1.SCHOOL OF ARCHITECTURE, BUILDING AND DESIGN THE DESIGN SCHOOL FOUNDATION IN NATURAL BUILD ENVIRONMENTTOPIC: FINANCIAL RATIO ANALYSISGROUP MEMBERS: PARHAM FARHADPOOR MOY CHIN HOONGSUBJECT:03136980314014BASIC ACCOUNTING (FNBE0145)LECTURER:CHANG JAU HOSUBMISSION DATE: 24th JANUARY 20141

2. The Introduction Apple Inc. (Apple) was founded by Steve Jobs, Steve Wozniak, and Ronald Wayne on 1 st April, 1976 to develop personal computers, then Applewas incorporated in January 3, 1977 in California.Their main focus was on computers until 2007, they changed their main focus to other electric devices such as mobile phones and tablets. They manufactures, and markets mobile communication and media devices such as iPhone, iPad, iPod, Mac, and apple TV as hard wares while iOS, OS X, and iCloud as softwares. Apple sells and delivers digital content and applications through the iTunes Store, App Store, iBooks Store, and Mac App Store. Apple is the world's top two largest information technology company and world's top three largest mobile phone maker. Recently they introduced iBeacon late last year on devices running iOS 7, the location-sensing technology works by sending off short-range transmitters that notify mobile devices when they are within 100 feet of a beacon. This type of locationsensing technology can be used for indoor navigation, automatic ticketing, and locationrelevant promotions. Besides , Apple has bought Israel-based PrimeSense Ltd, which is a developer of three dimensional chips with the price of $350 million. Apple also introduced IOS Mfi-certified game controlled to solve the problem of a pocket arcade without enough buttons recently. It gives the gamers to have a full game controller-like feeling while playing games with their phone and ipod touch.2 3. The Information needed for the Calculation of Ratio-2012 41,733 118,210 156,508 68,662 5,020 8,401Net Profit O/E Net Sales Gross Profit Selling Expenses General Expenses 1,698 Financial Expenses 791 Inventory 10,930 Debtors 57,653 Total Current Asset 38,542 Total Current Liability 87,846 Total GOGS 78,254 Credit Sales 0 Interest Expense 176,064 Total Asset 57,854 Total Liabilities *All the numbers present in the table are in millions.2013 37,037 123,549 170,910 64,304 5,415 9,890 16,379 1,764 13,102 73,286 43,658 106,606 85,455 136 207,000 83,451*Notes:-Total Selling & General Exp. Research & Development Exp. * Total Selling Exp. * Total General Exp.2012 10,0402013 10,8303,3814,475= 5,020 ) + 3,381 = 8,401= 5,415 + 4,475 = 9,8903 4. Ratio Analysis on the Business Based on the Year 2012 & 2013Profitability Ratio20122013 100Return on Equity (ROE) =Net profit Margin (NPM)100= 34.5%== ==26.7%=Gross profit Margin (GPM)=====43.9%=x 100 = 3.21%=Selling Exp. Ratio (SER) =General Exp. Ratio (GER) =5.37%=Financial Exp. Ratio (FER)== ==1.1%=Interpretation 100 (ROE) has decreased from 34.5% to 30.6% during 2012 to 2013 which means 100=30.6% that the owners are getting the lower return on their capital. (NPM) has decreased from 26.7% to 21.7% during 2012 to 2013 which means =21.7% that the business is getting worse in controlling its expenses. (GPM) has decreased from 43.9% to 37.6% during 2012 to 2013 which means =37.6% that the business is getting worse in controlling its cos of goods sold expenses. (SER) has decresed from 3.21% to 3.17% during the year 2012 to 2013. This 100 = 3.17% means the company is getting better in controlling the selling expenses. (GER) has increased from 5.37% to 5.79% during the year 2012 to 2013. This means that the business is = 5.79% getting worse in controlling the general expenses. (FER) has increased from 1.1% to 9.6% during 2012 to 2013 which means that =9.6% the business is getting worse in controlling its financial expenses.4 5. Stability Ratios= =1.68:1=== =40.3%= 365= 365=365=365=5.3 days=4.4 days=365=365=365=365=56 days=51.3 daysWorking Capital has increased from 1.50:1 to 1.68:1 during 2012 to 2013 which means that the ability to pay off its current liabilities by using current assets is getting better. But, it still doesnt satisfy to the minimum ratio of 2:1. Total Debt has increased from 32.9% to 40.3% during the year 2012 to 2013 which means that the total debt level has gone up, however it is still below the maximum of 50% level. Stock Turnover has decreased from 5.3 days to 4.4 days during 2012 to 2013 which means that the business is selling the stocks faster. Debtor Turnover has decreased from 56 days to 51.3 days during 2012 to 2013, which means that the business is getting faster at collecting its debts.=Interest Coverage (ICR)==32.9%Debtor Turnover (DTR)==Stock Turnover (ITR)Interpretation=1.50:1Total Debt (TDR)2013=Working Capital (WCR)2012==== NOT AVAILABLE=273.3 timesInvest coverage for 2012 is invalid, however it is 273.3 times for 2013, which means that the businesss ability to pay its interest expenses is very good and it also does satisfy the minimum of 5 times requirement.5 6. P/E Ratio = = =13.87This ratio means that the investor will need to wait nearly 14 years to recoup his investment.This means that Apple Inc. is not a very good company to invest because it takes a very long time for the investor to claim back his/her original principle, however the P/E ratio is not more than 15 and even conservative investor may invest in Apple Inc.Investment Recommendation Profitability: As the gathered data shows, the net profit is getting lower from 2012 to 2013, and it is more than 11% which is a big reduction during a year. Based on the ratios calculated, the owners are getting lower return on their capital and also the business is getting worse in controlling its expenses. Even if Apple is a very big and reliable name, but the information says that this company is getting worse day by day and investors better to find a more reliable company to invest. Stability: Apple Inc. is doing better in stability and the information says that their ability to pay off its current liabilities by using current assets is getting better, the business is selling stocks faster,getting faster in collecting its debt, and the ability to pay its interest expenses is very good. However, their total debt level has gone up. Price: Base on P/E ratio (13.87), this company is still good to invest because it is still below 15, but after analysing all the other data, we realized that there are so many better choices for investor to invest and they better to invest on some other company which is more reliable.6 7. Appendix7 8. 8 9. 9 10. 10 11. 11 12. 12 13. References list Stein, S. (2014, January 16). Logitect powershell controller battery review. Retrieved from http://reviews.cnet.com/game-controllers/logitech-powershell-controllerbattery/4505-3146_7-35832650.htmlApple Inc. (2014). Financial history. Retrieved from http://investor.apple.com/financials.cfmReuters. (2013, November 25). Apple inc acquires israeli 3d developer primesense. Retrieved from http://www.reuters.com/finance/stocks/AAPL.O/keydevelopments/article/2875856Glen, S. (1996-2014). Company history. Retrieved from http://apple-history.com/h1MR, B. (2008-2014). ibacon app makes iphone more tasty. Bacon Today. Retrieved from http://bacontoday.com/ibacon-app-makes-iphone-more-tasty/13