Summary:
Apple has announced that they have reached a new all-time sales record of $20 billion in the fourth quarter results on Monday, October 18, 2010. In this quarter alone, they have sold 14.1 million iPhones, 3.9 million Macintosh computers, and 250,000 Apple TV devices. The iPhone sales have increased 91% since last year, and Macintosh have increased 27%. Apple did disappoint investors when they broke out the news that they did not reach the estimated 5 million sales of the iPads, when they only sold 4.2 million. However, the big picture of Apple have surpassed Wall Street forecasts and earned a total profit of $4.3 billion, which is a 70% increase from last year. Apple CEO, Steve Jobs stated that Apple did, in fact, outsell Research in Motion, and argues that RIM needs to improve their software to be able to keep up with Apple. Steve Jobs continues to acknowledge that Google’s mobile business is too “fragmented” to compete with Apple, and that Apple makes products that just work. Even after Steve Jobs’ speech regarding other companies, the increased amount of competition has caused Apple to stop its restrictions on apps for iPhones, iPads, and iPod Touch devices. Steve Jobs also stated that Apple has a giant cash stash of $40 billion, and is unlikely for Apple to do share paybacks, or pay a dividend.
Connection:
We learned in chapter two that profit margin ratio is a ratio that compares the net income over the revenues during an accounting period. Apple reported that they have earned a total of 4.3 billion within this single account period. The equation to figure out the profit margin ratio would be $4.3 billion / $20 billion = 21.5%. This shows that Apple has earned 21.5% of their total revenue within this account period. In this chapter, we also study different types of transactions and which accounts will be affected. Apple has accounts that they have accumulated a total revenue amount of $20 billion in the fourth quarter period. This transaction will affect the revenue and cash accounts, where the revenue account will credit $20 billion and cash will debit $20 billion. This article also connects with chapter 2 regarding financial statements. Since Apple earned this large sum of revenue of $20 billion, the financial statements would obviously have been affected by this transaction. With this amount of revenue, cash flow of Apple will definitely be affected, but dividends declared will not be affected since Apple CEO, Steve Jobs stated that they would not pay any dividends, and would rather keep this amount of money in case of mistakes, or strategical opportunities.
Reflection:
I believe that it might be a good idea to keep some extra cash, in case of some incident that was not planned, but I think that Apple should give some back towards the investors. Since Apple has broken a new sales record, they should use some of the cash to increase the trust between Apple and investors. This will result in investors believing in Apple more, and possibly invest even more money into the company. Even if the investors don’t invest more, they can still spread positive comments regarding Apple with their high dividend paybacks. The amount of money that Apple should keep and what should be distributed towards the investors is something that requires calculations from experts of Apple, since they are the people that know how much money would be required, in case Apple does go into some trouble.
