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Financial Plan

Financial Plan

Income Projection Statement

The Company’s revenue projection in the next fiscal year shows profit potential. Apple is poised to boost its revenue from its services division. The tech giant is projected to post an average income of $ 381.81 billion in the next 12 months (Market screener: Apple Inc, 2022). Out of these earnings, the Company’s enterprise value-to-revenue multiple (EV/R) is projected at 7.55x, signaling an overvalue thanks to the Company’s revenue-generating ability (Market screener: Apple Inc, 2022). In the same vein, Apple’s enterprise value-to-EBITDA (EV/EBITDA) in 2022 is projected at 23.7x, indicating its ability to generate more operating cash flows. In the first quarter of the next fiscal year, the Company is also forecasted to post a net sale of $ 365.82 billion on a net income of $ 30,966 billion (Yahoo Finance, 2022). During the same fiscal period, Apple’s earnings will come in at $ 5,74 per share basis (Yahoo Finance, 2022).

These projections are attributed to the firm’s position as one of the leading smartphone vendors in the world. Demand for iPhone gadgets is projected to remain strong due to the upcoming release of larger iPhone sizes, such as the 6.1-inch iPhone 14, the 6.7-inch iPhone 14 Max, and the 6.1-inch iPhone 14 Pro. The firm argues that it is setting a new standard for significant redesigns, upgraded specifications, and new features. As such, sales for the new models are expected to exceed those of the previous iPhone versions, whose sales will still skyrocket in the next financial year. The prospect is also premised on the evolution of Apple’s services segment to include AppleCare warranties, ApplePay, AppleCare, iCloud storage services, and subscriptions to other services such as Apple TV+ and Apple Arcade. The non-operating revenues are also expected to hit an all-time high of $ 316. 166 (Yahoo Finance, 2022). These forms of payment will be realized from non-core businesses, such as the Wearables, Home, and Accessories segment. This line of business also comprises Apple Watch, AirPods, and HomePods.

Forecasted 12-Month Profit and Loss

The 12-month profit and loss statement shows that Apple will remain profitable in the next fiscal year. Essentially, the Company’s revenues are expected to outweigh the expenditure over the next financial year heavily. For example, Apple’s working capital expenditure is anticipated to average $8.5 billion. The fee encompasses manufacturing process equipment and product tooling, corporate facilities, and infrastructures, data centers, and information centers (United States Securities and Exchange Commission, 2019). The Company’s other purchase obligations consist of non-cancelable obligations to acquire capital assets, including product tooling and manufacturing process equipment, and non-cancelable obligations related to advertising, licensing, research, and development (R&D), content creation, internet services, and telecommunications services. At the end of the next fiscal year, a significant portion of the other non-current liabilities in the Company’s Consolidated Balance Sheet consisted of the deemed repatriation tax imposed by the Act (United States Securities and Exchange Commission, 2019). The Company plans to pay the deemed repatriation tax payable in installments per the Act. Apple’s remaining non-current liabilities primarily consist of items for which it is unable to make a reasonably reliable estimate of the timing or amount of payments.

Accordingly, the Company expects its future quarterly revenue and operating profits to increase. Software, accessories, and service and support contracts are at the heart of these growths, which exhibit higher gross margins than those of its non-core products. In particular, the firm expects iPhone revenue of $38.87 billion, with a 25.6% year-over-year growth; service revenue of $18.28 billion; other products revenue of $8.7 billion; iPad revenue of $8.25 billion; and Mac revenue of $9.18 billion (Leswing, 2021). These earnings are projected to hit a gross margin of 42.2% (Leswing, 2021). The prospects will be mainly due to seasonal holiday demand, new product introductions, operating expense strategies, internal system improvements, and partnerships with other high-end manufacturers.

4-Year Profit and Loss Projection

The Company’s four-year profitability is projected to improve while the loss is to be maintained at an acceptable minimum within the next four years. Typically, the firm’s Gross profit margin ratio will improve in the next four financial years. At the same time, the operating profit margin ratio is anticipated to strengthen due to expected high net revenue and reduced active income. The net profit margin is also expected to rise, courtesy of increased revenue and net income.

Sales Forecast

Apple’s product and service sales are also expected to grow faster in the next four years. In particular, the 5 G-enabled iPhone SE to be launched in CY22 is likely to boost the total number of sales per unit (Yahoo Finance, 2021). Estimates suggest that this surge in sales will lead to an average of 2% of sales revenue and approximately 7% more profits in the next four years (Yahoo Finance, 2021). The expected high number of sales will see Apple Company close the next fiscal year with a net sale of $367.2 billion and adjusted earnings per share of $5.63 (Yahoo Finance, 2021). Year-over-year expectations show that the company is currently facing more demand for its iPhone 13 and MacBook Pro models than it can supply (Leswing, 2021). With the Company now in the middle of massive sales growth, its annual revenues from sales are expected to grow by 33%, an equivalent of $366 billion (Leswing, 2021). Other than the iPhones, Apple Inc. anticipates higher sales from different product categories, including music and video subscription services, licensing, advertising, App Store, and extended warranties. Sales of these services are projected to grow by 26% annually (Leswing, 2021). The Company has put measures in place to ensure it meets these expectations. Some of these initiatives include effective customer-centric marketing practices. Another critical strategy involves the effective management of quality and warranty costs. Therefore, these measures will ensure Apple Inc. realizes its net sales forecasts.

Cash Flow Projection

Accordingly, insights into Apple’s cash flow statements suggest that it will manage its cash position well to maintain a solid financial footing. Ideally, cash from operating activities is expected to grow by 28.44% at the close of the next fiscal year. The net income before extraordinary is projected to hit $ 29,494.68 billion; depreciation and amortization are anticipated to hit $12.28 billion; depreciation and depletion are forecasted at $ 12.20 billion; and deferred taxes and investment tax credit are expected to average $ 4.88 billion (MarketWatch, 2022). The cash above flows are expected to result from the Company’s core operations. These forecasts paint a picture of the Company’s future operational efficiency and ability to make sustainable financial decisions.

However, cash flow from investment activities will decrease to less than $ 11.09 billion in the same period, indicating that a significant amount of cash will be invested in the Company’s long-term health. Long-term investments will include research and development (R&D) and the acquisition of robust technological solutions. Conversely, cash flow from financing activities, such as cash dividends paid, repurchasing of common stock, and change in current debt, is expected to exceed $ 111.976 billion in the succeeding fiscal year (MarketWatch, 2022), according to Apple Inc. Report (2019), the Company plans to issue more equity to investors, borrow more investment capital, and issue more bonds in terms of debts to investors. These activities will increase the firm’s assets by ensuring more money is flowing in. Therefore, Apple Inc.’s future cash-generating ability will bolster its shareholder confidence by placing it in a better position to expand, pay dividends, and reduce debt to pay interest.

Projected Balance Sheet, Income statement for the Next 3 Years

The planned operational strategies are expected to impact the Company’s balance sheet. The firm’s current assets, such as cash and cash equivalents, inventories, marketable securities, and vendor non-trade receivables, are anticipated to exceed $ 134,836 billion. Similarly, non-current assets, such as marketable securities, properties, and equipment, are projected to hit $ 216,166 billion in the next fiscal year (United States Securities and Exchange Commission, 2019). In the same breadth, the firm’s current liabilities within a year are expected to be fewer than assets, especially when compared against cash flow. In this way, Apple Inc. expects to settle its debts comfortably before booking net profit. The current liabilities, including accounts payable, differed revenue, commercial paper, and term debt, are expected to surpass $ 205,718 billion, with the non-current drawbacks projected to hit $348,028 billion (United States Securities and Exchange Commission, 2019). Additionally, significant equity, including retained earnings and paid-in capital, is projected to reach $ 90,988 billion (United States Securities and Exchange Commission, 2019). This projection is due to the future increase in the firm’s retained earnings.

Payback Calculation

Apple Inc.’s significant investment in the pipeline is in innovative fields like silicon engineering and 5G technology. Essentially, the Company has committed $450 billion to the project for five years (Apple Newsroom, 2021). The idea is to create jobs in cutting-edge fields, such as artificial intelligence and 5G networks. With the payback period projected to be five years and the Cost of investment estimated to be $450 billion, the average annual cash flow for investors after the asset reaches a breakeven point can be calculated as follows:

Payback period = Cost of investment / Average annual cash flow

5 = $450 billion/Average yearly cash flow

Average yearly cash flow = 450/5 = $90 billion annually.

References

Apple Newsroom. (2021). Apple commits $430 billion in US investments over five years. Apple Newsroom. Retrieved from https://www.apple.com/newsroom/2021/04/apple-commits-430-billion-in-us-investments-over-five-years/.

Leswing, K. (2021). Apple sales miss expectations; Tim Cook says supply issues cost the Company $6 billion. CNBC. Retrieved from https://www.cnbc.com/2021/10/28/apple-aapl-q4-2021-earnings.html.

Marketscreener: Apple Inc. (2022). APPLE INC: Financial Data Forecasts Estimates and Expectations | AAPL | US0378331005 | MarketScreener. Marketscreener.com. Retrieved 5 January 2022, from https://www.marketscreener.com/quote/stock/APPLE-INC-4849/financials/.

MarketWatch. (2022). AAPL | Apple Inc. Annual Cash Flow Statement | MarketWatch. MarketWatch. Retrieved from https://www.marketwatch.com/investing/stock/aapl/financials/cash-flow.

United States Securities and Exchange Commission. (2019). 2019 Annual Report (pp. 1-101). California: Apple Inc. Retrieved from https://www.sec.gov/Archives/edgar/data/320193/000032019319000119/a10-k20199282019.htm

Yahoo Finance. (2022). Yahoo is part of the Yahoo family of brands. Finance.yahoo.com. Retrieved five from https://finance.yahoo.com/quote/aapl/analysis/.

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Question 


Financial Plan

Financial Plan

In this second week of your course project, you will be adding the financial section to the business plan.

As you completed the first section of your business plan, your manager has informed you of outside interest in the Company. You have been tasked to meet and verify the Company’s current financial health.

Find a year-end report for your Company: Apple Inc.
Utilize the website, Dun & Bradstreet. https://www.dnb.com/products/marketing-sales/dnb-hoovers.html This will significantly assist you in writing your report.
Note that you might need to create some hypothetical details to fill in gaps for researched information. However, the project should use as much accurate information as possible.

Based on your research, write a brief analysis of each of the following items:

Financial Statements and Projections
Income Projection Statement
Forecasted 12-Month Profit and Loss
4-Year Profit and Loss Projection
Sales Forecast
Cash Flow Projection
Projected Balance Sheet, Income statement for the Next 3 Years
Payback Calculation
The submission details are as follows:

Present your analysis as a 5-page report in a Microsoft Word document formatted in APA style.
Cite any sources in APA format.
Submitting your assignment in APA format means, at a minimum, that you will need the following:

Title page: Remember the running head. The title should be in all capitals.
Length: There should be at least five pages. (Please make sure to include an introduction and a conclusion because it counts toward the grading of essay structure)
Abstract: This is a summary of your paper, not an introduction. Begin writing in the third person.
Body: This begins on the page following the title page and abstract page and must be double-spaced (be careful not to triple- or quadruple-space between paragraphs). The typeface should be 12-point Times New Roman or 12-point Courier in regular black type. Do not use color, bold type, or italics except as required for APA-level headings and references. The deliverable length of the body of your paper for this assignment is five pages. In-body academic citations to support your decisions and analysis are required. Using a variety of literary sources is encouraged.
Reference page: References that align with your in-body academic sources are listed on the final page of your paper. The references must be in APA format using appropriate spacing, hanging indent, italics, and uppercase and lowercase usage as suitable for the type of resource used. Remember that this page is not a bibliography but a further listing of the abbreviated in-body citations used in the paper. Every referenced item must have a corresponding in-body source. (Use at least 4-5

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