For this assignment, you will complete the Financial Overview component of your course project. To complete this assignment, use the Financial Analysis Toolkit Excel file, provided in the Resources, to complete a financial analysis of your chosen company (Apple Inc,) over the last two most recent years available in annual reports. Replace the numbers provided in the Excel file with the appropriate numbers for your firm. Then, write a 2–3 page financial analysis of your company, addressing the following elements:

• Identify your company, its industry, and analyze the important segments (percentage of sales or subsidiaries) of your company compared to its industry and its overall business.
• Perform a complete financial analysis of your chosen company’s financial statements—horizontal, vertical (Percentage of Sales and Common-Size), and changes in ratios—for the last two years.
• Compare all ratios to industry averages. Evaluate the company’s ratios against the industry averages.
• Explain the significance of the company’s ratios when compared to industry averages.
• Analyze the company’s cash flows.
• Assess the overall financial health of your company based on this financial analysis.

A great way to integrate your completed calculations from your Excel sheet into your written analysis is to paste pieces of the worksheet directly into your Word document. You are also encouraged to create graphs or charts from the data that may illustrate your analyses as well.

                                Tool Kit for Analysis of Financial Statements                          Financial statements are analyzed by calculating certain key ratios and then comparing them with the ratios of other firms and by examining the trends in ratios over time.  We can also combine ratios to make the analysis more revealing, those indicated below are exceptionally useful for this type of analysis.                                            RATIO ANALYSIS (Section 3.1)               *NVIDIA Fiscal Years starts and ends on Jan 31, such that FY13 represents Jan 31,2012 to Jan31, 2013     Input Data:                       2013 2012         Year-end common stock price   $12.26 $13.86         Year-end shares outstanding (in thousands) 616,756 612,191         Tax rate     15% 12%         After-tax cost of capital               Lease payments (in thousands)   $18,998 $21,439         Required sinking fund payments   $0 $0                           Balance Sheets                 (in thousands of dollars)                                 Assets     2013 2012         Cash and equivalents   $906,223 $767,218 * Added to cash and quivalents prepaid expense and deferred income taxes Short-term investments   $2,995,097 $2,461,700   2013 2012   Accounts receivable   $454,252 $336,143   69,701 49,411 prepaid expenses and other Inventories     $419,686 $340,297   103,736 49,931 deferred income taxes    Total current assets   $4,775,258 $3,905,358         Net plant and equipment   $1,636,987 $1,647,570 * In addition to equpment also includes goodwill, intangible assets, and other assets Total assets     $6,412,245 $5,552,928   2013 2012               641,030 641,030 goodwill Liabilities and equity         312,332 326,136 intangible assets Accounts payable     $356,428 $335,072   107,481 120,332 other assets Notes payable     $0 $0         Accruals     $619,795 $594,886            Total current liabilities   $976,223 $929,958         Long-term bonds     $608,319 $477,246   2013 2012      Total liabilities     $1,584,542 $1,407,204   3,193,623 2,900,896 additional paid-in capital Preferred stock (2,00,000 shares: none issued) $0 $0   -1,622,709 -1,496,904 treasury stock Common stock (616,756,134 shares oustanding 2013 and 612,191,412 outstanding in 2012 $720 $700   9981 10,614 accumulated other comprehensive income Retained earnings     $3,246,088 $2,730,418         Total common equity   $4,827,703 $4,145,724 * Added to Total Common equity additional paid-in capital, treasuary stock, and accumulated other comprehensive income Total liabilities and equity   $6,412,245 $5,552,928                           Income Statements               (in thousands of dollars)                     2013 2012         Net sales     $4,280,159.0 $3,997,930.0            Operating costs     $3,631,920.0 $3,349,631.0         Earnings before interest, taxes, depr. & amort. (EBITDA) $648,239.0 $648,299.0            Depreciation     $0.0 $0.0            Amortization     $0.0 $0.0            Depreciation and amortization   $0.0 $0.0         Earnings before interest and taxes (EBIT) $648,239.0 $648,299.0            Less interest      -$13,800.0 -$15,097.0         Earnings before taxes (EBT)   $662,039.0 $663,396.0            Taxes (15.0%, 12.4%)   $99,503.0 $82,306.0         Net income before preferred dividends   $562,536.0 $581,090.0            Preferred dividends   $0.0 $0.0         Net income available to common stockholders $562,536.0 $581,090.0         Common dividends   $0.0 $0.0         Addition to retained earnings   $562,536.0 $581,090.0                           Calculated Data:  Operating Performance and Cash Flows                 2013 2012         Net operating working capital (NOWC)   $803,938.0 $513,700.0         Total operating capital   $2,440,925.0 $2,161,270.0         Net Operating Profit After Taxes (NOPAT) $551,003.2 $567,909.9         Net Cash Flow (Net income + Depreciation) $562,536.0 $581,090.0         Operating Cash Flow (OCF)   $551,003.2 $567,909.9         Free Cash Flow (FCF)   $271,348.2 N/A                           Calculated Data:  Per-share Information                     2013 2012         Earnings per share (EPS)   $0.91 $0.95         Dividends per share (DPS)   $0.00 $0.00         Book value per share (BVPS)   $7.83 $6.77         Cash flow per share (CFPS)   $0.91 $0.95         Free cash flow per share (FCFPS)   $0.44 N/A                           LIQUIDITY RATIOS (Section 3.2)     Industry             2013 2012 Average         Liquidity ratios                   Current Ratio   4.89 4.20 2.22           Quick Ratio   4.46 3.83 1.3                           ASSET MANAGEMENT RATIOS (Section 3.3)   Industry             2013 2012 Average         Asset Management ratios                 Inventory Turnover 10.20 11.75 4.78         Days Sales Outstanding 38.7 30.69 25.6 *Industry leader       Fixed Asset Turnover 2.61 2.43 1.89 *Industry leader       Total Asset Turnover 0.67 0.72 0.63                           DEBT MANAGEMENT RATIOS (Section 3.4)   Industry             2013 2012 Average         Debt Management ratios                 Debt Ratio   24.71% 25.34% 39.30% *Industry leader       Debt-to-Equity Ratio 0.33 0.34 0.65 *Industry leader       Market Debt Ratio 17.33% 14.23% 24.40 *Industry leader       Times Interest Earned 46.97 42.94 196.79 *Incorrect for 2013 and 2012 as interest combined is income not expense    EBITDA Coverage Ratio 128.36 105.60 N/A                           PROFITABILITY RATIOS (Section 3.5)     Industry             2013 2012 Average         Profitability ratios                   Profit Margin   13.14% 14.53% 19.96%           Basic Earning Power 10.11% 11.67% 17.63% *Industry leader       Return on Assets   8.77% 10.46% 12.56%           Return on Equity   11.65% 14.02% 19.43%                           MARKET VALUE RATIOS (Section 3.6)     Industry             2013 2012 Average         Market Value ratios                 Price-to Earnings Ratio 13.44 14.60 25.77 *NVIDIA doesn’t account for depreciation in their 10-K statements Same P/E P/CF Ratio because there is no depreciation   Price-to-Cash Flow Ratio 13.44 14.60 9.66           Price-to-EBITDA   11.66 13.09 5.13 *Industry Leader       Market-to-Book Ratio 1.57 2.05 3.59                           TREND ANALYSIS, COMMON SIZE ANALYSIS, AND PERCENT CHANGE ANALYSIS (Section 3.7)                         TREND ANALYSIS                 Trend analysis allows you to see how a firm’s results are changing over time.  For instance, a firm’s ROE may be slightly below the benchmark, but if it has been steadily rising over the past four years, that should be seen as a good sign.                     A trend analysis and graph have been constructed on this data regarding Nvidia’s ROE over the past 5 years.  (Nvidia and indusry average data for earlier years has been provided.)                         ROE             NVIDIA AMD Intel           2009 -1.2% -213.1% 12.93%           2010 -2.7% 107.4% 10.82%           2011 8.7% 56.7% 25.16%           2012 15.9% 37.7% 27.15%           2013 11.7% -111.2% 22.66%                           Figure 3-1  Rate of Return on Common Equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               COMMON SIZE ANALYSIS               In common size income statements, all items for a year are divided by the sales for that year.                         Figure 3-2  Common Size Income Statements                   Industry Composite Nvidia             2013 2013 2012       Net sales     100.0% 100.0% 100.0%          Operating costs     72.1% 84.9% 83.8%       Earnings before interest, taxes, depr. & amort. (EBITDA) 27.9% 15.1% 16.2%          Depreciation and amortization   0.0% 0.0% 0.0%       Earnings before interest and taxes (EBIT) 27.9% 15.1% 16.2%          Less interest      0.0% -0.3% -0.4%       Earnings before taxes (EBT)   27.9% 15.5% 16.6%          Taxes (15.0%, 12.4%)   7.3% 2.3% 2.1%       Net income before preferred dividends   20.6% 13.1% 14.5%          Preferred dividends   0.0% 0.0% 0.0%       Net income available to common stockholders (profit margin) 20.6% 13.1% 14.5%                                           In common sheets, all items for a year are divided by the total assets for that year.                           Figure 3-3  Common Size Balance Sheets                 Industry Composite Nvidia             2013 2013 2012         Assets                 Cash and equivalents 13.0% 14.1% 13.8%         Short-term investments 11.5% 46.7% 44.3%         Accounts receivable 7.1% 7.1% 6.1%         Inventories   5.6% 6.5% 6.1%            Total current assets 37.2% 74.5% 70.3%         Net plant and equipment 62.8% 25.5% 29.7%         Total assets   100.0% 100.0% 100.0%                           Liabilities and equity               Accounts payable   12.6% 5.6% 6.0%         Notes payable   0.4% 0.0% 0.0%         Accruals   2.3% 9.7% 10.7%            Total current liabilities 15.3% 15.2% 16.7%         Long-term bonds   61.1% 9.5% 8.6%            Total liabilities   76.4% 24.7% 25.3%         Preferred stock   0.0% 0.0% 0.0%         Total common equity 23.6% 75.3% 74.7%         Total liabilities and equity 100.0% 100.0% 100.0%                                             PERCENT CHANGE ANALYSIS                                 In percent change analysis, all items are divided by the that item’s value in the beginning, or base, year.                       Figure 3-4  Income Statement Percent Change Analysis           Base year = 2012   Percent Change in                 2013           Net sales     7.1%              Operating costs     8.4%           Earnings before interest, taxes, depr. & amort. (EBITDA) (0.0%)              Depreciation and amortization   0.0%           Earnings before interest and taxes (EBIT) (0.0%)              Less interest      (8.6%)           Earnings before taxes (EBT)   (0.2%)              Taxes (15.0%, 12.4%)   20.9%           Net income before preferred dividends   (3.2%)              Preferred dividends   0.0%           Net income available to common stockholders (3.2%)                                               Balance Sheet Percent Change Analysis (not in textbook)           Base year = 2012   Percent Change in                 2013           Assets                 Cash and equivalents   18.1%           Short-term investments   21.7%           Accounts receivable   35.1%           Inventories     23.3%              Total current assets   22.3%           Net plant and equipment   -0.6%           Total assets     15.5%                             Liabilities and equity               Accounts payable     6.4%           Notes payable     0.0%           Accruals     4.2%              Total current liabilities   5.0%           Long-term bonds     27.5%              Total liabilities     12.6%           Preferred stock (2,00,000 shares: none issued) 0.0%           Common stock (616,756,134 shares oustanding 2013 and 612,191,412 outstanding in 2012 2.9%           Retained earnings     18.9%           Total common equity   16.5%           Total liabilities and equity   15.5%                                               DU PONT ANALYSIS (Section 3.8)                              ROE    = (Profit margin) (TA turnover) (Equity Multiplier)       Nvidia 2013 11.65% 13.14% 0.67 1.33       Nvidia  2012 14.02% 14.53% 0.72 1.34       Industry Average   20.72% 19.96% 0.63 1.65