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