Before you begin, I just want to say thank you to everyone who has visited and supported me. I will be posting more essays and works very soon from my upper division college courses. If you like my work, and want to support me, please check out the links to the right and read my other blog posts or support me by clicking the link below:

Tuesday, May 3, 2011

How to Write a Financial Statement Analysis.

It's that time of year again, the college kids are scrambling to get their term papers in last minute. I added a reflection paper last week and got nearly 100 hits on it overnight. Today, I come with an even better paper, a Financial Statement Analysis for Apple Computers Inc. I spent 2 months composing it. It includes all the key financial ratios: liquidity, ROA, ROE, total asset turnover, DSO, Profit margin, profitability, debt management, the works.

I can't post the entire paper because of the integrated tables and graphs, but I'm going to include some excerpts from it. If you want the whole thing, please purchase my eBook on how to write a Financial Statement Analysis. In my book, I detail each step needed to be taken, the best free sites to get your financial information from, where and how to calculate industry ratios, and proper formatting for the Ratio Analysis section. It's just a quick guide on what to do and how to do it. You can spend $200 to have one done for you in no time, or you can buy my guide and save $198 dollars and actually do the work yourself in half the time you'd have if you tried to do it yourself.

Believe me, when I first starting working on this it took me at least a week to gather information from several sources just on how to START the Financial Statement Analysis.

Here's portions of the document, with graphs excluded:

Apple Computers, Inc. was founded by Steve Wozniak, Steve Jobs, and Ronald Wayne on April 1st, 1976 (Linzmayer). While there may be an April fool’s joke in the founding date, one cannot deny the success Apple Inc. has achieved as it rose to number two on the Fortune 500 list. Originally located in Steve Jobs Garage (Pederson) Apple Inc. is now headquartered in Lupertino, California and currently worth $255.18 billion, operating 301 retail stores in ten countries, 46,600 full time employees, and annual sales of 65.23 billion (explorepedia).
            Although Apple has seen success in recent years, the company had hard times. During the early eighties, Steve Jobs was struggling against the market controlled by IBM. To compete, Jobs worked relentlessly on the Macintosh computer and during the 1984 Superbowl, Apple aired its famous commercial starring Anya Major. The ad created the buzz as Jobs and Wozniak hoped, generating over $5 million in free publicity (Low End Mac). The Mac sold incredibly well, however, by Christmas of 1984, the public was growing tired of the low specs.
            During the early 90s, Apple did not have any problems with selling computer, but with building them. With over $1 billion in backorders, Apple was unable to acquire the parts fast enough to build the new PowerMac’s. Misjudging the market for the fourth quarter in 1995, Apple pushed the low-cost Performa over the mid-range PowerMac’s. Apple, Inc. posted a $68 million loss for that quarter. In the late 90s, Steve Jobs was appointed interim CEO. Since Apple’s stock price was the lowest it had been in 5 years, Jobs put his best efforts into new marketing strategies. Previously, Apple had sold its products direct to retailers, like best buy. Jobs changed this by offering its products over the web and phone, known as The Apple Store. Within a week, Apple had the third largest e-commerce site on the web and Jobs was able to announce, for the first time in a year, a profitable first quarter of $44 million. Jobs steamrolled the competition and Apple posted its first full year of profitable quarters. Jobs efforts allowed Apple’s stock price to rise to the 20s and in 1999, after the release of several new products Apple’s stock price rose to the high 70s.
            In 2000, Jobs dropped the “interim” from his title and became permanent CEO if the company and announced a new internet, mac-only based applications called iTools. As sales rose, so did the stock price, climbing to 130 by March. However, there was turbulence in the technology industry by mid 2000. Apple’s corporate strategy response, faced with massive sales decreases, was to get into the personal electronic devices market- mp3s, dvds, and digital cameras. The new product line, coupled with complementary software added incredible value to Apple products. The hope was that the new innovations and products would make Mac the digital hub and rejuvenate sales and security. In May of 2001 Jobs announced the opening of retail stores across America offering products like Apple computers, mp3 players, digital cameras, and other “digital lifestyle” products. With the new products and stores, Apple’s sales increased dramatically. Apple released the iPod in 2002 but the company struggled financially until 2003, when it released iTunes. In the first year, the iTunes store sold 70 million+ songs and the iTunes owned over 70% of the legal online music download services. iPods went from “Expensive toys” to must-have Christmas presents, launching Apple into the spotlight; Apple was in the position of having a monopoly for the first time in several decades.

Ratio Analysis
            In this section, Apple’s financial ratios will be covered in detail. The purpose of looking at the financial ratios for Apple is to discover how it compares to the technology and personal computers industry overall. By looking at the past and present performance trends of Apple, a short term forecast of Apple's future performance will be able to be determined. Ultimately, this section will act as a guide to investors; providing data and giving a realistic view of Apple’s financial position and comparison to the industry.
Liquidity Ratios
          Liquidity ratios exhibit a company’s ability to meet short term debt obligations and provide an overall picture of the company’s financial health (Brigham & Investopedia). 


Asset Management Ratios
          Asset management ratios measure how effectively Apple controls assets and inventories. A firm overinvested in its inventories can damage profit by having high operating costs, on the other hand, a firm underinvested in assets will not be operating at optimum efficiency and will be unable to meet demands. Both situations can adversely affect stock price and harm the firm long term, therefore it is highly important to have the right amount invested in assets. 


The total asset turnover ratio is the overall way to analyze how Apple is utilizing all of its assets to generate sales. The industry average is 1.1; Apple falls short of the allowed range at 0.86755. To increase sales margins, Apple could benefit from finding ways to utilize more of its assets or cut down on underperforming equipment. In the end, asset management may not be where it should be, but Apple can remedy the problem with minor changes in certain key areas.


Debt Management
            The debt management section covers the financial leverage Apple has. In essence, a firm can finance assets with debt to increase returns to stockholders. Debt is usually a good measurement of the fixed cost to finance a company......................The debt ratio indicates how much debt a firm uses to finance its assets. Generally, the smaller the debt ratio, the better off the firm is. In Apple’s case, they have incredibly good debt management, with no short or long term debt or interest expense, indicating Apple doesn’t take risks, or have no current need for outside financing.
            After liquidity, asset management, and debt management are combined, Profitability ratios are the result. Profitability ratios can be explained using the highly important DuPont analysis which gives a much better estimate of Return on Equity, the amount of profit generated on shareholder investments.

From Grandma’s garage to large-cap growth company, Apple has taken a beating throughout the years. The company owes its success to one man who some say is a visionary; however, with the current health conditions of Steve Jobs, Apple may have to gear-up for another rocky road. Based on the analysis, Apple should perform well in 2011. Given recent trends, Apple is projected to outperform other companies in the Personal Computers industry. An investment in Apple would bring a positive return at a relatively low risk level. For technology’s sake, let’s hope Apple continues to thrive on Steve Jobs’ inspiring quote, “Sometimes when you innovate, you make mistakes. It is best to admit them quickly, and get on with improving your other innovations.1

Click here to get the rest of the paper, with graphs and a guide on how to write a Financial Statement Analysis!

**UPDATE (Feb 2014): Due to the use of a third party company, there will sometime be issues with transactions. If any errors or issues occur, a quick email to me with a brief detail and copy of your receipt, I will Email you the PDF version.**

Saturday, April 23, 2011

Johnny Cash I Walk the Line short essay.

The following is a short essay I wrote for a friend who needed help in his writing class. I believe the instructions were along the lines of pick a song that has meaning to you and explain why, using lyrics etc.

If you have a similar project, you can follow the format of this essay and include your own story. Always provide a background on the artist and song, what you interpret the meaning as and of course how it relates to you, personally.

Johnny Cash and Elvis Presley were two of the most influential rock artists of the 1950s. The ‘50s is an amazing decade, we had monumental bounds in our social, political, and technological climate as Americans. From Rosa Parks to Satellites, the Korean War and IBM’s first ever Hard -Disk Drive, and even the introduction of the Interstate system all left marks on Americans in the 1950s. However, nothing leaves its mark music. Music is it’s own language, and we’ll see how Johnny Cash communicated through his chart-topping hit, “I Walk the Line.”
“I Walk the Line” is a relatively short song, just coming in under three minutes, however the impact it had on the music industry and people’s lives is immeasurable. Johnny Cash stumbled upon the chords by accidentally playing a song backwards on his cassette recorder. Dorothy Horstman, in an Interview with Johnny Cash, found that he wrote the song backstage before a performance, as his pledge of devotion to his first wife, Vivian Liberto. It has been the center of much debate that Cash wrote the song for June Carter, however the was written in 1956 and the marriage between Johnny and June took place in 1958. He pledged well, even though he had feelings for June, nothing ever happened until the day of the divorce.
Johnny starts the song off with “I keep a close watch on this heart of mine” which could be interpreted as his heart’s feelings, or “the love of his heart.” When he sings the lyrics,
“I find it very, very easy to be true
I find myself alone when each day is through
Yes, I'll admit that I'm a fool for you.”
It’s quite easy to feel the emotion in his voice as well as the love and devotion for his wife. In a sense, he means,” even though I have several chances to cheat on you, I go back to my tour bus and sleep alone. It doesn’t make me upset, because I know in my heart how happy I am with you.” Cash goes on to admit that his love is on his mind as “sure is dark is night and light is day,” which has a deeply honest tinge to it. He basically states that he is willing to go to the ends of the earth to do anything for his wife. You can’t get more honest than a song written backstage before a performance. Everyone can relate, you’re in a bind to get something done, you usually draw from personal experiences to fill in the missing pieces.
The most controversial recurring theme in the song is Cash’s use of the line, “I walk the Line.” This has been debated several times as to what he was trying to convey. Many people say it’s due to his use of drugs and alcohol that caused his first wife to worry about Johnny. What he was saying is that, “I walk a thin line, and I’m really pushing it.” Others say he was in the military, on guard duty, when he wrote it and was literally “walking the line” for duty while thinking of his wife. Personally, I think he didn’t have a set meaning for it. I personally think he left it open for interpretation. I interpret it as a moral standing. Every time he is away he may be tempted to cheat on his wife and he’s walking the line between “good upstanding morals” and “evil degenerate morals.” so, every night on tour, he walks the line and has to decide “Am I good person? Am I going to be faithful to my wife?”
The first reason I chose “I Walk the Line” was because it is one of my favorite movies. It was inspiring to see the stuff he went through portrayed on screen. It was well directed, and it was very easy to relate to personally. I had friend in High School (and even back to Junior High) who had a drinking problem. He was the first person I ever had a drink with, when I was a freshman in High School. We ha some really great times together, but I was always worried about the road he was travelling down. I remember, to this day, the one thing he said to me and I can remember it like he was standing right in front of, the room of the house we were in. It was sophomore year and it was the weekend after a party. I was asking him if he was ever scared to get really drunk (as he usually had been doing) and he said in a sort of up-tempo yet pitiful voice, “well, my dad is an alcoholic and that shit runs in the family, so I might as well accept it and start early.”
Although I’ve never been married, this song has a lot of personal meaning to me. This song is like the Lays potato ships commercial “You can’t eat just one!” in the fact that you can’t listen to this song and not think of your loved one, or some love you have had. When I was in High School I was very much in love with this girl, I would never do anything to hurt her. Just like in the song, I found it “very, very easy to be true.” We would spend long nights out by the lake and we even snuck over to each others house late on school nights just to be with each other. We were living the dream. Our relationship was great until her parents wanted to move to Georgia. At nights I found myself alone, but she “had a way of keeping me at her side.” I stayed faithful, the thought of cheating never crossed my mind. After a year or so of this long distance relationship, we both decided that it was almost hopeless to try and continue it. We talked it over and decided that we were both young and it just wasn’t meant to be between us. What led us to this decision was my acceptance into Tennessee Tech. She also grew to like Georgia, so I knew it was hopeless for her deciding to come live, on her own, back in Lebanon.
Johnny Cash Lyrics. I Walk the Line.  2010.       
Horstman, Dorothy (1976). Sing Your Heart Out, Country Boy, Country Music Foundation. p. 144
Bob Stritof. Johnny Cash and June Carter Cash Marriage Profile.