Ratios and Retained Earnings

Ratios and Retained Earnings

Projected Financial Ratios

Projected Ratios
	2020	2021	2022
Current Ratio	1.36	1.07	0.88
Quick-ratio	1.14	0.98	0.76
Debt-to-equity ratio	1.72	1.98	2.37
Debt-to-total assets ratio	0.35	0.36	0.34
Times Interest Earned Ratio	23.07	41.19	40.75
Inventory turnover	41.52	40.03	38.79
Total assets turnover	0.83	1.08	1.12
Average collection period	26	28	22
Gross profit margin	38.23%	41.78%	43.31%
Operating profit margin	24.15%	29.78%	30.29%
ROA	17.33%	28.06%	28.36%
ROE	73.69%	147.44%	175.46%

Financial ratios offer insight into a company’s financial performance (Kadim et al., 2020). The current ratio, inventory turnover, return on assets, and return-to-equity present the ratios of interest. Specifically, they offer insight into the company’s financial performance regarding liquidity, turnover, gearing, and leverage. The projections regarding these metrics indicate a declining performance regarding liquidity across the three years (Rashid, 2018). However, the other three metrics indicate a promising performance regarding the company’s financial performance. Notably, this is so because the company is expected to make more sales. Overall, all ratios indicate a promising future for Apple Inc. Hire our assignment writing services in case your assignment is devastating you. Our team of experts is ready to help.

Retained Earnings Table

	Dividend Information		Balance Sheet Information
Steps	1	2	3	4	5
Year	Current Year’s Net Income	Less Current Year’s Dividends Paid	New RE	Plus Prior Year’s RE	Current Year’s Balance Sheet RE
2020	57,411,000	–	57,411,000	45,898,000	103,309,000
2021	94,680,000	–	94,680,000	14,966,000	109,646,000
2022	99,803,000	–	99,803,000	5,562,000	105,365,000

Apple Inc. has not paid any dividends in the three years considered. Essentially, this means that the company’s net income becomes retained earnings in the following year. From the projections, the company has significant amounts of retained earnings that can be used to finance multiple investment activities, which can win investors’ confidence (Husain & Sunardi, 2020). In the future, the investments will deliver dividends to investors.

References

Husain, T., & Sunardi, N. (2020). Firm’s Value Prediction Based on Profitability Ratios and

Dividend Policy. Finance & Economics Review, 2(2), 13-26.

Kadim, A., Sunardi, N., & Husain, T. (2020). The modeling firm’s value is based on financial.

Ratios, intellectual capital, and dividend policy. Accounting, 6(5), 859-870.

Rashid, C. A. (2018). The efficiency of financial ratios analysis for evaluating companies’

liquidity. International Journal of Social Sciences & Educational Studies, 4(4), 110.

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 In 50-100 words, provide an analysis overview for this part. Also, explain how the projected ratios compare to the prior year’s ratios. Explain the importance of this comparison.

Retained Earnings: Use your Strategic-Planning Template to complete the company retained earnings table.