Apple, Inc. has a fiscal year that ends on the last Saturday of September. For t

Question

Apple, Inc. has a fiscal year that ends on the last Saturday of September. For the year ended September 26, 2015, Apple reported a net income of $53,394 M and cash flow from operations (i.e. income producing activities) of $81,266 M.

On another note, Apple reported a total stockholder’s equity of $119,355 M on its 2015 balance sheet. The company also reported a total of 5.6 billion shares of common stock outstanding. According to these numbers, the value of each share of Apple stock on its balance sheet is $21.31. The stock price for Apple on Friday, September 25 was $116.44 per share.

Required:

1.       Why would Apple choose a fiscal year that ends at the end of September?

2.       What could be some primary causes why cash flow from operations is so much greater than accounting net income?

3.       Why would investors be willing to pay $116.44 per share when the stock is valued at $21.31 per share on the Company’s balance sheet?

Explanation / Answer

1) Apple choose a fiscal year that ends at the end of September because the next quarter i.e. Oct 1 - Dec 31 is the boom period for Apple sale as Chirismus falls in the quarter.

2) Apple's cash flow from operations is so much greater than accounting net income because of certain reasons like reversal of the non-cash expenses like depreciation, income tax refund and fast recovery form the Accounts Receivables.

3) Apple's investors be willing to pay $116.44 per share when the stock is valued at $21.31 per share on the Company’s balance sheet because of the company's current and expected future growth. Apple is paying good dividends as it has good income and higher cash flow from operations.

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