Figure 1: Apple INC. and Samsung Electronics Co., Ltd. Qualitative Comparative Analysis
|Ratio||Apple INC. 2020||Apple INC. 2019||Samsung Electronics 2020||Samsung Electronics 2019|
|Debt to Equity Ratio||0.79827||0.73269||0.37068||0.34116|
|Gross Profit Ratio||0.38233||0.37818||0.38985||0.36094|
|Return on Investment||0.33859||0.34155||0.18277||0.14764|
To analyze the performance of Apple Inc., we can compare it with the performance of Samsung Electronics Co., Ltd., a competitor, over the same period. Apple Inc.’s liquidity is more volatile than Samsung Electronics Co., Ltd. This is because the current ratios for Apple Inc. reduced by fifty percent between 2019 and 2020. Therefore, the management of short-term resources may not be efficient for the company.
The cash reserves for both companies were almost similar for both years (Ernst & Young LLP., 2021). This is because an average of forty percent of the current liabilities would be offset using the present cash reserves. Therefore, despite the volatility, Apple Inc. has healthy liquidity.
Qualitative Comparative Analysis Debt-to-equity ratio
The debt-to-equity ratio is a financial ratio on the proportion of the shareholder equity used to finance debt in case of solvency. In the case of Apple Inc., the debt-to-equity ratio is over seventy percent. Therefore, more than seventy percent of the shareholder equity would be used to finance debt. In the case of Samsung Electronics Co., Ltd., less than forty percent of the shareholder equity would be used to finance the debt (Ernst & Young LLP., 2021).. This indicates Apple INC has a relatively high debt that ought to be reduced to guarantee future financial well-being.
Qualitative Comparative Analysis Profitability Ratio
The profitability ratio for the two companies is almost equal for both years. This is illustrated using gross profit ratio, operating ratio, and the return on investment. Furthermore, the profitability ratios of Apple Inc. were more stable for the two years. In general, Apple Inc. is performing well relative to its competitors. Other than the liquidity, there are no other signs of volatility. The company will be able to take care of its financial obligations.
Apple Inc.’s performance is quite similar to that of Samsung Electronics Co., Ltd., a close competitor in the global market. Apple Inc. has had one of the greatest profit margins in the industry over a long time. This is expected to continue, as indicated by the stability of the financial ratios. Based on the fact that the company is expected to continue investing resources in research and development, they may keep their competitive advantage.
Like most of its competitors, the company is investing more in research and development (Tien, 2019). Apple Inc. has the United States as its primary market. Still, the use of its devices and other services is quickly expanding to the global market, including both developed and developing countries. The uniqueness of Apple Inc.’s products is expected to guarantee a stable market share. However, Apple’s debt is significantly higher than the industry average.
Qualitative Comparative Analysis Recommendation
I would recommend that potential investors invest in Apple Inc. This is because the company seems healthy in both the short and long run. The fact that the company has continued investing in research and development, it is likely that it continues with its profitability. Thus the shareholder value is expected to increase in both the short and long run. The lack of volatility of Apple Inc., especially relative to its competitor, indicates that it may be an efficient use of investors’ resources (Chen et al., 2021).
Furthermore, the company is not at risk of insolvency, as indicated by the solvency ratios. Therefore, it is less likely that the investors’ funds may be used to pay off the debt. However, the company may face liquidity problems in the future, which may affect the number of dividends paid to the investors. Thus, I would advise potential investors to buy Apple Inc. stock.
Qualitative Comparative Analysis References
- Chen, X., Liu, Y., & Gong, H. (2021, December). Apple Inc. Strategic Marketing Analysis and Evaluation. In 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021) (pp. 3053-3061). Atlantis Press.
- Ernst & Young LLP. (2021). UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549. Apple Inc. [Ebook] (1st ed.). Ernst & Young LLP. Retrieved 21 January 2022.
- Tien, N. H. (2019). International distribution policy comparative analysis between samsung and apple. International journal of research in marketing management and sales, 2020(1), 2.