Understanding the Numbers For Better Decisions

# Understanding the Numbers For Better Decisions

Running Head: UNDERSTANDING THE NUMBERS FOR BETTER DECISIONS

Understanding the Numbers For Better Decisions

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Ratio analysis can be described as a tool which was established in order to perform the quantitative analysis pertaining to the numbers which are found in the financial statements. In essence, the ratio helps in linking the three financial statements of an organization together while offering the figures which can easily be compared between the organizations as well as across industries and sectors in an economy. This study seeks to perform ratio analysis for the Apple Inc for the years 2015,2016 and 2017.

Liquidity Ratios

The liquidity ratios can be described as used to measure the ability of an organization to meet its short-term obligations.

Current ratio = Current Assets/ Current Liabilities

 2015 2016 2017 89,378/ 80,610 106,869/79,006 128,645/100,814 =1.11 =1.35 =1.28

Ratios above 1 shows that the company is liquid enough.

Asset Turnover Ratios

Asset Turnover ratios can be described as the ratios which seek to show how an organization utilizes its assets.

Inventory Turnover = Cost of Goods Sold/ Average inventory

 2015 2016 2017 140,089/2,349 131,376/2,132 141,048/4,855 =60% 62% 29%

Asset Turnover shows that the company is averagely utilizing its assets to generate revenue.

Financial Leverage Ratios

Financial leverage ratios can be described as the ratios which indicate the solvency in the longer term of an organization.

Debt Ratio = Total Debts/ Total Assets

 2015 2016 2017 30,343/ 290,345 29,299/ 321,686 35,673/ 375,319 =0.10 =0.09 =0.10

The Financial Leverage ratios shows that the company has little debts.

Profitability Ratios

Profitability ratios can be described as the ratio which is used to measure the success of an organization in generating profit.

Return on Equity = Net Income/ Shareholders Equity

 2015 2016 2017 53,394/119,355 45,687/128,249 48,351/134,047 =0.4 =0.4 =0.4

The refutability ratios show that the company is utilizing the shareholders equity averagely to generate profit.

Dividend Policy Ratios

The Dividend Policy Ratio can be described as the ratios employed to provide an insight into the dividend policy of the firm together with the prospects of future growth.

Dividend Yield = Dividends per Share/ Share Price

 2015 2016 2017 0.47/33.5 0.52/31.7 0.57/34.6 =1.4% =1.6% 1.6%

From the above ratios, it can be denoted that Apple performing very well in its sector and therefore investors interested in investing in the company should do so.

Reference

https://www.nasdaq.com/symbol/aapl/financials?query=income-statement