Apple’s financial statements clearly show the company’s significant amount of success over the past two years. Apples ability to provide customers with new products containing superior ease-of-use, seamless integration, and innovative industrial design has been the key to their success. Since 2006, Apple has improved in nearly every aspect of their company’s operations. Increases in profitability, liquidity, and returns on investments (both theirs and their stockholders) show that they truly are leading their industry in the right direction. Apple Inc. 2007 10-K Annual Report

Name of Chief Executive Officer

Ending Date of Latest Fiscal Year

Steven P. Jobs

September 29, 2007 (fiscal year ends on last Saturday in September)

Location of Home Office Cupertino, California

Products or Services Provided Apple Inc. provides a wide variety of technical products. These products include but are not limited to: personal computers, portable digital music players, mobile communication devices, as well as software. Main Geographic Area of Activity Approximately 60% of the company‟s net sales came from the U.S. in 2007. Final assembly of products sold by Apple is currently performed in the company‟s manufacturing facility in Cork, Ireland, and by external vendors in Fremont, California; Fullerton, California; Taiwan; the Republic of Korea; the People‟s Republic of China; and the Czech Republic.

Independent Auditors KPMG LLP Apple‟s auditors believe that the accounting done by Apple was in conformity with the U.S. generally accepted accounting principles. Their auditing process also led them to believe that Apple‟s Management has effectively and accurately overseen the financial reporting process fairly depicting the current dispositions of assets in the company.

• • • •

Price of the company’s stock: 97.07 Twelve month trading range of the company’s stock: 202.96 – 94.65 (108.31) Dividend per share: No dividends paid. Date of the above information: October 4th, 2008

Investment opinions: BUY/SELL/HOLD? I believe Apple is a great investment in the long run, and would recommend anyone who owns the stock to avoid selling until the distant future. The stock has fallen more than 80 points in the past three months, and currently hit its 52 week low of 94.65 on October 3rd. Although these low prices are in a buyers favor, I do not believe this is the right time to invest in Apple. I believe the stock will continue to go down in the short run, due to our weak economy, but when America escapes this financial crisis I believe the stock will rise higher than ever before.

The technology industry is one of the fastest growing industries in the world. There are hundreds of new “tech” products released daily keeping the industry very competitive. This competitiveness leads to better products, and greater breakthroughs in technology. The more advanced our technology becomes, the more we see our society flourish. To this day, Apple has astonished America with their revolutionary products. With the thousands of brilliant minds working to advance Apple’s technology daily, there really are no limits for this company in the future. Over the years, Apple has taken over the market with their Ipods, Mac Computers, and Iphones. In the future, Apple would like to get greater exposure to Business technology, which is dominated currently by Microsoft. They have made solid efforts recently with the new Iphone 3G and are using it to attract a new audience known as “business buyers”. CEO Steve Jobs believes that a large part of Apple's future success will be their ability to win over corporate buyers. The faster 3G model iphone, with added business features (such as Microsoft Outlook) will be a large part of this success. Also, similar to many other companies, Apple has plans to be a “greener apple.” Apple designs products with high quality materials that are in high demand from recyclers. They also are working on plans to revolutionize the energy efficiency of their products in their industry.

Sources Guglielmo, Connie. "Apple Wins BlackBerry Defectors With Business IPhones (Update2) ." Bloomberg. 3 Oct 2008. Bloomberg. 4 Oct 2008 . Jobs, Steve. "A Greener Apple." Apple. Apple Inc.. 4 Oct 2008 .

Apple uses a Multistep Income Statement, going through a series of steps, or subtotals, to arrive at their net income. Apple has shown significant increases in Gross Profit, Income from Operations, and Net Income in the past two years. Apple’s release of the iPhone has had a substantial effect on the company’s profits. It has also expanded and diversified Apple’s market of customers. New iPhone users who are impressed with the product are very apt to purchase Apple brand products for other aspects of their life (i.e. computer, iPod, etc) Stepping in to the phone industry was one of the smartest moves Apple has made.

Apple Inc. (in millions)



Gross Profit

$ 8,154

$ 5,598

Income from Operations

$ 4,409

$ 2,453

Net Income

$ 3,496

$ 1,989

From 2006 to 2007 Apple showed increases in Assets, Liabilities, and Stockholders’ Equity. Assets increased by almost 3 times as much as liabilities, and almost twice as much as stockholders equity. This large increase in assets is an exceptional trait for any company. It emphasizes Apple’s liquidity and possible success in the future.

Apple Inc. (in millions)



Liabilities + Stockholders’ Equity


$ 25,347

$ 10,815

$ 14,532


$ 17,205

$ 7,221

$ 9,984

• Cash flows from operations in 2006 and 2007 were significantly larger than net income. •Apple is growing greatly from investing activities, most of which is in the form of short-term investments. •The company’s primary source of financing is through the proceeds of common stock as well as tax benefits from stock-based compensation. • The end of year cash in the company has increased greatly in the past two years, doubling from ’05 to ’06 and increasing by 50% from ’06 to ’07.

•Accounting policies are related to revenue recognition, allowance for doubtful accounts, inventory valuation, warranty costs, stock based compensation, income taxes and legal and other contingencies. These policies are crucial to the proper display of the operating results and the financial condition of the company. • Apple must make judgments, assumptions, and estimates that affect the amounts reported in its financial statements and notes •Management bases estimates mainly on historical experience, as well as other assumptions deemed reasonable under specific situations. These results form the basis of judgments made on the values of the assets and liabilities of the company.

Topics of the Notes to the Financial Statements •Summary of Significant Accounting Policies •Financial Instruments •Consolidated Financial Statement Details •Goodwill and Other Intangible Assets •Income Taxes •Shareholders‟ Equity

•Stock-Based Compensation •Commitments and Contingencies •Segment Information and Geographic Data •Related Party Transactions •Selected Quarterly Financial Information

Positives: Increases in working capital and the current ratio both show Apple‟s liquidity and ability to pay off debts. This is due to the large increase in assets in the company Negatives: Decreases in “inventory turnover” and increases in the “Average days‟ inventory on hand” show Apple‟s inefficient use of inventory. Apple needs to make improvements on managing inventory in the future in order to maximize efficiency.

Apple Inc.



Working Capital (in millions)



Current Ratio



Receivable turnover (less allowances of 47 M)



Average days‟ sales uncollected



Inventory turnover



Average days‟ inventory on hand



The data table below shows the following: o From „06 to „07 the firmed earned more in net income for every dollar in net sales. This great for the company and means that it has become more profitable.

o The company‟s return on assets and return on equity increased significantly. This shows that Apple and its stockholders are making more money off of each dollar invested. o The small increase in asset turnover means that Apple continues to improve efficiency and use assets more efficiently.

Apple Inc.



Profit Margin



Asset Turnover



Return on Assets



Return on Equity



The debt to equity has slightly increased from „06 to „07. Apple‟s high debt to equity ratio is very positive for the company entailing that Apple receives only 25% of its financing from creditors and 75% from investors. This shows great capability of expansion for Apple.

Apple Inc.



Debt to equity



Price/earnings per share: 2007: 4.04 2006: 2.36 The increase in earnings per share shows great progress in the company and an increase in stock price. This is great for stockholders, who potentially doubled their money invested. There were no dividends paid in 2006 or 2007 proving that Apple’s priorities in these two years were to invest this money back into the company.