Financial Analysis of Apple, Inc. Essay Example

When looking at the financial performance of a company, it is important to examine the financial ratios. There are several different classifications of financial ratios. Profitability ratios show the profitability of the company. Liquidity ratios deal with the current assets and current liabilities of the company, and they determine how the company is performing with their liquid finances. Leverage ratios deal with the company’s debt, and how they affect performance. Activity ratios deal with a company’s inventory and collection period, determining how well a company is able to turn over inventory and collect debts. The other important measures of financial performance include information on dividends, common stock, and cash flows (**Use the text book citation here). Profitability Ratios The profitability ratios of Apple show that the company is doing well financially. The gross profit margin shows the percentage of revenues available to cover the operating expenses and still turn a profit. The higher the percentage is the better off the company is. Over the years, the trend should be moving in an upward position (**Book citation.). For 2010, 2011, and 2012, Apple’s ratios were 39.38%, 40.48%, and 43.87%, respectively (Apple financials). The trend is increasing over the three-year period, and the percentages are fairly high. Therefore, it can be concluded that the gross profit margin shows positive growth. Operating profit margin shows the profitability of current operations without taking interest charges and income tax into consideration. Like the gross profit margin, the trend over the years should be upward, and higher percentages are better (**Book citation.). For Apple, the ratios for 2010, 2011, and 2012 were 88.81%, 90.74%, 91.42%, respectively (Apple financials). Over time, the ratio is increasing. It is extremely high, nearing 100%. This shows positive growth for Apple. Net profit margin is similar to gross profit margin and operating