Accounting statements and ratios Essay

Accounting statements and ratios provide a great deal of information about a company’s financial stability. Some of the concepts to be discussed in further detail include horizontal analysis, current ratio, quick ratio, and cash to current liabilities ratio. A horizontal analysis is used to compare data from two or more periods side by side. The current ratio reveals the relative amount of working capital by dividing current assets by current liabilities. A quick ratio is calculated by dividing the assets by the current liabilities. This paper will examine the financial standing of Apple, INC and provide recommendations on how to better improve their financial gains in the future. Apple was founded in April of 1976 to develop and sell personal computers. It was incorporated as Apple Computer, Inc. on January 3, 1977, and was renamed as Apple Inc. on January 9, 2007 to reflect its shifted focus towards consumer electronics. Apple Inc. is headquartered in Cupertino, California and designs, develops, and sells consumer electronics, computer software, online services, and personal computers. Its best-known hardware products are the Mac line of computers, the iPod media player, the iPhone, and the iPad. Its online services include iCloud, iTunes Store, and App Store. Its consumer software includes the OS X and iOS operating systems, the iTunes media browser, the Safari web browser, and the iLife and iWork creativity and productivity suites. Apple is the world’s second-largest information technology company by revenue after Samsung Electronics, and the world’s third-largest mobile phone maker after Samsung and Nokia. Below is the horizontal analysis and balance sheet of Apple, INC for 2011 through 2013. This analysis shows that while Apple has consistently seen an increase in revenue, they have also seen an increase in administrative and operating expenses each year. Also, there has been a steady increase in the cost of goods sold. Minimizing these costs could drive the revenues for Apple, INC even higher. Below are the liquidity ratios for Apple, INC. These ratios can be used as a tool to determine a company’s ability to pay off its short-terms debts obligations. The current ratio is computed as follows: Current Ratio = Current Assets/Current Liabilities. The quick ratio: Quick Ratio = (Cash + Accounts Receivable) / Current Liabilities. The liquidity ratios as they apply to Apple, INC suggest that the company is becoming more liquid the longer they are operational. â€Å"Liquidity is the ability to meet near-term obligations as they mature,† (Bridgepoint Education, INC, 2012, p. 229). Based on the information provided, Apple, INC is doing very well and are overly-capable of meeting their near-term financial obligations. Reference Apple, INC company financials. (2014). Retrieved, AUG, 2014, Retrieved from http://www.nasdaq.com/symbol/aapl/financials Principles of Accounting: Volume I. (2012). San Diego, CA: Bridgepoint Education, Inc