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Apple Inc Financial Forecasting

Beth

Apple Inc Financial Forecasting

Introduction

Financial forecasting involves the use of models that aid in managerial decision-making. They enable managers to predict the future. To get the best value from the forecasts, managers must understand the different forecasting tools and identify what each forecasting method can and cannot achieve. The best situation to use each particular model.

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Types of Forecasting Methods

Qualitative and Quantitative Forecasting Tool

Quantitative methods use past statistical data to forecast future outcomes. The quantitative methods include multiplicative seasonal indexes, simple exponential smoothing, and moving averages. On the other hand, examples of qualitative methods are informed opinions, the Delphi method, and the historical life-cycle analogy.

Casual Forecasting Methods

Examples are the autoregressive moving average and the regression analysis forecast using underlying variables.

Judgmental Forecasting Methods

The Delphi method, statistical surveys, scenario building, and composite forecasts are all based on subjective and intuition estimates.

Time Series Forecasting Methods

Examples of these methods are trend analysis and exponential smoothing. They use past data to predict future outcomes. Time series are groups of data that are recorded over some time.

I chose to use the Moving Average Method for the forecasting exercise.

Moving Average

The moving averages method uses the underlying pattern of a set of data to predict future values. The typical examples are the 3-month/year and 5-month/year forecasts.

Why I Selected The Moving Average Method

  1. The moving average method can be understood and computed compared to the other methods.
  2. This method gives a constant forecast
  3. Moving averages help sort different random variations.

Why Apple’s Board Of Directors Should Be Confident In These Forecasts

Apple’s Board of Directors should be confident in these forecasts because the method applied in deriving the estimates considers the previous years’ figures. The moving averages method effectively smoothes out short-term fluctuations and highlights long-term trends in the available data. These factors make the forecasted data much more reliable for future planning purposes.

Years ended September 26, September 27, September 28, September 29 September 24 Assumption September 26, September 27, September 28, September 29 Average
2015 2014 2013 2012 2011 2015 2014 2013 2012
Net sales 233,715 182,795 170,910 156,508 108,249 % growth 127.86% 106.95% 109.20% 144.58% 122.15%
Cost of sales 140,089 112,258 106,606 87,846 64,431 % of Sales 59.94% 61.41% 62.38% 56.13% 59.96%
Gross margin 93,626 70,537 64,304 68,662 43,818
Operating expenses:
Research and development 8,067 6,041 4,475 3,381 2,429 % of Sales 3.45% 3.30% 2.62% 2.16% 2.88%
Selling, general and administrative 14,329 11,993 10,830 10,040 7,599 % of Sales 6.13% 6.56% 6.34% 6.42% 6.36%
Total operating expenses 22,396 18,034 15,305 13,421 10,028 % of Sales 9.58% 9.87% 8.96% 8.58% 9.24%
Operating income 71,230 52,503 48,999 55,241 33,790 30.48% 28.72% 28.67% 35.30% 30.79%
Other income/(expense), net 1,285 980 1,156 522 415 0.55% 0.54% 0.68% 0.33% 0.52%
Income before provision for income taxes 72,515 53,483 50,155 55,763 34,205 31.03% 29.26% 29.35% 35.63% 31.32%
Provision for income taxes 19,121 13,973 13,118 14,030 8,283 8.18% 7.64% 7.68% 8.96% 8.12%
Net income 53,394 39,510 37,037 41,733 25,922 22.85% 21.61% 21.67% 26.67% 23.20%
Earnings per share: 0.00% 0.00% 0.00% 0.00% 0.00%
Basic 9.28 6.49 5.72 44.64 28.05 0.00% 0.00% 0.00% 0.03% 0.01%
Diluted 9.22 6.45 5.68 44.15 27.68 0.00% 0.00% 0.00% 0.03% 0.01%
Shares used in computing earnings per share: 0.00% 0.00% 0.00% 0.00% 0.00%
Basic 5,753,421 6,085,572 6,477,320 934,818 924,258 2461.73% 3329.18% 3789.90% 597.30% 2544.53%
Diluted 5,793,069 6,122,663 6,521,634 945,355 936,645 2478.69% 3349.47% 3815.83% 604.03% 2562.00%
Cash dividends declared per share $1.98 $1.82 $1.64 $2.65 $0.00 0.00% 0.00% 0.00% 0.00% 0.00%
September 26, September 27, September 27, September 28 September 29 September 24
2015 2014 2013 2012 2011
ASSETS:
Current assets:
Cash and cash equivalents 21,120 13,844 14,259 10,746 9,815
Short-term marketable securities 20,481 11,233 26,287 18,383 16,137
Accounts receivable, less allowances of $82 and $86, respectively 16,849 17,460 13,102 10,930 5,369
Inventories 2,349 2,111 1,764 791 776
Deferred tax assets 5,546 4,318 3,453 2,583 2,014
Vendor non-trade receivables 13,494 9,759 7,539 7,762 6,348
Other current assets 9,539 9,806 6,882 6,458 4,529
Total current assets 89,378 68,531 73,286 57,653 44,988
Long-term marketable securities 164,065 130,162 106,215 92,122 55,618
Property, plant and equipment, net 22,471 20,624 16,597 15,452 7,777
Goodwill 5,116 4,616 1,577 1,135 896
Acquired intangible assets, net 3,893 4,142 4,179 4,224 3,536
Other assets 5,556 3,764 5,146 5,478 3,556
Total assets     290,479     231,839 207,000 176,064 116,371
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current liabilities:
Accounts payable 35,490 30,196 22,367 21,175 14,632
Accrued expenses 25,181 18,453 13,856 11,414 9,247
Deferred revenue 8,940 8,491 7,435 5,953 4,091
Commercial paper 8,499 6,308
Current portion of long-term debt 2,500 0
Total current liabilities 80,610 63,448 43,658 38,542 27,970
Deferred revenue, non-current 3,624 3,031 2,625 2,648 1,686
Long-term debt 53,463 28,987 16,960 0
Other non-current liabilities 33,427 24,826 20,208 16,664 10,100
Total liabilities 171,124 120,292 83,451 57,854 39,756
Commitments and contingencies
Shareholders’ equity:
Common stock and additional paid-in capital, $0.00001 par value: 12,600,000 shares authorized; 5,578,753 and 5,866,161 shares issued and outstanding, respectively 27,416 23,313 19,764 16,422 13,331
Retained earnings 92,284 87,152 104,256 101,289 62,841
Accumulated other comprehensive income (345 1,082 -471 499 443
Total shareholders’ equity 119,355 111,547 123,549 118,210 76,615
Total liabilities and shareholders’ equity 290,479 231,839 207,000 176,064 116,371
3 Year Forecast
Years ended September 26, September 27, September 28, September 29 September 24
2015 2014 2013 2012 2011
Net sales 233,715 182,795 170,910 156,508 108,249 132,379
Cost of sales 140,089 112,258 106,606 87,846 64,431 76,139
Gross margin 93,626 70,537 64,304 68,662 43,818 56,240
Operating expenses:
Research and development 8,067 6,041 4,475 3,381 2,429 2,905
Selling, general and administrative 14,329 11,993 10,830 10,040 7,599 8,820
Total operating expenses 22,396 18,034 15,305 13,421 10,028 11,725
Operating income 71,230 52,503 48,999 55,241 33,790 44,516
Other income/(expense), net 1,285 980 1,156 522 415 469
Income before provision for income taxes 72,515 53,483 50,155 55,763 34,205 44,984
Provision for income taxes 19,121 13,973 13,118 14,030 8,283 11,157
Net income 53,394 39,510 37,037 41,733 25,922 33,828
Earnings per share:
Basic 9.28 6.49 5.72 44.64 28.05 36
Diluted 9.22 6.45 5.68 44.15 27.68 36
Shares used in computing earnings per share:
Basic 5,753,421 6,085,572 6,477,320 934,818 924,258 929,538
Diluted 5,793,069 6,122,663 6,521,634 945,355 936,645 941,000
Cash dividends declared per share $1.98 $1.82 $1.64 $2.65 $0.00 1.33
September 26, September 27, September 27, September 28 September 29 September 24
2015 2014 2013 2012 2011
ASSETS:
Current assets:
Cash and cash equivalents 21,120 13,844 14,259 10,746 9,815 10,281
Short-term marketable securities 20,481 11,233 26,287 18,383 16,137 17,260
Accounts receivable, less allowances of $82 and $86, respectively 16,849 17,460 13,102 10,930 5,369 8,150
Inventories 2,349 2,111 1,764 791 776 784
Deferred tax assets 5,546 4,318 3,453 2,583 2,014 2,299
Vendor non-trade receivables 13,494 9,759 7,539 7,762 6,348 7,055
Other current assets 9,539 9,806 6,882 6,458 4,529 5,494
Total current assets 89,378 68,531 73,286 57,653 44,988 51,321
Long-term marketable securities 164,065 130,162 106,215 92,122 55,618 73,870
Property, plant and equipment, net 22,471 20,624 16,597 15,452 7,777 11,615
Goodwill 5,116 4,616 1,577 1,135 896 1,016
Acquired intangible assets, net 3,893 4,142 4,179 4,224 3,536 3,880
Other assets 5,556 3,764 5,146 5,478 3,556 4,517
Total assets     290,479     231,839 207,000 176,064 116,371 146,218
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current liabilities:
Accounts payable 35,490 30,196 22,367 21,175 14,632 17,904
Accrued expenses 25,181 18,453 13,856 11,414 9,247 10,331
Deferred revenue 8,940 8,491 7,435 5,953 4,091 5,022
Commercial paper 8,499 6,308
Current portion of long-term debt 2,500 0
Total current liabilities 80,610 63,448 43,658 38,542 27,970 33,256
Deferred revenue, non-current 3,624 3,031 2,625 2,648 1,686 2,167
Long-term debt 53,463 28,987 16,960 0 0
Other non-current liabilities 33,427 24,826 20,208 16,664 10,100 13,382
Total liabilities 171,124 120,292 83,451 57,854 39,756 48,805
Commitments and contingencies
Shareholders’ equity:
Common stock and additional paid-in capital, $0.00001 par value: 12,600,000 shares authorized; 5,578,753 and 5,866,161 shares issued and outstanding, respectively 27,416 23,313 19,764 16,422 13,331 14,877
Retained earnings 92,284 87,152 104,256 101,289 62,841 82,065
Accumulated other comprehensive income (345 1,082 -471 499 443 471
Total shareholders’ equity 119,355 111,547 123,549 118,210 76,615 97,413
Total liabilities and shareholders’ equity 290,479 231,839 207,000 176,064 116,371 146,218
5 Year Forecast
Years ended September 26, September 27, September 28, September 29 September 24
2015 2014 2013 2012 2011
Net sales 233,715 182,795 170,910 156,508 108,249 154,616
Cost of sales 140,089 112,258 106,606 87,846 64,431 92,785
Gross margin 93,626 70,537 64,304 68,662 43,818 61,830
Operating expenses:
Research and development 8,067 6,041 4,475 3,381 2,429 4,082
Selling, general and administrative 14,329 11,993 10,830 10,040 7,599 10,116
Total operating expenses 22,396 18,034 15,305 13,421 10,028 14,197
Operating income 71,230 52,503 48,999 55,241 33,790 47,633
Other income/(expense), net 1,285 980 1,156 522 415 768
Income before provision for income taxes 72,515 53,483 50,155 55,763 34,205 48,402
Provision for income taxes 19,121 13,973 13,118 14,030 8,283 12,351
Net income 53,394 39,510 37,037 41,733 25,922 36,051
Earnings per share:
Basic 9.28 6.49 5.72 44.64 28.05 21
Diluted 9.22 6.45 5.68 44.15 27.68 21
Shares used in computing earnings per share:
Basic 5,753,421 6,085,572 6,477,320 934,818 924,258 3,605,492
Diluted 5,793,069 6,122,663 6,521,634 945,355 936,645 3,631,574
Cash dividends declared per share $1.98 $1.82 $1.64 $2.65 $0.00 2
September 26, September 27, September 27, September 28 September 29 September 24
2015 2014 2013 2012 2011
ASSETS:
Current assets:
Cash and cash equivalents 21,120 13,844 14,259 10,746 9,815 12,166
Short-term marketable securities 20,481 11,233 26,287 18,383 16,137 18,010
Accounts receivable, less allowances of $82 and $86, respectively 16,849 17,460 13,102 10,930 5,369 11,715
Inventories 2,349 2,111 1,764 791 776 1,361
Deferred tax assets 5,546 4,318 3,453 2,583 2,014 3,092
Vendor non-trade receivables 13,494 9,759 7,539 7,762 6,348 7,852
Other current assets 9,539 9,806 6,882 6,458 4,529 6,919
Total current assets 89,378 68,531 73,286 57,653 44,988 61,115
Long-term marketable securities 164,065 130,162 106,215 92,122 55,618 96,029
Property, plant and equipment, net 22,471 20,624 16,597 15,452 7,777 15,113
Goodwill 5,116 4,616 1,577 1,135 896 2,056
Acquired intangible assets, net 3,893 4,142 4,179 4,224 3,536 4,020
Other assets 5,556 3,764 5,146 5,478 3,556 4,486
Total assets     290,479     231,839 207,000 176,064 116,371 166,478
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current liabilities:
Accounts payable 35,490 30,196 22,367 21,175 14,632 22,093
Accrued expenses 25,181 18,453 13,856 11,414 9,247 13,243
Deferred revenue 8,940 8,491 7,435 5,953 4,091 6,493
Commercial paper 8,499 6,308 6,308
Current portion of long-term debt 2,500 0 0
Total current liabilities 80,610 63,448 43,658 38,542 27,970 43,405
Deferred revenue, non-current 3,624 3,031 2,625 2,648 1,686 2,498
Long-term debt 53,463 28,987 16,960 0 15,316
Other non-current liabilities 33,427 24,826 20,208 16,664 10,100 17,950
Total liabilities 171,124 120,292 83,451 57,854 39,756 75,338
Commitments and contingencies
Shareholders’ equity:
Common stock and additional paid-in capital, $0.00001 par value: 12,600,000 shares authorized; 5,578,753 and 5,866,161 shares issued and outstanding, respectively 27,416 23,313 19,764 16,422 13,331 18,208
Retained earnings 92,284 87,152 104,256 101,289 62,841 88,885
Accumulated other comprehensive income (345 1,082 -471 499 443 388
Total shareholders’ equity 119,355 111,547 123,549 118,210 76,615 107,480
Total liabilities and shareholders’ equity 290,479 231,839 207,000 176,064 116,371 182,819
10 Year Forecast
Forecast Forecast Forecast Forecast September 26, September 27, September 28, September 29 September 24
2019 2018 2017 2016 2015 2014 2013 2012 2011
170,435 170,435 170,435 170,435 233,715 182,795 170,910 156,508 108,249 170,435
102,246 102,246 102,246 102,246 140,089 112,258 106,606 87,846 64,431 102,246
68,189 68,189 68,189 68,189 93,626 70,537 64,304 68,662 43,818 68,189
4,879 4,879 4,879 4,879 8,067 6,041 4,475 3,381 2,429 4,879
10,958 10,958 10,958 10,958 14,329 11,993 10,830 10,040 7,599 10,958
15,837 15,837 15,837 15,837 22,396 18,034 15,305 13,421 10,028 15,837
52,353 52,353 52,353 52,353 71,230 52,503 48,999 55,241 33,790 52,353
872 872 872 872 1,285 980 1,156 522 415 872
53,224 53,224 53,224 53,224 72,515 53,483 50,155 55,763 34,205 53,224
13,705 13,705 13,705 13,705 19,121 13,973 13,118 14,030 8,283 13,705
39,519 39,519 39,519 39,519 53,394 39,510 37,037 41,733 25,922 39,519
19 19 19 19 9.28 6.49 5.72 44.64 28.05 19
19 19 19 19 9.22 6.45 5.68 44.15 27.68 19
4,035,078 4,035,078 4,035,078 4,035,078 5,753,421 6,085,572 6,477,320 934,818 924,258 4,035,078
4,063,873 4,063,873 4,063,873 4,063,873 5,793,069 6,122,663 6,521,634 945,355 936,645 4,063,873
2 2 2 2 $1.98 $1.82 $1.64 $2.65 $0.00 2
September 27, September 27, September 28 September 29 September 24
2015 2014 2013 2012 2011
13,957 13,957 13,957 13,957 21,120 13,844 14,259 10,746 9,815 13,957
18,504 18,504 18,504 18,504 20,481 11,233 26,287 18,383 16,137 18,504
12,742 12,742 12,742 12,742 16,849 17,460 13,102 10,930 5,369 12,742
1,558 1,558 1,558 1,558 2,349 2,111 1,764 791 776 1,558
3,583 3,583 3,583 3,583 5,546 4,318 3,453 2,583 2,014 3,583
8,980 8,980 8,980 8,980 13,494 9,759 7,539 7,762 6,348 8,980
7,443 7,443 7,443 7,443 9,539 9,806 6,882 6,458 4,529 7,443
66,767 66,767 66,767 66,767 89,378 68,531 73,286 57,653 44,988 66,767
109,636 109,636 109,636 109,636 164,065 130,162 106,215 92,122 55,618 109,636
16,584 16,584 16,584 16,584 22,471 20,624 16,597 15,452 7,777 16,584
2,668 2,668 2,668 2,668 5,116 4,616 1,577 1,135 896 2,668
3,995 3,995 3,995 3,995 3,893 4,142 4,179 4,224 3,536 3,995
4,700 4,700 4,700 4,700 5,556 3,764 5,146 5,478 3,556 4,700
166,478 166,478 166,478 166,478     290,479     231,839 207,000 176,064 116,371 166,478
24,772 24,772 24,772 24,772 35,490 30,196 22,367 21,175 14,632 24,772
15,630 15,630 15,630 15,630 25,181 18,453 13,856 11,414 9,247 15,630
6,982 6,982 6,982 6,982 8,940 8,491 7,435 5,953 4,091 6,982
7,404 7,404 7,404 7,404 8,499 6,308 7,404
1,250 1,250 1,250 1,250 2,500 0 1,250
50,846 50,846 50,846 50,846 80,610 63,448 43,658 38,542 27,970 50,846
2,723 2,723 2,723 2,723 3,624 3,031 2,625 2,648 1,686 2,723
24,853 24,853 24,853 24,853 53,463 28,987 16,960 0 24,853
21,045 21,045 21,045 21,045 33,427 24,826 20,208 16,664 10,100 21,045
94,495 94,495 94,495 94,495 171,124 120,292 83,451 57,854 39,756 94,495
20,049 20,049 20,049 20,049 27,416 23,313 19,764 16,422 13,331 20,049
89,564 89,564 89,564 89,564 92,284 87,152 104,256 101,289 62,841 89,564
380 380 380 380 345 1,082 -471 499 443 380
109,855 109,855 109,855 109,855 119,355 111,547 123,549 118,210 76,615 109,855
204,351 204,351 204,351 204,351 290,479 231,839 207,000 176,064 116,371 204,351

Similar Post: Business Research Data

Reference

Martelli, J., & Greener, S. (2015). An Introduction to Business Research Methods, BookBoon. Com, 2015: An Introduction to Business Research Methods (Vol. 1). Bukupedia.

Zhu, Y., Zhou, L., Xie, C., Wang, G. J., & Nguyen, T. V. (2019). Forecasting Smes’ Credit Risk In Supply Chain Finance With An Enhanced Hybrid Ensemble Machine Learning Approach. International Journal of Production Economics, 211, 22-33.

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Question 

Financial Forecasting Exercise

Apple Inc Financial Forecasting

Switching gears for a bit, we will do an exercise in a different kind of business research that incorporates financial forecasting. If you are doing a business plan for your final project, this process will help you think about your financials for that as well.

Apple Inc Financial Forecasting

For this assignment, find and use Apple Inc’s financial information from their 10-K reports to create a financial forecast for Apple for the next 3, 5, and 10 years. Note that if you wanted to go farther back in the company’s history, you could find additional filings on the SEC webpage in EDGAR. There are simpler and more complex ways to accomplish a forecast such as this, as you know from your previous statistics class(es) and as you have seen in the readings for this course, including averaging straight-line and time-series forecasting. As Greener and Martinelli (2015) argue, simple forecasts can be as effective as complex ones, and using several different types together results in even better predictions than a single complex forecast. Please follow these steps (read through them all before beginning):

  1. Find Apple Inc.’s 10-K filings that will give you their financial data for the past five years. Note: You can find it on Apple, Inc.’s investor relations website or in EDGAR.

https://investor.apple.com/investor-relations/

  1. Create a spreadsheet to enter the 5-year data from the report (from page 24 of Apple’s 2015 10-K report).
  2. In your spreadsheet, build a similar set-up with the column on the left showing all the lines, e.g., from Net Sales down to Total Shareholder’s Equity.
  3. Then create columns for the five years of historical data (2011) to (2015) – you will note that their fiscal year ends in September.
  4. Using this year-by-year historical data, calculate your 3, 5, and 10-year forecasts for each row (i.e. Net Sales, etc., down to Total Shareholder’s Equity). You can choose which forecasting method you want to use (remember your undergraduate statistics course), and there are refresher tutorials of various methods online. For example, here are some helpful videos and webpages on time-series analysis if you chose that method and needed a refresher:

http://www.cimaglobal.com/Pages-that-we-will-need-to-bring-back/Old-site-pages1/Old-site-pages/Thought-leadership/Newsletters/Insight-e-magazine/Insight-2010/Insight-November-2010/Spreadsheet-skills-trendy-forecasting-in-Excel/

  1. After you have completed your forecast, in a Word document, state the type of forecasting method you chose and why. Then write a brief statement on why Apple’s Board of Directors should be confident in these forecasts (for the 3, 5, and 10 years). Remember that hundreds of millions of dollars are at stake. Only one page is necessary for this written statement.
  2. Submit your written statement and the spreadsheet with your forecasts as attachments using the Session 4 Research Assignment link.

Note that you and your classmates may produce different forecasts depending on your methods. This is the nature of the process and is why it is such an uncertain and risky process in business. Nevertheless, we use forecasting as one research tool to support our future-looking decision-making.

The Reading Assignment:

Greener, S., & Martelli, J. (2018). An introduction to business research methods (3rd ed.).

Greener, S., & Martelli, J. (2018) for the reading assignment. An introduction to business research methods (3rd ed.). (eBook available at https://bookboon.com/en/an-introduction-to-business-research-methods-ebook).

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