HP v. Apple PRESENTED BY: DANIEL VAKNIN MICHAEL DIFIORE JENNY YOO CHRISTINA MURDOCH VANESSA LOPEZ
Dec 27, 2015
HP v. Apple
PRESENTED BY:
DANIEL VAKNIN
MICHAEL DIFIORE
JENNY YOO
CHRISTINA MURDOCH
VANESSA LOPEZ
DuPont Framework
2014 2013 2012
Apple HP Apple HP Apple HP
Return on Equity .3360 .1828 .3064 .2025 .4283 (.4091)
Profit Margin .2161 .0451 .2167 .0457 .2666 (.1055)
Asset Turnover .8331 1.0633 .8923 1.0432 1.0704 1.0063
Equity Multiplier 1.8666 3.829 1.5845 4.2473 1.5010 3.8534
Profitability Ratios
2014 2013 2012
Apple HP Apple HP Apple HP
Profit Margin .2161 .0451 .2167 .0457 .2666 (.1055)
Return on Assets .1801 .0480 .1934 .0477 .2854 (.1062)
Return on Shareholders’ Equity
.3361 .1828 .3064 .2041 .4283 (.4117)
Current Ratio: Apple vs. HP
2012 2013 2014
Apple $57,653/$38,542 = 1.50 $73,286/$43,658 = 1.68 $68,531/$63,448 = 1.08
HP $50,637/$46,666 = 1.09 $50,364/$45,521 = 1.11 $50,145/$43,735 = 1.15
Acid – Test Ratio (or Quick Ratio):Apple vs. HP
2012 2013 2014
Apple $56,862/$38,542 = 1.48 $71,522/$43,658 = 1.64
$66,420/$63,448 = 1.05
HP $44,320/$46,666 = 0.95 $44,318/$45,521 = 0.97
$43,730/$43,735 = 1.00
Debt to Equity Ratio: Apple vs. HP
2012 2013 2014
Apple $57,854/$118,210 = 0.49
$83,451/$123,549 = 0.68 $120,292/$111,547 = 1.08
HP $85,935/$22,833 = 3.76 $78,020/$27,656 = 2.82 $76,079/$27,127 = 2.80
How operations and investments are being financed
Apple: Financed mostly by proceeds by issuance of long-term debt
2014 2013 2012 2011
Proceeds by issuance of long-term debt $11,960 $16,896 0 0
How operations and investments are being financed
HP: Financed mostly by issuance of debt
2014 2013 2012 2011
Issuance of debt $2,875 $279 $5,154 $11,942
Assessing the cash flow of Apple:
2014 2013 2012 2011
Beginning cash balance $14,259 $10,746 $9,815 $11,261
Cash flows from operating activities
59,713 53,666 50,856 37,529
Cash flows from investing activities
(22,579) (33,774) (48,227) (40,419)
Cash flows from financing activities
(37,549) (16,379) (1,698) 1,444
Ending cash balance $13,844 $14,259 $10,746 $9,815
Cash as a source or a use of cash
Apple: Overall, cash is sometimes a SOURCE and USE of cash
2014: More cash was used than gained USE
2013: More cash was gained than used SOURCE
2012: More cash was gained than used SOURCE
2011: More cash was used than gained USE
Apple: Cash as a source or a use of cash
2014 2013 2012 2011
Cash flows from operating activities:
Net income $ 39,510 $ 37,037 $ 41,733 $ 25,922
Accounts receivable, net (4,232) (2,172) (5,551) 0
Cash flows from investing activities:
Proceeds from sales of marketable securities
$ 189,301
$ 104,103 $ 99,770 $ 49,416
Purchases of marketable securities (217,128) (148,589) (151,232)
(102,317)
Cash flows from financing activities:
Proceeds from issuance of long-term debt $ 11,960 $ 16,986 $ 0 $ 0
Repurchase of stock (45,000) (22,860) 0 0
U
S
U
2011 2012 2013 2014
-60,000
-40,000
-20,000
0
20,000
40,000
60,000
80,000
$13,844
Cash Flows
OperatingInvestingFinancingCash (end)
Cash
($
)
Assessing the cash flow of HP:
2014 2013 2012 2011
Beginning cash balance $12,163 $11,301 $8,043 $10,929
Cash flows from operating activities 12,333 11,608 10,571 12,639
Cash flows from investing activities (2,792) (2,803) (3,453) (13,959)
Cash flows from financing activities (6,571) (7,943) (3,860) (1,556)
Ending cash balance $15,133 $12,163 $11,301 $8,043
Cash as a source or a use of cash
HP: Overall, cash is mostly a SOURCE of cash
2014: More cash was gained than used SOURCE
2013: More cash was gained than used SOURCE
2012: More cash was gained than used SOURCE
2011: More cash was used than gained USE
HP: Cash as a source or a use of cash
2014 2013 2012 2011
Cash flows from operating activities:
Net earnings $ 5,013 $ 5,113 $ (12,650) $ 7,074
Other assets and liabilities (2,021) (1,037) (2,356) (293)
Cash flows from investing activities:
Maturities & sales of securities and other investments
$ 1,347 $ 1,153 $ 662 $ 68
Investments in property, plant, & equipment (3,853) (3,199) (3,706) (4,539)
Cash flows from financing activities:
Issuance of debt $ 2,875 $ 279 $ 5,154 $ 11,942
Payment of debt (6,037) (5,721) (4,333) (2,336)
S
U
U
2011 2012 2013 2014
-20,000
-15,000
-10,000
-5,000
0
5,000
10,000
15,000
20,000$15,133
Cash Flows
Operating
Investing
Financing
Cash (end)Ca
sh
($
)
Major differences in cash flows by activities
Operating activities:
Apple has a much larger net income than HP
Apple has a greater amount of other assets and liabilities than HP
Investing activities:
Apple purchased a greater amount in marketable securities
than HP
Apple received more proceeds from maturities of marketable
securities than HP
Financing activities:
HP used less cash to repurchase common stock
HP used less cash to pay dividends
Apple HP
$ 39,510 $5,013
6,177 (2,021)
(217,128) (1,086)
18,810 1,347
(45,000) (2,728)
(11,126) (1,184)
Differences
2014:
1. Apple generated more cash from operating activities than HP
2. HP used less cash in investing activities than Apple
3. HP used less cash in financing activities than Apple
Apple HP
$ 59,713 $12,333
(22,579) (2,792)
(37,549) (6,571)
2011 2012 2013 2014
-20,000
-15,000
-10,000
-5,000
0
5,000
10,000
15,000
20,000$15,133
Cash Flows
Operating
Investing
Financing
Cash (end)Ca
sh
($
)
2011 2012 2013 2014
-60,000
-40,000
-20,000
0
20,000
40,000
60,000
80,000
$13,844
Cash Flows
OperatingInvestingFinancingCash (end)
Cash
($
)
Investment Recommendations