Financial statement development and analysis – act 12
Part C: Apple’s debt load and earnings performance had a significant impact on the company’s debt to capital and debt to equity ratios from 1999 through 2002. During this period, the company’s total liabilities increased from $3 billion in 1999 to almost double that amount by 2002; this resulted in a significant increase in both its debt to capital (from 48% in 1999 to 63% in 2002) and its debt to equity (from 8.7x in 1999 to 12.0x by 2002) ratio during the same time frame. Apple took on greater financial risk by relying heavily on borrowings rather than relying on shareholder investments and retained earnings to fund its operations.
Part D: The evidence available when looking at Apple’s fixed contractual expenses (e.g., lease payments, loan repayments etc.) would suggest that they were able cover these costs throughout their entire 4-year period, with relatively minor variations year over year; however, there may be some room for concern when it comes to 2001 & 2002 due primarily due because net income decreased significantly from what it was back 1998 & 2000 respectively which could cause some strain financially if not monitored carefully.
Part E: While Apple had seen overall positive growth between 1998 and 2000 with regards revenue generated through sales of products/services as well reasonably healthy profits each year, the subsequent two years did see a downturn with net income decreasing steadily until just barely breaking even by 2003 – this makes predicting future earnings somewhat challenging without considering factors such external market conditions or organizational decisions related internal spending patterns like research & development initiatives among other potential cost drivers. Although the current data suggests that momentum could continue through 2004, investors must be careful as there is no guarantee of success, especially considering how cyclical technology industry which makes it more vulnerable to economic volatility.