Financial Policy at Apple 2013 A Case Solution

1. Who are the players in this Financial Policy at Apple case?

1. Present an overview of Apple Incorporation’s business, its history, its operating strategy, its growth strategy, and any potential competitive advantages it has.

Apple is a global technology company headquartered in the USA, and its notable products include iPhone, iPad, Mac, Apple Watch, and various software applications. Apple was founded on April 1st 1976, by Steve Jobs and Steve Wozniak, creating the Apple I in 1976. Over the years, Apple faced financial challenges but experienced a resurgence with the launch of the iMac in 1998. The 2000s marked significant milestones with the introduction of revolutionary products like the iPod, iTunes, iPhone, and iPad. 

Apple's operating strategy centers revolves around seamless integration of hardware and software, offering users a consistent and aesthetically pleasing experience. Apple maintains a closed ecosystem to ensure its products work harmoniously together, contributing to a unique and user-friendly environment.

Apple's growth strategy involves continuous product innovation, global expansion, and product ecosystem development. Apple regularly introduces new and upgraded products to meet evolving consumer demands, such as introducing new and upgraded iPhone models every year, prompting loyal users to upgrade their models every year. Apple's global retail presence, including iconic Apple Stores, enhances brand visibility. Additionally, services like the App Store, Apple Music, iCloud, and Apple Pay contribute to a thriving ecosystem with products linked to each other. This brand loyalty and ecosystem of products gives Apple a competitive advantage over other companies in the market. 

2. Present a historical analysis of the company’s financial performance and financial position based on the information in the case.

Apple's total revenue has shown a consistent upward trend over the years. There has been a significant jump of over 20 times from $7.98 billion in 2000 to $156.51 billion in 2012. The cost of goods sold has also increased in line with revenue as new and advanced products were introduced from 2000 to 2012. Gross profit, the difference between revenue and COGS, has experienced substantial growth, reaching $68.66 billion in 2012 from only $2.17 billion in 2000. 

Net income has grown significantly from $786 million in 2000 to $41.73 billion in 2012. 2001 witnessed a net loss, and from 2002 to 2012, there has been a steady growth in net income. The selling, administrative and general expenses have also grown over the years, albeit the growth rate is not as fast as that of revenue. 

Cash flow from operations of Apple has seen significant growth, reaching $50.86 billion in 2012 which signifies Apple's ability to generate significant cash from its operational activities. The cash and marketable securities position has also witnessed substantial growth, reaching $121.25 billion in 2012. Apple maintains a robust liquidity position; both current assets and current liabilities have increased over the year, but the quick ratio and current ratio have remained well above 1, which shows that current assets are enough to meet accounts payable. The current ratio based on cash as marketable securities as current assets and accounts payable as current liabilities was 3.48 in 2000 and 5.72 in 2012.

3. What is the current situation and issue faced by Apple?

After Steve Jobs’s death, Apple’s stock price has been on a decline as Apple continues to lose share in both phone and tablet industries, and there is a halt in new innovations and product line launches. The shareholders are concerned about the excess cash Apple has accumulated due to its high profitability and why it is not being returned to the shareholders. The top management at Apple is concerned about coming up with a use for this excess cash, which will satisfy Apple’s shareholders while being in the best interests of the corporation.