Why Apple Is Such A Success?

974 words | 4 page(s)

Apple’s Inc.’s 2011 financial statement, as compared to the textbook financial statements, is like comparing apples to oranges. Besides the fact that Apple and the textbook statement both listed revenues, expenses, and income, there were not any similarities that stuck out. Apple’s 100 plus pages statement is extremely detailed and extensive, all of its bases in every area covered. Unlike the textbook financial statements, which group its operating expenses all together and does not separate them by categories (due to fear that proprietary information may be leaked out), Apple Inc., included Research and Development and Selling/General/Administration in its expenses (Apple Inc., 2011).

As one continues to read the reports, differences between both of the financial statements become more evident. Apple Inc. includes many categories in its report, such as Enterprise, Education, and Government, and Legal Proceeding information. I was surprised to see that Apple Inc. even listed information such as catastrophes and earthquakes that affected its sales. In contrary to the textbook statements that just showed sales, revenues, income, and expenses for a shorter period of time, Apple Inc. also showed its price ranges for stock by quarters, some information listed for the last three years (i.e. 2011, 2010, and 2009). Another major difference is that Apple Inc. listed its Net Sales by operating segments. Nets sales are broken down into categories, such as desktops, portables, iPod, iPad, iPhone, and Mac Nets products. Apple Inc. also showed statistics and notes related to foreign, domestic operations, and geographic data (Apple Inc., 2011).

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Because Apple Inc. has so many investors, does so well in sales, and sells so many various products internationally, the company needs to have a lengthy financial statement that breaks statistics and data down right to the last dollar. Investors want to know how well the company is doing, how their stock value and earnings are increasing, and how Apple sales, values, and stock values have improved over the years. Liquidity, capital resources, and leases and markets risks are also listed inside the financial statement.

As a potential investor, there are several areas that I would have some concern in and want to keep a close eye on. The Revenue Recognition information is listed on page 48 of the report, which explains how Apple Inc. can offer future upgrades for iPhone, iPod, and Apple TV sales and shipping/software development costs (Apple Inc., 2011). I feel that Apple Inc. is a good company to invest in. It offers a wide variety of products with multiple sources of income coming in from all parts of the world. In 2011, Apple Inc. made $108,249 million in total sales, after costs adjustments bringing the revenue down to $43,818, still an impressive sales number (Apple Inc., 2011). Apple Inc. continues to keep growing and is considered one the valuable companies with a market value of $623 billion in August 2012, its revenues for that year listed as $156.5 billion, an increase of $48.3 billion from 2011 (Heracleous, 2013).

In addition to its incredible revenue and sales, its stock earnings per share are also impressive, as well as its improvement each year. In 2011, stock earnings were listed as $28.05 per share, a substantial increase from $15.41 in 2010 and $9.22 in 2009 (Apple Inc., 2011). As an investor, I want to see evidence that stock earnings are going up or are at least staying stable, which Apple Inc. financial reports have proven.

As a potential investors, I have some reservations about the company. According to the “Accounting for the iPhone at Apple Inc.” article, Apple Inc. was forced to adhere to strict regulations in how the company lists its Revenue Recognition. The company was required to list its iPhone sales as Generally Accepted Accounting Principles (GAAP) versus Non-GAAP numbers when its iPhone was released in 2008. Under the GAAP system, future income is projected for the next 24 months. GAAP sales are not as immediate as Non-GAAP sales, which are more short-term and immediate (Brochet, Palepu, & Barley, 2011) . I feel that Non-GAAP numbers show more accuracy. GAAP numbers are not as adjusted for future problems that can affect company costs, such as software problems, major catastrophes, and malicious viruses.

I also have some concerns about Apple’s Founder Steve Jobs passing away in 2011 and how this will affect Apple Inc.’s long-term economic future. Although one study has shown that the state of Job’s health issues (prior to his death) did affect share prices in a slightly negative way, but only for the short-term, I have some trepidation on how the new Apple Inc. leaders will handle unexpected company problems. I question if they will possess the intelligence level and brilliance of Steve Jobs, in terms financial planning, product innovation, and original thinking (Koch & Cebula, 2011) .

Apple Inc. is one the most successful companies in history, raking in billions of revenue each year through its sales of diverse products internationally. Stock investors have a large stake in the company, which is a major reason that Apple Inc. offers such a detailed, expansive financial report. When compared to the simple financial reports in the textbook we used in class, Apple Inc. is quite different, covering all its financial bases with notes, descriptions, and statistics. While Apple Inc.’s GAAP numbers for the iPhone and Job’s passing could pose a problem for investors if financial numbers drop, Apple Inc.’s excellent annual revenue, expansive product options, and high stock earnings per share are solid reasons to invest in the company.

    References
  • Apple Inc. (2011). Annual report pursuant to section 13 OR 15(d) of the securities exchange act of 1934. Washington D.C.: United States Securities and Exchange Commission.
  • Brochet, F., Palepu, K. G., & Barley, L. (2011, April ). Accounting for the iPhone at Apple Inc. Retrieved from Harvard Business School: http://www.hbs.edu/faculty/Pages/item.aspx?num=40437
  • Heracleous, L. (2013). Quantum Strategy at Apple Inc. . Organizational Dynamics, 92-99.
  • IKoch, J. V., & Cebula, R. J. (2011). Do investors care if Steve Jobs is healthy? Atlantic Economic Journal, 59+.

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