Apple & Microsoft company financial analysis
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The two companies selected are Microsoft company and Apple company.
A business description of the two companies.
Microsoft company.
Microsoft Corporation is a technology company that supports the development of a wide range of software and technology products. The principal business segments include intelligent cloud, personal computing, and business processes. The corporation’s products include operational systems, video games, server applications, server management tools, and certification of computer integrators. The company also offers a diverse range of services that provide users with content, software, services, and support. The company operates on a global scale and works nearly in every country partnering with leading companies, such as AT&T and Walmart, to deliver high-quality services (Microsoft Corporation). The corporation has become a real phenomenon becoming the most significant technological company in the world. The company’s technological breakthrough has been supported by a series of successful acquisitions, which allowed the corporation to grow at a high pace. Nevertheless, the industry factors played an essential role in the development of Microsoft as computers are embedded in everything nowadays.
Apple company.
Apple is an American worldwide innovation corporation located in California, which manufactures, strategies, and markets buyer goods, computer programs, and internet facilities. The corporation’s electronics devices include all the iPhone mobile, the free iPhone processer, the Mac home processor, the iPod personal broadcasting entertainer, the Smartwatch smartwatch, the Apple TV digital video playmaker, and the Google Home mobile. Apple apps cover Mac Operating System, iOS, iPad Operating System, watches, and TV Operating System software, Functioning devices, iTunes video entertainer, Search network browser, Shazam audio signature utility, life, and iWork creative and efficiency packages. It was founded as Apple phone, Inc., in January the year 1977, and the revenues of its machines, especially Apple II, increased rapidly (Naqvi, 2019). In limited years, the manager had employed computer programmers and had a factory line. In 1980, Apple became famous for its immediate monetary achievement. In the next few years, Apple has delivered new machines incorporating groundbreaking user interface designs, including the initial Macintosh in the year 1984, and Apple’s promotion ads for all its products have gained generally positive reviews.
Question 1.
Net income for the last three years.
Apple company
The net income for the first year, which is from the year 2017 to the year 2018, increases because of the rise in sales and the total revenue at the end of the financial year. However, after the year 2018, the net income decreases. This is caused by many factors such as many debts and reduction in the number of customers in the company.
Microsoft company
The net income of the first year 2017 to the year 2018 decreases due to various reasons many debts, low customer turnover. This led to little net profit at the end of the year. However, after one year, the net income increased due to the increase in the overall sales if the company. The net profit also rose due to the low debts; therefore less money was going out of the company.
Question 2.
Sources of funds for the last three years
Apple company
Apple company mainly obtains funds through various methods, but the primary causes of funds are through the profits and retained earnings. Also, through the sale of assets, both fixed and current assets. It also obtains cash from the reduction of the working capital.
The trend of the sources of funds of Apple company decreases in the first year. This is from the year 2017 to the year 2018; there is a decrease in the origins of funds. This decrease is caused by reduced access to cash, many debts with the creditors, and this reduces their borrowing capacity hence the low sources of funds. However, in the year 2019, there is an increase in the origins of funds. This comes as a result where the company is in a position to obtain some cash from various financial institutions. Therefore, the company is in a better place of getting money since they have cleared all the debts.
Microsoft company
Microsoft company mainly obtains funds through various methods, but the primary sources of funds are through the profits and retained earnings. Also, through the sale of assets, both fixed and current assets. It also obtains cash from the reduction of the working capital.
There is an increase in the sources of funds from year 1 to the last year. This is from the year 2017 to the year 2018 and then to the year 2019. This is seen since the company has a higher borrowing capacity, and they do not have many debts; hence they are in a better position to get more loans.
Question 3.
Uses of funds for the last three years
Apple company
Apple company mainly uses its funds in various ways. The main ways in which they use their funds are through the payment of wages and salaries, purchasing of new equipment, paying off their debts, buying more stock, which will last for an extended period. They also pay for some training for their employees.
The uses of funds decrease in the first year, which is caused by many reasons. This can be since there is a reduction in the general expenses of the company. These expenses lead to a fall in the trend. However, in the last year, which is the year 2019, there is an increase in the use of funds. This is since there is an increase in the general expenses, which causes an overall increase in the utilization of funds. This can be in cases where there is an increase in wage payments of the employees. This comes in the form of promotion whereby if an employee is promoted, there is an overall increase in salary.
Microsoft company
Microsoft company mainly uses its funds in various ways. The main ways in which they use their funds are through the payment of wages and salaries, purchasing of new equipment, paying off their debts, buying more stock, which will last for a long period of time. They also pay for some training for their employees.
The uses of funds decrease in the first year which is caused by many reasons. These can be due to the fact that there is a reduction in the general expenses of the company. These expenses lead to a fall in the trend. However, in the last year which is year 2019, there is an increase in the uses of funds. This is due to the fact that there is an increase in the general expenses which causes an overall increase in the uses of funds. This can be in cases where there is increase in wage payments of the employees. This comes in form of promotion whereby if an employee is promoted there is an overall increase in salary.
Question 4.
Net income for the last three years
Apple company
The net income for the first year which is from year 2017 to year 2018 increases because of the increase in sales and the total revenue at the end of the financial year. However, after year 2018, the net income decreases (Kudryavtseva, 2019). This is caused by many factors such as many debts and decrease in the number of customers in the company.
Microsoft company
The net income of the first year 2017 to year 2018 decreases due to various reasons many debts, low customer turnover. This led to the low net income at the end of the year. However, after one year the net income increased due to the increase in the overall sales if the company. The net income also rose due to the low debts therefore less money was going out of the company.
Question 5.
Total assets for the last three years
The assets can be in form of both current and fixed assets. The current assets are the intangible while the fixed assets of the company are the tangible ones (Grennan, 2019). The fixed assets last for a long period of time while current assets are valued in liquidity form.
Apple company
The total assets of the company decrease from year 2017 to year 2019. The total assets comprise of both the current assets and the fixed assets. The total assets reduce due to the low-income turnover whereby the management is not in a position to acquire the assets. This can be due to the decrease in sources of funds from the different sources of funds. Also, it can be caused by bankruptcy whereby the company has no cash for the daily operations of the company.
Microsoft company
The total assets of the company increase from year 2017 to the year 2019. This is caused by many reasons such as the increase in income in the entire company. It is also caused by the urge to purchase more items for the company and the various reasons that lead to the need of renovating more assets for the company.
Question 6.
Total liabilities for the last three years
The total liabilities are both the current liabilities and the long-term liabilities. The current liabilities are the short-term loans, creditors, overdraft loans. While the long-term liabilities are the liabilities for a period over one year. The total liabilities determine the financial position of the company in form of debts.
Apple company
The total liabilities increase from the first year that is from 2017 to the year 2018. The total liabilities increase because of the need to finance the company and therefore requires more cash from the different financial institutions. However, from the year 2018, there is a decrease in the total liabilities. This is caused by the satisfaction with the available cash in the company and therefore no need to acquire more cash. The number of creditors also decreases since the company does not buy goods on credit.
Microsoft company
The total liabilities of the company increase from the first year to the last year. There is an increase from year 2017 to ear 2019. This shows that the company has less income and therefore the need to obtain more cash from the various institutions that assists in financing the company. The increase in the liabilities shows that the company is operating in form of debts and therefore can be bankrupt due to the low income and more debts.
Question 7.
Total owner equity for the last three years
Total owner equity comprises of the common stock, the comprehensive income, and the retained earnings which are either deficit or surplus. It comprises of the total income and assets available in the company (Chung, 2019). It is the total net worth or income of the company less all the liabilities.
Apple company
The total equity decreases from the first year to the last year which is from year 2017 to year 2019. This shows that the company does not operate at a profit effectively since the total equity of the company is decreasing. This shows that the company has less money in form of equity and therefore their daily operations are limited.
Microsoft company
The total equity of the company increases from the first year to the last year. This is from year 2017 to year 2019. The increase in equity shows that the company is operating effectively and efficient thus the rapid increase in equity. It also shows that the company has no debts and they operate at a profit.
Question 8.
Memorandum
To: Investor
From: Financial analyst
Date: 21st April 2020
Subject: Financial performance of Apple and Microsoft company
I am writing to inform you about the financial position/ performance of Apple and Microsoft company. Apple company is in a better financial position as compared to Microsoft company. This is clearly seen since Apple net income increases while that of Microsoft company decreases. This shows that Apple operates effectively and efficiently thus able to finance all its operations. Apple company is also in a better position since it has less liabilities as compared to Microsoft company that has a lot of liabilities. By having less liabilities, it means that the company has a lot of finances to enhance its daily activities as compared to the Microsoft company that has many liabilities and therefore operates with debts. Also, Apple company more total equity than Microsoft company. By having high equity, it shows that the company is more liquid since it has ready cash therefore increases its liquidity position.
Microsoft has less equity and therefore they are less liquid and this shows that the liquidity position of the company is low. Apple company manages their employees well by ensuring that all the payments are made at the right time. This rises the financial position of the company thus making Apple company to be in a better position. Microsoft company does not clearly show that it is in a better position to pay off their workers. Therefore, Microsoft company is not in a better financial performance. I would recommend that you invest in Apple company since you will obtain high dividends with very low interest rate. This will help since you will not operate at a loss since all your investments will yield some dividends. Apple company is the best to invest in and has a low interest rate for all the members who invest in it.
Thank you for your cooperation.
Works cited
Chung, Doug J., Kyoungwon Seo, and Reo Song. Does Apple Anchor a Shopping Mall? The Effect of the Technology Stores on the Formation of Market Structure. No. 20-066. Harvard Business School Working Paper, 2019.
Grennan, Jillian, and Roni Michaely. “Fintechs and the market for financial analysis.” Michael J. Brennan Irish Finance Working Paper Series Research Paper 18-11 (2019): 19-10.
Kudryavtseva, Tatiana, Evgeniia Kozlova, and Angi Skhvediani. “Empirical analysis of security papers of high-technology companies on the basis of a VARMA model.” IOP Conference Series: Materials Science and Engineering. Vol. 497. No. 1. IOP Publishing, 2019.
Naqvi, Mohammed Moosa. “Relationship discovery of price movements between sentiment analysis on social media data and stock market.” (2019).