HP v. Apple PRESENTED BY: DANIEL VAKNIN MICHAEL DIFIORE JENNY YOO CHRISTINA MURDOCH VANESSA LOPEZ

DuPont Framework AppleHPAppleHPAppleHP Return on Equity (.4091) Profit Margin (.1055) Asset Turnover Equity Multiplier

Profitability Ratios AppleHPAppleHPAppleHP Profit Margin (.1055) Return on Assets (.1062) Return on Shareholders’ Equity (.4117)

Current Ratio: Apple vs. HP 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 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 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 Proceeds by issuance of long-term debt$11,960$16,89600

How operations and investments are being financed  HP: Financed mostly by issuance of debt Issuance of debt$2,875$279$5,154$11,942

Assessing the cash flow of Apple: Beginning cash balance$14,259$10,746$9,815$11,261 Cash flows from operating activities59,71353,66650,85637,529 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 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 Repurchase of stock(45,000)(22,860)00

Assessing the cash flow of HP: Beginning cash balance$12,163$11,301$8,043$10,929 Cash flows from operating activities12,33311,60810,57112,639 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 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)

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 AppleHP $ 39,510$5,013 6,177(2,021) (217,128)(1,086) 18,8101,347 (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 AppleHP $ 59,713$12,333 (22,579)(2,792) (37,549)(6,571)

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