Financial statements analysis Apple Vs Microsoft

1. Financial Statement Analysis
Apple vs Microsoft
Harshitha Chidananda, Simen , Symphony
Group 3

2. Contents
- Company Overview
- Financial Statement Comparison
- Financial Analysis
- Vertical Analysis
- Horizontal Analysis
- Ratio Analysis
- Observations
- Conclusion

3. - Electronics, software
and personal
Computers
- Most renowned
products
- Macbook, iMac
- iPhone
- iPad
- 115,000 employees
- Public ownership
- Electronics, software &
hardware, digital
distribution
- Most renowned
products
- Windows 10 OS
- Microsoft Surface
- Office Suite
- Xbox
- Skype
- 114,000 employees
- Public ownership
Apple Microsoft
Company Overview

4. Financial Statement Comparison
Apple Microsoft
Nasdaq Name Apple Inc. (AAPL) Microsoft Corporation
(MSFT)
Reporting Period End of September 30th of June
- All numbers in Million

5. Apple

6. Microsoft

7. Income Statement Comparison
Apple Microsoft
Types of Income Products and services Products and services
Types of Expenses R&D: 10,045
SG&A: 14,194
R&D: 11,988
Sales & Marketing : 14,697
G&A: 4,563
Impairment, restructuring: 1,110
Net Income 45,687 16,798

8. Balance Sheet Comparison
Apple Microsoft
Cash 20,484 6,510
Debt
- Total current Liability
- Total liabilities
79,006
193,437
59,357
21,697
Inventory 2,132 2,251
Assets:
- Total Current Asset
- Total asset
- Net tangible asset
106,869
321,686
119,629
139,660
193,694
50,392

10. Cash Flow Apple Microsoft
Period Ending 9/24/2016 6/30/2016
Net Income 45,687,000 16,798,000
Operating Activities, Cash Flows Provided By or Used In
Depreciation 10,505,000 6,622,000
Adjustments To Net Income 9,148,000 11,981,000
Changes In Accounts Receivables 1,044,000 -530,000
Changes In Liabilities -1,867,000 -938,000
Changes In Inventories 217,000 600,000
Changes In Other Operating Activities 1,090,000 -1,208,000
Total Cash Flow From Operating Activities 65,824,000 33,325,000
Investing Activities, Cash Flows Provided By or Used In
Capital Expenditures -12,734,000 -8,343,000
Investments -32,022,000 -14,417,000
Other Cash flows from Investing Activities -1,221,000 -1,190,000
Total Cash Flows From Investing Activities -45,977,000 -23,950,000
Financing Activities, Cash Flows Provided By or Used In
Dividends Paid -12,150,000 -11,006,000
Sale Purchase of Stock -29,227,000 -15,301,000
Net Borrowings 22,057,000 18,283,000
Other Cash Flows from Financing Activities -1,570,000 -369,000
Total Cash Flows From Financing Activities -20,483,000 -8,393,000
Effect Of Exchange Rate Changes - -67,000
Change In Cash and Cash Equivalents -636,000 915,000

11. Interesting Observations
- Almost the same amount of employees, but Microsoft has a lot less
money
- Inventories are quite similar - Microsoft has slightly more inventory
- Microsoft has more products, but comparatively less profitable
- Microsoft spends more on both R&D AND sales & marketing than Apple
- Apple has much more in total liabilities than microsoft

12. Vertical Analysis
2016 and 2015

13. Vertical Analysis: Income sheet
13
Apple 2016(%) 2015(%)
Revenue
Total Revenue 100.0 100.0
Cost of Revenue 60.9 59.9
Gross Profit 39.1 40.1
Operating Expenses
Research Development 4.7 3.5
Selling, General and Administrative 6.6 6.1
Operating Income or Loss 27.8 30.5
Income from Continuing Operations
Total Other Income/Expenses Net 0.6 0.5
Earnings Before Interest and Taxes 28.5 31.0
Interest Expense
Income Before Tax 28.5 31.0
Income Tax Expense 7.3 8.2
Minority Interest
Net Income From Continuing Ops 21.2 22.8
Net Income 21.2 22.8
Preferred Stock And Other Adjustments
Net Income Applicable To Common
Shares 21.2 22.8
Microsoft 2016(%) 2015(%)
Revenue
Total Revenue 100 100.0
Cost of Revenue 38.4 35.3
Gross Profit 61.6 64.7
Operating Expenses
Research Development 14.1 12.9
Sales and marketing 17.2 16.8
General and Administrative 5.3 4.9
Operating Income or Loss 23.7 19.4
Income from Continuing Operations
Total Other Income/Expenses Net -0.5 0.4
Earnings Before Interest and Taxes 23.1 19.8
Interest Expense
Income Before Tax 23.1 19.8
Income Tax Expense 3.5 6.7
Net Income From Continuing Ops 19.7 13.0
Net Income 19.7 13.0
Preferred Stock And Other Adjustments
Net Income Applicable To Common Shares 19.7 13.0

14. Apple Microsoft
Period Ending 2016 (%) 2015(%) 2016 (%)
2015(%
)
Current Assets
Cash And Cash Equivalents 6.4 7.3 3.4 3.2
Short Term Investments 14.5 7.1 55.1 52.1
Net Receivables 9.1 10.5 9.4 10.3
Inventory 0.7 0.8 1.2 1.7
Other Current Assets 2.6 5.2 3.0 3.1
Total Current Assets 33.2 30.8 72.1 70.4
Long Term Investments 53.0 56.5 5.4 6.9
Property Plant and
Equipment 8.4 7.7 9.5 8.4
Goodwill 1.7 1.8 9.2 9.7
Intangible Assets 1.0 1.3 1.9 2.8
Other Assets 2.7 1.9 1.9 1.8
Total Assets 100.0 100.0 100.0 100.0
Apple Microsoft
Period Ending 2016 (%) 2015(%) 2016 (%) 2015(%)
Current Liabilities
Accounts Payable 18.4 20.9 6.7 7.1
Short/Current Long Term Debt 3.6 3.8 6.7 4.3
Other Current Liabilities 2.5 3.1 17.3 17.1
Total Current Liabilities 24.6 27.8 30.6 28.5
Long Term Debt 23.4 18.4 21.1 15.9
Other Liabilities 11.2 11.5 7.0 7.8
Deferred Long Term Liability
Charges 0.9 1.2 4.1 1.9
Total Liabilities 60.1 58.9 62.8 54.1
Stockholders' Equity
Common Stock 9.7 9.4 35.2 39.2
Retained Earnings 30.0 31.8 1.2 5.2
Other Stockholder Equity 0.2 -0.1 0.8 1.4
Total Stockholder Equity 39.9 41.1 37.2 45.9
Net Tangible Assets 37.2 38.0 26.0 33.4
Vertical Analysis:
Balance Sheet

15. Observations about Vertical Analysis
Income Statement: (%)
- Total revenue as constant
- Cost of revenue for Apple is more .
- Gross Profit of Microsoft is higher
- Can use this number to price products
- Operating expense of Microsoft is higher
- Operating Income of Apple is higher
- Net Income of Apple is higher
- Because Apple profitability is slightly better, Apple
has better sustainability
Balance Sheet: (%)
- Total Assets as constant
- Total current assets of Microsoft is way
higher
- Short term investments add to maximum
current asset for both
- Cash and net receivables are less for both
the companies
- Microsoft has better liquidity

16. Horizontal Analysis
2016 vs 2015

17. Horizontal Analysis: (2016 vs 2015)Income Statement
Apple
Revenue
Total Revenue -7.73
Cost of Revenue -6.22
Gross Profit -10.00
Operating Expenses
Research Development 24.52
Selling, General and Administrative -0.94
Operating Income or Loss -15.73
Income from Continuing
Operations
Total Other Income/Expenses Net 4.90
Earnings Before Interest and Taxes -15.37
Interest Expense
Income Before Tax -15.37
Income Tax Expense -17.97
Minority Interest
Net Income From Continuing Ops -14.43
Net Income -14.43
Net Income Applicable To Common
Shares -14.43
Microsoft
Revenue
Total Revenue -8.83
Cost of Revenue -0.78
Gross Profit -13.22
Operating Expenses
Research Development -0.48
Sales and marketing -6.47
General and Administrative -1.04
Operating Income or Loss 11.13
Income from Continuing Operations
Total Other Income/Expenses Net -224.57
Earnings Before Interest and Taxes 6.72
Income Before Tax 6.72
Income Tax Expense -53.23
Net Income From Continuing Ops 37.77
Net Income 37.77
Net Income Applicable To Common
Shares 37.77

18. Horizontal Analysis:
(2016 vs 2015)
Balance Sheet
Apple Microsoft
Current Assets
Cash And Cash Equivalents -3.0 16.4
Short Term Investments 127.9 17.4
Net Receivables -3.4 2.1
Inventory -9.2 -22.4
Other Current Assets -45.1 7.9
Total Current Assets 19.6 13.7
Long Term Investments 3.9 -13.5
Property Plant and Equipment 20.2 24.6
Goodwill 5.8 5.5
Intangible Assets -17.6 -22.8
Other Assets 61.5 16.8
Total Assets 10.8 11.0
Apple Microsoft
Current Liabilities
Accounts Payable -2.2 5.3
Short/Current Long Term Debt 5.5 72.4
Other Current Liabilities -9.6 12.2
Total Current Liabilities -2.0 19.6
Long Term Debt 41.4 46.7
Other Liabilities 7.9 0.7
Deferred Long Term Liability Charges -19.2 133.5
Total Liabilities 13.1 28.9
Stockholders' Equity
Common Stock 14.0 -0.4
Retained Earnings 4.4 -74.9
Other Stockholder Equity -283.8 -39.1
Total Stockholder Equity 7.5 -10.1
Net Tangible Assets 8.4 -13.6

19. Ratio Analysis

20. Ratios
Type of ratio Apple 2016 Microsoft 2016 Apple 2015 Microsoft 2015
Current ratio 1.35 2.35 1.1 2.47
Quick ratio 1.33 2.31 1.08 2.41
Inventory Turnover 59.63 12.72 -- --
Price per earnings 13.9 29.8 11.4 36.8
Net profit margin 21% 19.7% 22.8% 13%

21. Interesting Observations about Ratio Analysis
Interesting Observations:
● Microsoft is a lot more liquid
● Apple has an incredibly high inventory turnover rate
● Apple and Microsoft have comparable price per earnings, and both saw a large drop from last
2015 to 2016
● Apple had a higher net profit margin than Microsoft
So which company seems to be doing better?

22. Conclusions

23. Questions?