Analysis of the Business Activity (Turnover Ratios)

Further in the table, the calculated rates of turnover of assets and liabilities describe how fast prepaid assets and liabilities to suppliers, contractors and staff are effected. Turnover ratios have strong industry specifics and depend on activity. This is why an absolute value of the ratios does not permit making a qualitative assessment. When assets turnover ratios are analysed, an increase in ratios (i.e. velocity of circulation) and a reduction in circulation days are deemed to be positive dynamics. There is no well-defined interaction for accounts payable and capital turnover. In any case, an accurate conclusion can only be made after the reasons that caused these changes are considered.

Turnover ratio	Ratio 2014	Ratio 2015	Change, days (col.3 - col.2)
Receivables turnover (days sales outstanding) (average trade and other current receivables divided by average daily revenue*)	X.X	X.X	-X
Accounts payable turnover (days payable outstanding) (average current payables divided by average daily purchases)	X.X	X.X	+X
Inventory turnover (days inventory outstanding) (average inventory divided by average daily cost of sales)	XX.X	XX.X	–
Asset turnover (average total assets divided by average daily revenue)	X.X	X.X	-XX
Current asset turnover (average current assets divided by average daily revenue)	X.X	X	-XX
Capital turnover (average equity divided by average daily revenue)	X.X	X	-XX
Reference: Cash conversion cycle (days sales outstanding + days inventory outstanding - days payable outstanding)	x	x	-X

* Calculation in days. Ratio value is equal to 365 divided by days outstanding.

According to the above table, the average collection period (Days Sales Outstanding), calculated based on the data for the last year, was 53 days, while average repayment period for credit debts (Days Payable Outstanding) was 142 days. The data on asset turnover, on average, for the whole period analysed, shows that apple gains revenue equal to the sum of all the assets every 423 days.

Conclusion

Key Ratios Summary

The most important indicators of apple's financial state and activity results are summarized below by using a qualitative assessment for the period analysed (from 31 December, 2013 to 31 December, 2015).

The following indicators describe the apple's financial state from only a good point of view:

· the cash ratio is 0.26 at the end of the period (a high cash at hand required for current payments);

· high return on equity (46.2% per annum);

· return on total assets was during the last year 20.4% per annum;

· long-term resources of the financing of the company's activity are enough to form a normal amount of working capital which would cover the available inventories;

· During the period from 01.01.2015 to 31.12.2015, earnings before interest and taxes (EBIT) showed USD 72,515 million, at the same time, a positive dynamics compared with the data for the year 2014 (USD +19,032 million) was observed;

· the income from financial and operational activities (comprehensive income) was USD 53,394 million during the period 01.01–31.12.2015.

The following indicators describe the financial condition of apple relative a positive standard:

· the percentage of liabilities in the total balance of apple is 58.9% which is normal for stable activity;

· a good relationship between liquid assets (current assets minus inventories) and current liabilities (quick ratio is 1.08);

· the company has equity (positive net worth) of USD 119,355 million.

The analysis discovered the following negative financial characteristics:

· the value of the non-current assets to net worth ratio equal to X.XX can be considered as an unsatisfactory one;

· the current ratio (1.11) does not correspond to the normal criteria for this rate (2);

· equity reduced during the whole period analysed, while the company's total assets grew.

Rating of the Financial Position and Financial Performance of apple

Financial performance for the period analysed (01.01.14–31.12.15) Financial position on 31.12.2015 AAA AA A BBB BB B CCC CC C D Excellent (AAA) • • • • V • • • • • Very good (AA)         •           Good (A)         •           Positive (BBB)         •           Normal (BB)         •           Satisfactory (B)         •           Unsatisfactory (CCC)         •           Adverse (CC)         •           Bad (C)         •           Critical (D)         •

Final rating of the financial condition of apple (period analysed: from 01.01.2014 to 31.12.2015 analysis step - year): A (good)

According to the results of the conducted analysis, the financial position for apple was assessed at a score scale in +X.XX, which corresponds to the BB rating (normal position). The financial results of the company's activities were scored at +X.X for the period reviewed (31.12.13–31.12.15), which corresponds to the AAA rating (excellent results). One should mention that final scores are calculated considering both rates at the end of the period analysed and rates dynamics, including their expected values for the next year. The final score of the financial condition, which includes analysis of the company's financial position and financial performance, makes +X.XX, which equals the rating scale to a good (A) condition.

An "A" rating shows a good financial condition of a company and its' capability to meet their likely current liabilities. Companies with this rating refer to the category of the borrowers who can obtain credits with high probability (good creditworthiness).

Appendix

Bankruptcy Test (Altman Z-score)

The Altman Z-score was calculated to predict the probability of the company's bankruptcy (a 4-factor model for a private non-manufacturer is taken for apple):

Z-score = 6.56T₁ + 3.26T₂ + 6.72T₃ + 1.05T₄, where

Ratio	Calculation	Ratio value on 31.12.2015	Weighting factor	Product (col. 3 x col. 4)
T1	Working Capital / Total Assets	0.03	6.56	0.2
T2	Retained Earnings / Total Assets	0.32	3.26	1.04
T3	Earnings Before Interest and Taxes / Total Assets	0.25	6.72	1.68
T4	Equity / Total Liabilities	0.7	1.05	0.73
Altman Z-score:	3.64

Discrimination ranges:

· 1.1 or less – “Distress” zone

· from 1.1 to 2.6 – “Grey” zone

· 2.6 or more – “Safe” zone

According to calculations, at the end of the period analysed, the Z-score equaled 3.64 for apple. Such a value says about the insignificant probability of apple's bankruptcy.

Calculation of the Final Rating of the Financial Condition

Ratio	Weighting factor	Score	Average score (col.3 x 0.25 + col.4 x 0.6 + col.5 x 0.15)	Weighted average score (col.2 x col.6)
past	present	future
I. Rating of the company's financial position
Debt ratio	X.X	+X	+X	-X	+X.XX	+X.XXX
Non-current assets to net worth	X.XX	-X	-X	-X	-X.XX	-X.XXX
Current ratio	X.X	-X	-X	-X	-X.XX	-X.XX
Quick ratio	X.X	+X	+X	-X	+X.XX	+X.XX
Cash ratio	X.XX	+X	+X	+X	+X.XX	+X.XXX
Total		Final score (in total col.7: col. 2):	+X.XX
II. Rating of the company's financial performance
Return on equity (ROE)	X.X	+X	+X	+X	+X	+X
Return on assets (ROA)	X.X	+X	+X	+X	+X	+X.X
Sales growth	X.X	+X	+X	+X	+X	+X.X
Total		Final score (in total col.7: col. 2):	+X.X

 

Final rating score for apple's financial condition: (+X.XX x 0,6) + (+X.X x 0,4) = +X.XX (A - good)

Reference: Financial condition scale

Total score	Sign	The qualitative assessment of a financial condition
from	to (inclusive)
	1.6	AAA	Excellent
1.6	1.2	AA	Very good
1.2	0.8	A	Good
0.8	0.4	BBB	Positive
0.4		BB	Normal
	-0.4	B	Satisfactory
-0.4	-0.8	CCC	Unsatisfactory
-0.8	-1.2	CC	Adverse
-1.2	-1.6	C	Bad
-1.6	-2	D	Critical

 

Note: Report prepared with the assistance of ReadyRatios Software.
Date: 02-03-2016 17:43

Extra Tables

Analytic Balance Sheet

Indicators	Value *	31.12.2013	31.12.2014	31.12.2015
Non-current assets	value, million USD	133,714	163,308	201,101
change, million USD	x	+29,594	+37,793
change, %	x	+22.1%	+23.1%
% of total	64.6%	70.4%	69.2%
Property, plant and equipment	value, million USD	16,597	20,624	22,471
change, million USD	x	+4,027	+1,847
change, %	x	+24.3%	+9%
% of total	8%	8.9%	7.7%
Investment property	value, million USD	106,215	130,162	164,065
change, million USD	x	+23,947	+33,903
change, %	x	+22.5%	+26%
% of total	51.3%	56.1%	56.5%
Goodwill	value, million USD	1,577	4,616	5,116
change, million USD	x	+3,039	+500
change, %	x	+192.7%	+10.8%
% of total	0.8%	2%	1.8%
Intangible assets other than goodwill	value, million USD	4,179	4,142	3,893
change, million USD	x	-37	-249
change, %	x	-0.9%	-6%
% of total	2%	1.8%	1.3%
Other non-current non-financial assets	value, million USD	5,146	3,764	5,556
change, million USD	x	-1,382	+1,792
change, %	x	-26.9%	+47.6%
% of total	2.5%	1.6%	1.9%
Current assets	value, million USD	73,286	68,531	89,378
change, million USD	x	-4,755	+20,847
change, %	x	-6.5%	+30.4%
% of total	35.4%	29.6%	30.8%
Current inventories	value, million USD	1,764	2,111	2,349
change, million USD	x	+347	+238
change, %	x	+19.7%	+11.3%
% of total	0.9%	0.9%	0.8%
Trade and other current receivables	value, million USD	24,094	31,537	35,889
change, million USD	x	+7,443	+4,352
change, %	x	+30.9%	+13.8%
% of total	11.6%	13.6%	12.4%
Other current financial assets	value, million USD	33,169	21,039	30,020
change, million USD	x	-12,130	+8,981
change, %	x	-36.6%	+42.7%
% of total	16%	9.1%	10.3%
Cash and cash equivalents	value, million USD	14,259	13,844	21,120
change, million USD	x	-415	+7,276
change, %	x	-2.9%	+52.6%
% of total	6.9%	6%	7.3%
Equity	value, million USD	123,549	111,547	119,355
change, million USD	x	-12,002	+7,808
change, %	x	-9.7%	+7%
% of total	59.7%	48.1%	41.1%
Other equity interest	value, million USD	19,293	24,395	27,071
change, million USD	x	+5,102	+2,676
change, %	x	+26.4%	+11%
% of total	9.3%	10.5%	9.3%
Retained earnings	value, million USD	104,256	87,152	92,284
change, million USD	x	-17,104	+5,132
change, %	x	-16.4%	+5.9%
% of total	50.4%	37.6%	31.8%
Liabilities	value, million USD	83,451	120,292	171,124
change, million USD	x	+36,841	+50,832
change, %	x	+44.1%	+42.3%
% of total	40.3%	51.9%	58.9%
Non-current liabilities	value, million USD	39,793	56,844	90,514
change, million USD	x	+17,051	+33,670
change, %	x	+42.8%	+59.2%
% of total	19.2%	24.5%	31.2%
Trade and other non-current payables	value, million USD	16,960	28,987	53,463
change, million USD	x	+12,027	+24,476
change, %	x	+70.9%	+84.4%
% of total	8.2%	12.5%	18.4%
Deferred tax liabilities	value, million USD	2,625	3,031	3,624
change, million USD	x	+406	+593
change, %	x	+15.5%	+19.6%
% of total	1.3%	1.3%	1.2%
Other long-term financial liabilities	value, million USD	20,208	24,826	33,427
change, million USD	x	+4,618	+8,601
change, %	x	+22.9%	+34.6%
% of total	9.8%	10.7%	11.5%
Current liabilities	value, million USD	43,658	63,448	80,610
change, million USD	x	+19,790	+17,162
change, %	x	+45.3%	+27%
% of total	21.1%	27.4%	27.8%
Trade and other current payables	value, million USD	36,223	48,649	60,671
change, million USD	x	+12,426	+12,022
change, %	x	+34.3%	+24.7%
% of total	17.5%	21%	20.9%
Other current financial liabilities	value, million USD	7,435	14,799	19,939
change, million USD	x	+7,364	+5,140
change, %	x	+99%	+34.7%
% of total	3.6%	6.4%	6.9%
ASSETS/EQUITY AND LIABILITIES	value, million USD	207,000	231,839	290,479
change, million USD	x	+24,839	+58,640
change, %	x	+12%	+25.3%

 

* Line "% of total" indicates percentage ratio of the item to the total assets.

Analytic P&L Statement

Indicators	Value
Revenue	value, million USD	182,795	233,715
change, million USD	x	+50,920
change, %	x	+27.9%
Cost of sales	value, million USD	112,258	140,089
change, million USD	x	+27,831
change, %	x	+24.8%
Gross profit	value, million USD	70,537	93,626
change, million USD	x	+23,089
change, %	x	+32.7%
Administrative expense	value, million USD	18,034	22,396
change, million USD	x	+4,362
change, %	x	+24.2%
Profit (loss) from operating activities	value, million USD	52,503	71,230
change, million USD	x	+18,727
change, %	x	+35.7%
Finance income	value, million USD		1,285
change, million USD	x	+305
change, %	x	+31.1%
Profit (loss) before tax	value, million USD	53,483	72,515
change, million USD	x	+19,032
change, %	x	+35.6%
Income tax expense (from continuing operations)	value, million USD	13,973	19,121
change, million USD	x	+5,148
change, %	x	+36.8%
Profit (loss) from continuing operations	value, million USD	39,510	53,394
change, million USD	x	+13,884
change, %	x	+35.1%
Profit (loss)	value, million USD	39,510	53,394
change, million USD	x	+13,884
change, %	x	+35.1%
COMPREHENSIVE INCOME	value, million USD	39,510	53,394
change, million USD	x	+13,884
change, %	x	+35.1%