Liquidity Analysis for Apple Paper Example

Introduction

The current ratio for Apple as at the end of 2017 fiscal year was 3.723 implying that its current assets exceeded its current liabilities. The ratio shows that it had a strong liquidity. Its current ratio was more than that of Microsoft and Cisco indicating that Apple had the highest liquidity of all the companies.

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Cisco had the highest Current cash debt coverage ratio of 2.56, showing that its operating cash flows for the fiscal year 2017 were sufficient to repay all its average current liabilities. It was higher than that of Apple (0.67) and Microsoft (0.63). It indicates that Cisco had the highest ability to repay is current liabilities using its operating cash flows than all the other companies.

Activity and Efficiency Ratios

Apple's inventory turnover was 38.42 indicating that it replaced its inventory 38 times during the year. The ratio was higher than that of Microsoft (15.46) and Cisco (11). It shows that Apple was more efficient than Cisco and Microsoft, in converting its inventories into revenues.

Apple's receivables turnover was 12.82 while Microsoft and Cisco's receivables turnover ratios were 4.725 and 9.33 respectively. It indicates that of the three companies, Apple had the highest efficiency in collecting its receivables.

Capital Structure or Leverage Ratios

Apple's debt-to-total assets ratio was 0.46 while those of Microsoft and Cisco were 0.31989 and 25.7 respectively. The values show that Microsoft had the highest solvency since it had the least amount of debt while Cisco had the lowest financial stability.

Times Interest Earned Ratios were 16.2, 10.04 and 15.27 for Apple, Microsoft, and Cisco respectively. It implies that all the companies generated sufficient earning to cover their interest expenses since the interest cover is more than one (Gibson 2013). Apple had the highest interest cover with its operating income covering 16.2 times its finance costs for the period. It shows that Apple has the least likelihood of defaulting interest obligations due to insufficient earnings.

Profitability Ratios

Apple had the highest return on equity and return on assets ratios while Microsoft had the highest net profit margin. For each of the profitability ratios, Cisco had the least value indicating that it was the least profitable of the three companies. Microsoft generated the highest net income per dollar of revenue meaning that it was the most profitable (Gibson 2013). However, Apple made the highest return on shareholders' equity.

Market Value Ratio

Microsoft had the earnings price-earnings ratio (34.4) while Cisco had the lowest PE ratio. It implies that investors were willing to pay more per dollar of Microsoft's earnings than for a dollar of either Apple or Cisco. It means that Microsoft's incomes are expected to grow at a higher rate than Apple and Cisco's earnings (Gibson 2013). It could also imply that Microsoft's stock is overvalued.

Employment Opportunity

An employee should analyze the financial performance and stability of a company to determine whether it is a good employment opportunity or not. Excellent financial performance and stability ensure that a firm can pay reasonable and sustainable salaries to the employees. It also reflects the ability to improve employees' compensation.

References

Gibson, C. (2013). Financial statement analysis. Mason (Ohio): South-Western Cengage Learning.