Financial Statement Analysis: Apple vs. Alphabet

School: Valparaiso University - Course: ACC 503 - Subject: Accounting

ACCT 503 Signature Assignment Financial Statement Analysis of Apple and Alphabet David Ramos II Professor Joel Frazier

Complete one paragraph, profiling each company's business, including information such as brief histories, where each company is located, number of employees, the products each company sells, and so forth. Please reference any websites that you used for the profiles on the Bibliography tab. Apple Inc. Apple is the world's largest technology company by revenue that specializes in consumer electronics, computer software, and online services. Apple was founded by Steve Jobs, Steve Wozniak, and Ronald Wayne in 1976 to develop and sell Wozniak's Apple I personal computer. It was incorporated by Jobs and Wozniak as Apple Computer, Inc. in 1977. Now it is one of the Big Five American information technology companies, along with Amazon, Google, Microsoft, and Facebook. Alphabet Inc. is an American multi-industry company headquartered in Mountain View, California. On August 10, 2015, Google Inc. announced plans to create a new public holding company, Alphabet Inc. Google CEO Larry Page made this announcement in a blog post on Google's official blog. Alphabet would be created to restructure Google by moving subsidiaries from Google to Alphabet, narrowing Google's scope. The two co-founders of Google remained as controlling shareholders, board members, and employees at Alphabet. Alphabet is the world's fourth-largest technology company by revenue and one of the world's most valuable companies.

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Use this Excel spreadsheet to compute ratios; show your computations for all ratios on this tab, and also include your commentary. The 2017 and 2018 financial statements used to calculate these ratios are available in the Investor Relations sections of the Apple and Alphabet websites. AppleAlphabet 11/3/20176/2/2018 Earnings per Share of Common Stock (basic - common)As given in the income statement$ 9.27 $18.27 Current RatioCurrent assets$128,645=1.28$124,308=5.14Current liabilities$100,814$24,183 Gross Profit RateGross profit$88,186=38.5%$65,272=58.9% Gross Profit Rate shows that Alphabet's financial health is better then Apple's. Net sales$229,234$110,855 Profit MarginNet income$48,351=21.1%$12,662=11.4% With a higher Profit Margin Apple's, the company has more profit from their sales. Net sales$229,234$110,855 Inventory TurnoverCost of goods sold$141,048=40.4$45,58389.6 With a higher Inventory Turnover, Alphabet turns over inventory at a higher rate. Average inventory$3,494$509 *Note Apple (4855+2132)/2 = 3494 --- Alphabet (749+268)/2 = 509 Days in Inventory365 days365=9365=4Inventory turnover40.4days89.6days Accounts Receivable TurnoverNet credit sales$229,234=13.6 $110,855=6.8 Average net accounts receivable$16,814$16,237 *Note Apple (17874+15754)/2 = 16814 --- Alphabet (18336+14137)/2 = 16237 Average Collection Period365 days365=27365=53Accounts receivable turnover13.6days6.8days Asset turnover Net sales$229,234=0.66$110,855=0.61 Average total assets$348,503$182,396 *Note Apple (375319+321686)/2 = 348503 --- Alphabet (197295+167497)/2 = 182396 Return on Assets (ROA) Net income$48,351=13.9%$12,662=6.9% Average total assets$348,503$182,396 Debt to assets ratioTotal Liabilities$241,272=64.3%$44,793=22.7%This shows that most of Apple's debt is from their assets. Total Assets$375,319$197,295 Times-Interest Earned RatioNet income + interest expense + income tax expense$66,412=28.627,302=250.5interest expense$2,323$109 *Note Apple 48351+15738+2323=66412 Alphabet 12662+14531+109=27302 Dividend YieldDividend per share of common stock (Yahoo Finance 6/7/2021)$0.22=0.2%$0.00=0.0%Alphabet did not pay dividends. (Please follow the Course Project instructions to calculate the current dividend yield.)Market price per share of common stock (Yahoo Finance 6/7/2021)$125.96$2,466.11 Return on Common Stockholders' Equity (ROE)Net income - preferred dividends48,351=36.9%$12,662=8.7% Average common stockholders' equity131,148.00145,769.00 *Note Apple (134047+128249)/2 = 131148 --- Alphabet (152502+139036)/2 = 145769 Free cash flowNet cash provided by operating activities minus capital expenditures minus cash dividends =$38,378=$23,907 Apple has more free cash flow then Alphabet. in millionsin millions Price-Earnings Ratio Market price per share of common stock as of 9/28/2017 for Apple and of 12/29/2017 for Alphabet$153.28=17$1,046.40=57Alphabet has a higher value then Apple.