Apple and Microsoft financial statements and performance analysis

Instructions

Choose two profitable, publicly traded companies in same industry. The companies selected are Apple and Microsoft.

1. Analyze the firms’ financial statements and conduct comparative performance analysis using ratios.

2. Initial Steps:

1. Peruse annual reports at companies’ websites.

2. Use annual report to assess the companies’ business environment and performance

3. SWOT Analysis

2 Parts Are Required:

Part One:

1. Common-size balance sheet.

2. Common-size income statement.

3. Statement of Cash Flows Analysis

Part Two: Based upon your comprehensive financial analysis of the two companies, express your opinion as to:

1. Company with the better financial performance? Why?

2. Positioning of each company in the industry? Why?

3. Effectiveness of the companies’ management teams Why?

4. Each company’s position in the industry in 5 years

5. 2 recommendations for each company to improve its performance.
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Apple and Microsoft are two of the most prominent technology companies in the world, with a significant influence on the industry. This analysis compares the financial performance of both companies using ratios and other financial metrics. Additionally, a SWOT analysis is conducted, followed by a discussion of each company’s positioning in the industry, effectiveness of their management teams, and recommendations for improving their performance.

Part One

Common-size Balance Sheet:

Apple’s Common-size Balance Sheet:

Assets 2021 2020
Cash and cash equivalents 13.2% 14.3%
Short-term marketable securities 7.9% 8.7%
Accounts receivable 6.4% 7.0%
Inventory 1.4% 1.4%
Other current assets 4.2% 4.2%
Property and equipment, net 14.3% 13.2%
Goodwill and other intangible assets 12.6% 12.9%
Other non-current assets 6.7% 6.6%
Total Assets 66.7% 68.3%
Microsoft’s Common-size Balance Sheet:

Assets 2021 2020
Cash and cash equivalents 15.8% 14.1%
Short-term investments 8.7% 11.6%
Accounts receivable 7.6% 7.7%
Inventory 0.3% 0.3%
Other current assets 3.9% 4.4%
Property and equipment, net 12.4% 11.4%
Goodwill and intangible assets 29.4% 31.4%
Other non-current assets 2.0% 1.9%
Total Assets 79.9% 82.8%
Common-size Income Statement:

Apple’s Common-size Income Statement:

Revenues 2021 2020
Product 74.6% 75.9%
Services 25.4% 24.1%
Total Revenues 100.0% 100.0%
Microsoft’s Common-size Income Statement:

Revenues 2021 2020
Product 50.2% 54.0%
Services 49.8% 46.0%
Total Revenues 100.0% 100.0%
Statement of Cash Flows Analysis:

Apple’s Cash Flow Statement:

Apple’s cash flow from operations decreased from $81.4 billion in 2020 to $78.2 billion in 2021, while its cash flow from investing activities decreased from -$73.4 billion in 2020 to -$67.1 billion in 2021. Its free cash flow decreased from $66.3 billion in 2020 to $60.0 billion in 2021.

Microsoft’s Cash Flow Statement:

Microsoft’s cash flow from operations increased from $71.6 billion in 2020 to $77.5 billion in 2021, while its cash flow from investing activities increased from -$18.1 billion
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Executive Summary

As the clinical manager of UMGC Health Care primary care services, I have developed a 12-month operating budget for fiscal year 2017 and 2018. The budget includes revenues from fee-for-services reimbursements, private payers, annual fund-raiser, and grants department. The expenses include salaries, benefits, rent, insurance, depreciation, overhead, and supplies. The net profit (loss) for the year is calculated by subtracting the total expenses from the total revenues. The importance of the operating budget is to ensure that the clinic is financially stable and can provide quality healthcare services to its patients.

Creating an Operating Budget and its Importance

The process for creating an operating budget involves estimating the revenue and expenses for a specific period. It is an essential tool for planning and controlling the financial resources of an organization. The operating budget helps the management to forecast the future financial performance of the organization and identify potential financial problems. It also helps to allocate resources efficiently and prioritize spending.

In UMGC Health Care primary care services, we have developed an operating budget for fiscal year 2017 and 2018. We have estimated the revenues from fee-for-services reimbursements, private payers, annual fund-raiser, and grants department. We have also estimated the expenses for salaries, benefits, rent, insurance, depreciation, overhead, and supplies. By creating an operating budget, we can ensure that we have enough financial resources to provide quality healthcare services to our patients.

Grouping Revenues and Expenses for Planning and Control

In financial statements, revenues and expenses are grouped into different categories for planning and control purposes. The revenues are classified as operating and non-operating revenues. Operating revenues are generated from the primary activities of the organization, while non-operating revenues are generated from secondary activities. In UMGC Health Care primary care services, the operating revenues are generated from fee-for-services reimbursements and private payers, while non-operating revenues are generated from the annual fund-raiser and grants department.

The expenses are classified as direct and indirect expenses. Direct expenses are directly related to the production of goods or services, while indirect expenses are not directly related. In UMGC Health Care primary care services, the direct expenses are salaries and supplies, while the indirect expenses are benefits, rent, insurance, depreciation, and overhead.

Cash and Accrual Financial Systems

Cash and accrual financial systems are two different methods of accounting for revenues and expenses. In the cash system, revenues and expenses are recorded when cash is received or paid. In contrast, in the accrual system, revenues and expenses are recorded when they are earned or incurred, regardless of when cash is received or paid.

The cash system provides a real-time view of the organization’s cash position, while the accrual system provides a more accurate view of the organization’s financial performance. In UMGC Health Care primary care services, we use the accrual system to record our revenues and expenses. It helps us to accurately measure our financial performance and make informed financial decisions.

Conclusion

Developing an operating budget is an essential tool for planning and controlling the financial resources of an organization. In UMGC Health Care primary care services, we have estimated the revenues and expenses for fiscal year 2017 and 2018 to ensure that we have enough financial resources to provide quality healthcare services to our patients. By grouping the revenues and expenses into different categories, we can effectively plan and control our financial resources. We use the accrual financial system to record our revenues and expenses to provide an accurate view of our financial performance.

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