Apple Inc (AAPL)

Short-term

Turnover ratios

The activity ratios provide insight into how effectively Apple Inc manages its assets and liabilities to generate sales and manage working capital. Let's analyze the activity ratios for the latest five years.

Inventory Turnover: The inventory turnover ratio measures how efficiently a company manages its inventory. The trend for Apple Inc's inventory turnover has been fluctuating but generally remains high, indicating strong inventory management. This suggests that Apple is effectively selling off its inventory, which is a positive sign.

Receivables Turnover: The receivables turnover ratio reflects how efficiently the company collects credit sales. Apple has maintained a relatively stable trend in receivables turnover, indicating consistent effectiveness in collecting receivables.

Payables Turnover: The payables turnover ratio measures how quickly a company pays its suppliers. Apple Inc's payables turnover has remained relatively stable over the years, suggesting consistency in managing its trade payables.

Working Capital Turnover: The working capital turnover ratio indicates how effectively a company utilizes its working capital to generate sales revenue. Apple Inc did not report this ratio for the two most recent years. However, in the earlier years, the working capital turnover ratio increased significantly, suggesting that Apple improved its efficiency in utilizing working capital to generate sales.

Overall, the activity ratios indicate that Apple Inc has been effective in managing its inventory, collecting receivables, and managing payables. Additionally, the increasing trend in the working capital turnover ratio in the earlier years suggests that Apple has been overall efficient in utilizing its working capital to generate sales. This analysis suggests that Apple Inc has demonstrated strong operational efficiency in managing its assets and liabilities to drive sales and generate revenue.

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Average number of days

To analyze Apple Inc's activity ratios, we'll focus on three key ratios: Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Number of Days of Payables.

1. Days of Inventory on Hand (DOH):
- The trend in DOH indicates the efficiency of Apple's inventory management. A lower DOH suggests that the company’s inventory turnover is higher, indicating effective management.
- The DOH has increased from 8.74 days in 2020 to 10.79 days in 2023. This suggests that Apple is holding onto its inventory for a longer period, which could indicate slower inventory turnover or possibly overstocking.

2. Days of Sales Outstanding (DSO):
- DSO measures the average number of days it takes for a company to collect payment after a sale. A lower DSO is generally seen as a positive sign, as it indicates that the company is efficient in collecting its accounts receivable.
- Apple's DSO has fluctuated over the years, with an increase from 49.79 days in 2020 to 58.08 days in 2023. This may indicate that Apple is taking longer to collect its receivables, which could potentially impact its cash flow.

3. Number of Days of Payables:
- This ratio measures how long it takes a company to pay its bills to suppliers. A higher number of days indicates that the company is taking longer to pay its bills, which can be seen as favorable for the company as it implies better cash flow management.
- Apple's number of days of payables has increased from 91.05 days in 2020 to 106.72 days in 2023. This trend implies that the company is taking longer to pay its suppliers, which could indicate improved cash flow management or potential negotiations with suppliers for extended payment terms.

In summary, the trend in these activity ratios suggests that Apple has experienced a slowdown in inventory turnover and accounts receivable collection, while also extending the time it takes to pay its suppliers. While these trends may have varying implications, they should be carefully monitored to assess their impact on the company's working capital and overall financial performance.

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See also:

Apple Inc Short-term (Operating) Activity Ratios

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Long-term

The long-term activity ratios for Apple Inc provide insights into the efficiency with which the company utilizes its fixed assets and total assets to generate sales.

Fixed Asset Turnover:
The fixed asset turnover ratio measures the ability of a company to generate sales from its investments in fixed assets. Higher values are generally preferred as they indicate that the company is generating more revenue from its fixed assets. Apple Inc's fixed asset turnover has shown a fluctuating pattern over the past five years. The ratio decreased from 9.36 in 2022 to 8.77 in 2023, indicating a slight decrease in the efficiency of utilizing fixed assets to generate sales. However, it is important to note that the ratio has generally remained at a high level, reflecting strong operational efficiency.

Total Asset Turnover:
The total asset turnover ratio reflects how effectively a company uses all its assets to generate revenue. Apple Inc's total asset turnover has exhibited a gradual increasing trend over the past five years, from 0.77 in 2019 to 1.09 in 2023, indicating an improvement in the company's ability to generate sales from its total assets. This suggests that Apple has been more efficient in utilizing its assets to generate revenue, which is a positive sign of operational efficiency and effective asset management.

Overall, the trend in both the fixed asset turnover and total asset turnover ratios indicates that Apple Inc has been able to effectively utilize its assets to generate sales, with a notable improvement in the total asset turnover ratio over the years. This suggests efficient management of assets and a strong ability to generate revenue from its asset base.

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See also:

Apple Inc Long-term (Investment) Activity Ratios