Julio MesaACG2021-OH1

Apple Computer, Inc.Apple Computer, Inc.

Annual Report ProjectAnnual Report Project

Executive Summary

Pioneering into the 21st century as one of the leading tech companies, Apple prides itself in its innovative, user-friendly, and state of the

art products. With the release of the new iPod and Apple’s newly acquired partnership with Intel, Apple has endless possibilities at its disposal. The company is also exhibiting

growth through Investing Activities, specifically in the area of short term

investments and has increased its gross profit, net income, and working capital from previous years. Overall, Apple is a stable

company with a lot of promise and is definitely a solid investment.

http://www.apple.com/investor/

Part A. Introduction

Apple designs, manufactures, and markets -Personal Computers -Related Software

-Services -Peripherals

-Networking Solutions -portable digital music players (IPOD)

CEO:

Steven P. Jobs

Location of home office:

Apple Computer, INC.

Cupertino, California

1 Infinite Loop 95014

Main geographic area of activityApple has 84 retail stores all throughout

the United States, international

retailers in Tokyo, Osaka, and London,

and other operating segments include:

Ending date of latest fiscal year-September 25, 2004

                                                                               

            

                                                                                                                               

                

                                       

                                                                       

                                                                      

Part A. Audit Report• KPMG LLP are Apple’s independent auditors.

• The auditors in accordance with the standards of the Public Company Accounting OversightBoard (United States) and in conformity with the Generally Accepted Accounting Principals (GAAP) reviewed Apple’s consolidated financial statements and through their analysis were able to determine that their reports presented fairly, in all material respects, the financial position of Apple Computer, Inc. and subsidiaries.

• *Note* The company changed its method ofaccounting for asset retirement obligations and for financial instruments with characteristics of bothliabilities and equity in 2003 and changed its method of accounting for goodwill in 2002.

Part A. Stock Market Information

Most Recent Price of Company Stock $55.66Twelve Month Trading Range: $23.49-$56.98 Dividend Yield: $0.00Date of the above information 10/21/2005

Apple is determined to prove to the world that they provide the most innovative and user friendly products available in the market. The introduction of the new Power MacG5 Quad and Power Mac G5 Dual, as well as the new iPod®, featuring a gorgeous 2.5-inch color screen which can display album artwork and photos, and now also has the ability to play music videos, video “Podcasts”, home movies and television shows, gives the company a lot of promise in months to come. The chart below shows a little fluctuation in stock price, but overall it has increased, which in conjunction with the previous factors I stated makes AAPL a very good buy in the area of tech stock at this point in time.

Part B. Industry Situation and Company Plans

Apple is in the Tech. industry, which is an industry that is constantly developing new markets, including e-commerce, fiber optics,

telecommunications, personal computers, web site providers, servers… All of these markets are constantly producing innovative products and in turn stocks are yielding large profits, which mirrors the industry’s growth.

Apple, which is committed to bringing the best computer experience to educators, students, businesses, and consumers has now taken their path to provide the best computer on the market to the next level with

their announcement, at the Worldwide Developer Conference, that they will be introducing Intel

microprocessors in 2006 to their computers and ultimately to transition all Macs to Intel microprocessors by the end of 2007. With the introduction of the new IPOD, iTunes 6 with a new film-based media feature that has

2,000 music videos available for purchase (Pixar short films and T.V. shows included), and the new iTunes music store in Australia, Apple has gone beyond their pursuit of providing their customers with the ultimate

computer experience and are now tapping into a very profitable music/entertainment market creating products with the same elegance, user friendliness, and originality exhibited by their personal computers.

http://www.apple.com/pr/

http://www.apple.com/pr/library/2005/jun/06intel.html

Part C. Income Statement•Apple’s income statement format resembles the multi-

step format the closest.

2004 2003Gross Profit 2,259,000,000

Income for Operations

326,000,000

Net Income 276,000,000

1,708,000,000

(1,000,000)

69,000,000

Part C. Balance Sheet•Assets=Liabilities + Stockholders’ Equity

•Most of the accounts on the balance sheet have remained fairlystable so there really haven't been any drastic changes on any particular accounts on Balance Sheet.

Assets = Liabilities (+) Owner’s Equity

8050 (2004) 2974 5076

6815 (2003) 2592 4223

Part C. Statement of Cash Flows

•Cash flows from operations are considerably greater than net income in both years.

934-276= 658,000,000+ (2004)

289-69= 220,000,000+ (2003)

•The company is growing through Investing Activities, specifically in the area of short term investments. •Primary source of financing is through the issuance of common stock. •Cash has decreased by 427 million dollars in the last two years.

Part D. Accounting Policies•The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has

occurred, the sales price is fixed or determinable, and collection is probable. Product is considered delivered to the customer once it has been shipped, and title and risk of loss have been transferred. For most of the Company’s product sales, these criteria are met at the time the product is shipped.

•All highly liquid investments with maturities of three months or less at the date of purchase are classified as cash equivalents. Highly liquid investments with maturities greater than three months are classified asshort-term investments.

•Inventories are stated at the lower of cost (first-in, first-out) or market. If the cost of the inventories exceeds their market value, provisions are made currently for the difference between the cost and the market value.

•Property, plant, and equipment are stated at cost. Depreciation is computed by use of the straight-linemethod over the estimated useful lives of the assets, which are 30 years for buildings, from 2 to 5 years forequipment, and the shorter of lease terms or 10 years for leasehold improvements.

•The topics to the notes to the financial statements are inventories, property plant and equipment, asset retirement obligations, long lived assets including goodwill and other acquired intangible assets, foreign currency translation, revenue recognition, shipping costs, warranty expense, research and development…

Part E. Financial AnalysisLiquidity Ratios

Ratio 2004 2003

Working Capital 4,375,000,000 3,530,000,000

Current Ratio 2.63 2.50

Receivable Turnover 10.75 8.06

Avg./Days. Sales Uncollected

34 days 45 days

Inv. Turnover 76.69 57.32

Avg../Days. Inventory On Hand

5 days 6 days

Part E. Financial AnalysisProfitability Ratios

Ratios 2004 2003

Profit Margin .033 .011

ROA .0186 .0053

ROE .03 .0083

Asset Turnover .557 .473

Part E. Financial AnalysisSolvency Ratio

Ratio 2004 2003

Debt to Equity .586 .614

Measure of capital structure and leverage

Part E. Financial AnalysisMarket Strength Ratios

• Apple does not have a direct purchase program or a dividend reinvestment program at this time; since no dividends were paid dividend yield is $0.

Ratios Current 2004

Price/Earnings

Per Share

$35.68 $50.34

Dividend Yield 0.00 0.00

Price Earnings Ratio Projections

http://www.nasdaq.com/earnings/peratio.asp?symbol=AAPL%60&selected=AAPL%60

Earnings Per Share Forecast

 

http://www.nasdaq.com/earnings/earningspershare.asp?symbol=AAPL%60&selected=AAPL%60