Summary:
It was announced on January 19, 2011 that Apple has earned a net income of $6 billion in the 1st quarter period. The results are fascinating compared to previous quarter results of revenue with only $15.68 billion and net quarterly income of $3.38 billion. It was also reported that the sales of Mac, iPhone and iPad established the highest revenue and earnings ever. Revenue grew by 71% and earnings grew by 78%. It was announced that Apple sold 4.13 million Macs, 16.24 million iPhones, 19.45 million iPods, and 7.33 million iPads during the 1st quarter period. The iPhones sold in this quarter represents an 86% unit growth compared to previous quarter results. Also the Macs sold this quarter represent a 23% unit increase over the year-ago quarter. Steve Job, Apples CEO, announced “We are firing on all cylinders and we’ve got some exciting things in the pipeline for this year including iPhone 4 on Verizon which customers can’t wait to get their hands on. Apple’s CFO, Peter Oppenheimer said, “Looking ahead to the second fiscal quarter of 2011, we expect revenue of about $22 billion and we expect diluted earnings per share of about $4.90.
Connection:
In chapter 5 it mainly discusses about cash flow statements and the importance of this financial statement in a company. Cash flow statement is a financial statement that summarizes the cash flows of the company, categorized into operating, financing and investing activities. It was reported Apple has a net income of $6 billion in 1st quarter period. Apple could use the indirect approach method from using the $6billion as a starting point to determine the cash flow from operating activities. Indirect approach is a method of calculating a company’s cash from operations in which the net income is adjusted for non-cash revenues or expenses. This article also connects into the cash-to-cash cycle of Apple. Cash-to-cash cycle is the period of time when cash is used to purchase inventory and when cash is received from the sale of inventory. The cycle reflects Apple purchased a lot of inventories, cash outflow, and as a result, they made a net profit of $6 billion, cash inflow, from the sale of iPods, iPads, Macs and iPhones in the 1st quarter period. Steve Jobs, Apples CEO, said “We had a phenomenal holiday quarter with record Mac, iPhone and iPad sales.” Apple sold 16.24 million iPhones, 4.13 million Macs and 7.33 million iPads. As a result, inventories for iPhone, iPads and Macs would decrease. Therefore it would represent an increase in cash flow in the operating activities. Dividends for Apple could also be calculated from the formula Beginning Retained Earnings- Ending Retained Earnings+ Net Income= Dividends. Previously, it was announced from Steve Jobs, CEO of Apple, that he prefers a giant cash stash in the company.
Reflection:
In my opinion I think Apple is a very competitive and successful company, therefore great results were achieved from them with a $6 billion net profit for the 1st quarter period. However iPod sales this quarter represented a 7% drop compared to previous quarter. Therefore I believe partial of the money earned this quarter should be used on advertisement on iPods and iPhones. However the rest of the money earned should be kept in the company for strategic purpose or incase of mistakes. Previously, Steve Jobs, CEO of Apple, announced he prefers a giant cash stash in the company, and I support his decision. Therefore I believe Apple would not give out too much dividends to shareholders for this quarter. It would be an advantage having cash stash left in the company since problems can be solved immediately and easily without needing to borrow money from the bank. Also with a strong cash flow it can attract potential investors into investing into Apple. As a result shares would rise from the investment. Money generated from potential investors could be then spent on advertisement and R&D because of high competition. As a result, Marketing and R&D would be the major roles of attracting customers into buying Apple products. Therefore huge amount of cash should be spent in those areas in order to generate a high revenue and cash.
