and as companies perform at their best.

        The balance sheet of a company changes from year to year, Apple is no exception. Much of the line items on the balance sheet are similar to previous year. This can be viewed as a sense of stability in certain aspects of operations. Some variations to identify between 2013 and 2014 are:

• Short-Term Marketable Securities under assets decreased from $26,287 million (2013) to $11,233 million (2014)
• Long-Term Marketable Securities under assets increased from $106,215 million (2013) to $130,162 million (2014)
• Accounts Payable under liabilities increased from $22,367 million (2013) to $30,196 million (2014)
• Commercial Paper under liabilities increased from $0 (2013) to $6,308 million (2014)
• Retained Earnings under shareholders’ equity decreased from $104,256 million (2013) to $87,152 million (2014)

The largest change was to the Long-Term Marketable Securities most attributable to market price fluctuations. As this line item is an asset, any gain/loss is reflected under shareholders’ equity as Accumulated Other Income.

        Apple’s net income affects its retained earnings. Retained Earnings equal the Beginning Retained Earnings plus Net Income minus Dividends paid. Therefore, when there is a high value of net income it can be mitigated through dividend payments or can be carried over to retained earnings. For example, for the fiscal year 2014 Apple recorded a decrease in retained earnings. This is because there was net income of $39,510 million, it issued dividends that amounted $11,215 million, and issued a 7 for 1 stock split on June 6, 2014 which reflects a repurchase of common stock that amounted $45,000 million.