Pavin Prasad AbrahamRoll No: PGP/19/091MANAGEMENT ACCOUNTINGASSIGNMENT

The company selected for analysis is Apple Inc.ParticularsPY 2012-13(in Billions)CY 2013-14 (in Billions)

1Free Cash Flows$45.5$50.14

2Cash Realization Ratio1.4471.511

3Investment (or withdrawal) of working capital$6.48$7.05

1) Free cash flow is companys ability to generate excess cash for its investors. It is found by taking the difference between net operating cash flow and capital expenditure. For Apple Inc., not only is that the free cash flow values are positive, they are phenomenally higher compared to its competitors. The three reasons for the same arei) Huge revenue from its core business of selling electronic gadgets and internet services.ii) Higher credit period for payments and lower credit period for receivablesiii) Lower capital expenditure compared to the huge net income

2) Cash Realisation ratio is calculated by dividing operating cash flow by net income. The ratio is a good measure of earning quality. Apple has well exceeded the threshold value of 1. The reasons for the same area) Huge cash pile generated by the core business of the company.b) Lesser cash outflows compared to inflowsc) Lesser dependency of income on non cash resources

3) Working capital is the measure of Companys short term liquidity or its ability to cover short term liabilities. It is the difference between companys current liabilities and current assets. For Apple Inc., investment in working capital increases from 6.48 Billion to 7.05 Billion in the period 2012-14. Major three reasons for investment in working capital are:

a) Expand and improve operations using existing resourcesb) Helps in maintaining positive cash flowc) Better investments in equipments, plants and property