Prepared by:

Theresa FaustJohn Hansen

Marcus SanfordSara Todd

Brief Company Overview

Profitability Analysis Ratios

Asset Utilization Ratios

Liquidity Ratios

Capital Market Ratios

Conclusion

Questions

Went public in 19801, currently traded on the NASDAQ2

Multinational company with 60,400 employees2

Largest computer maker in the world (computing device units sold)3

Current Market Capitalization $547.74 Billion (U.S. dollars2)

1-Livingston, J. (2009). Founders at work. Retrieved May 31, 2012, from http://www.foundersatwork.com/steve-wozniak.html2-Yahoo finance: Apple competitors and market cap. (2012, March 30). Retrieved June 19, 2012, from http://finance.yahoo.com/q/co?s=AAPL Competitors3-Wingfield, N. (2012, January 30). Apple becomes world's biggest maker of computers, thanks to ipad. Retrieved June 19, 2012, from http://bits.blogs.nytimes.com/2012/01/30/apple-becomes-worlds-biggest-maker-of-computers-thanks-to-ipad/

Went public in 19571, currently traded on the NYSE2

Multinational company with 349,600 employees2

2nd largest computer maker in the world (computing device units sold)3

Current Market Capitalization $41.51 Billion (U.S. dollars2)

1-Sharpe, E. (2007). Hewlett-Packard: The early years. In SMEC Vintage Electrics (Vol. 3. Issue 1). Retrieved May 30, 2012, from http://www.smecc.org/hewlett-packard,_the_early_years.htm

2-Yahoo finance: Hewlett-Packard Company. (2012, March 30). Retrieved June 19, 2012, from http://finance.yahoo.com/q?s=HPQ 3-Wingfield, N. (2012, January 30). Apple becomes world's biggest maker of computers, thanks to ipad. Retrieved June 19, 2012, from http://bits.blogs.nytimes.com/2012/01/30/apple-becomes-worlds-biggest-maker-of-computers-thanks-to-ipad/

Apple 2011 HP 2011

23.9% 5.6%

Apple 2010 HP 2010

21.5% 7.0%

Net Profit Margin illustrates how much of each sales $ is earnings

Apple 2011 HP 2011

22.3% 5.5%

Apple 2010 HP 2010

18.6% 7.0%

Return on investment illustrates how efficient assets are utilized

Apple 2011 HP 2011

33.8% 18.1%

Apple 2010 HP 2010

29.3% 21.5%

Return on equity illustrates how much of each dollar of stockholder’s investments are return annually

Apple 2011 HP 2011

44.6% 13.9%

Apple 2010 HP 2010

38.8% 18.2%

Return on capital employed illustrates how efficiently a company makes investments

Apple HP

AR Turnover 11.8 6.8

Average Collection Period 30.4 52.8

Inventory Ratio 62.1 19.5

Fixed Asset Turnover 1.9 1.8

Total Asset Turnover 0.86 1.0

Apple HP

AR Turnover 19.9 6.9

Average Collection Period 18.1 52.3

Inventory Ratio 139.5 16.9

Fixed Asset Turnover 1.5 1.6

Total Asset Turnover 0.93 0.98

In 2011, Apple turned over inventory every 2.62 days, compared to every 21.48 days for HP.

HP’s Average Collection Period stayed steady from 2010 to 2011, while Apple improved from 30.4 to 18.1 days.

Apple was far more efficient dealing with credit sales during both periods, but improved AR Turnover ratio from 11.8 in 2010 to 19.9 in 2011. HP improved only slightly.

Financial metrics that are used to determine a company's ability to pay off its short-terms debts obligations.

The higher the value of the ratio, the larger the margin of safety that the company possesses to cover short-term debts.

A company's ability to turn short-term assets into cash to cover debts is of the utmost importance when creditors are seeking payment.

Apple IncorporatedCurrent Assets / Current Liabilities

$44,988 / 27,970 = 1.608 2011

$41, 678 / 20,722 = 2.011 2010

Current Assets / Current Liabilities

$51, 021 / 50,442 = 1.011 2011

$54,184 / 49,403 = 1.097 2010

Hewlett-Packard

Assets should be higher than liabilities.

Anything over 1 is good, means more assets.

Anything under 1 means more debt with less working capital

2011 2010

Net Working Capital

$17,018 $20,956

2011 2010

Net WorkingCapital

$579 $4,781

Apple Incorporated Hewlett-Packard

Assets should be higher than liabilities.

Apple Incorporated $3,938

Hewlett-Packard $4,202

An increase in net working capital is good

2011 2010 2011 2010

Earnings Per Share (EPS) $28.05 $15.41 $3.38 $3.78

Price Earnings (PE) Ratio 14.284 19.993 7.803 10.887

Market to Book Ratio 4.833 5.862 1.415 2.339

Net Income (US $ mill.) $25,922 $14,013 $7,074 $8,761

Stockholders' Equity (US $ mill.) $76,615 $47,791 $39,004 $40,781

Shares Outstanding 924,258,000 909,461,000 2,094,000,000 2,319,000,000

Market Price per Share $400.60 $308.05 $26.36 $41.13

Book Value of Equity per Share $82.89 $52.55 $18.63 $17.59

Apple Incorporated Hewlett-Packard Company

Apple’s EAT 3.66 times HP’s, EPS 7.9 times higher (2011).

Apple’s share price 15.2 times HP’s, equity 1.9 times higher (2011).

Determining over-valuation and share speculation.

2011 2010 2011 2010

Earnings Per Share (EPS) $28.05 $15.41 $3.38 $3.78

Cash EPS $30.01 $16.54 $6.09 $6.07

Net Income (US $ mill.) $25,922 $14,013 $7,074 $8,761

EBIT (US $ mill.) $34,205 $18,540 $9,677 $11,479

Depreciation $1,814 $1,027 $4,984 $4,820

Income Taxes (US $ mill.) $8,283 $4,527 $1,908 $2,213

Shares Outstanding 924,258,000 909,461,000 2,094,000,000 2,319,000,000

Market Price per Share $400.60 $308.05 $26.36 $41.13

Apple Incorporated Hewlett-Packard Company

OperatingCashFlow=EBIT+Depreciation–Taxes

1-Source: Wayman, R. (2010). How to evaluate the quality of eps. Investopedia.com. Retrieved May 31, 2012, from www.investopedia.com/terms/c/casheps.

Analyzing Over-evaluation and Quality of EPS

EAT can be manipulated through “creative accounting.”

“Cash is King!”

Compare EPS with Cash EPS1: EPS lower than Cash EPS is “High Quality.”

Apple had outstanding performance in

2011 on profit, inventory, AR.

HP has concerns with AR collection.

In 2011, Apple’s Debt to Equity Ratio

was 52%, while HP’s was 232%.

2011 SGR – Apple 37.6%, HP -4.5%