The Real-World Financial Statement Analysis |My essay solution

Posted: March 8th, 2023

PART 1:

In prior weeks, you learned about the financial statements and financial statement ratios. This week, you will utilize that information, to take a deep dive into one company.

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Assume the role of a senior financial analyst who has been assigned to complete a thorough and detailed review for the APPLE company below. Access the APPLE company quarterly financial statements (10-Q) for the past two quarters on EDGAR, which is available on the web page, EDGAR Company FilingsLinks to an external site.

Name:

Apple

AAPL

In your thorough and detailed review, analyze the APPLE company’s quarterly financial statements (10-Q) for the past two most current quarters and perform the following:

  • Prepare a balance sheet and income statement horizontal analysis for the last two quarters.
  • Prepare a balance sheet and income statement vertical analysis for the last two quarters.
  • Prepare a liquidity analysis by computing and using the appropriate ratios to assess liquidity.
    • Compute a minimum of three ratios and show your supporting calculations.
  • Prepare a solvency analysis by computing and using the appropriate ratios to assess solvency.
    • Compute a minimum of three ratios and show your supporting calculations.
  • Prepare a profitability analysis by computing and using the appropriate ratios to assess profitability.
    • Compute a minimum of three ratios and show your supporting calculations.
  • Analyze the methods and tips provided in the textbook, Warren Buffet Accounting, to address the following questions:
    • What is your company’s primary revenue, secondary revenue, and gains?
    • What is your company’s primary expenses, secondary expenses, financial activity generated expenses, and losses?
    • What is the revenue trend? Does the 10-K or 10-Q discuss primary revenues, as well as other revenue types?
    • What do the accounting policies say in the annual report (footnotes) regarding the cost of revenue? What are the drivers to the cost of revenue and the trends?
    • Are there any trends in sales and marketing expenses or research and development? Are these amounts reasonable for the type of business?
    • Compare general and administrative expenses to similar companies. Are they reasonable?
    • What is the ratio of net interest income (expense) to income from operations? Is this a safe ratio for the company? Why or why not?
    • What is the income taxes trend? Is the effective tax rate reasonable over time?

Formulate your analysis on the above requirements to discuss the financial health, performance, strengths, and weaknesses of the company, as well as any identified positive or negative trends.

The Real-World Financial Statement Analysis PART 1:

  • Must be seven double-spaced pages in length (not including title and references, supporting calculation of the horizontal analysis, vertical analysis or ratio calculations) and formatted according to APA Style
  • Must include a separate title page with the following:
    • Title of paper
    • Student’s name
    • Course name and number
    • Instructor’s name
    • Date submitted
  • Must utilize academic voice.
  • Must include an introduction and conclusion paragraph. Your introduction paragraph needs to end with a clear thesis statement that indicates the purpose of your paper.
  • Must document any information used from sources in APA Style
  • Must include a separate references page that is formatted according to APA Style

SOLUTION

  1. Prepare a balance sheet and income statement vertical analysis for the last two quarters: Vertical analysis expresses each item in the financial statement as a percentage of a base amount. For example, in a balance sheet vertical analysis, you would express each asset as a percentage of total assets, and each liability and equity item as a percentage of total liabilities and equity. In an income statement vertical analysis, you would express each expense as a percentage of revenue. To prepare a vertical analysis for Apple’s balance sheet and income statement, you need to calculate the percentage for each line item in relation to the base amount. Then, you can present the percentages in a table or a graph.

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