Achieving Financial Security

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Achieving Financial Security

Introduction

Achieving financial security now and in the future is very important. To this end, it is important for individuals to make sound investment decisions that will ensure the achievement of financial security now, and in the future. Consequently, there are various types of investments from which an individual can pick the most appropriate to invest in. An investor can choose to invest or put his or her funds in a fixed earnings investment with minimal risk or an investment with a higher risk but better returns prospects. In this case, there are two types of investment options available, that is, a fixed earning bank account with an interest rate of 5 percent per annum. This is a fixed earnings investment with very low risk. On the other hand, there is an option of investing in stock of a listed company with the likelihood of higher returns as the company grows. However, as a result of the uncertainty associated with stock prices, investing in a stock has a higher risk compared to investing in a fixed earnings type of investment such as a putting the money in bank account or buying treasury bills or bonds.

Problem Statement

Considering the argument presented above, in this case, the investor has to choose between putting his or her money in a fixed earnings investment with a lower risk or put the same in the stock of a company with a higher risk and a prospective higher rate of return. Based on calculated financial ratios and a qualitative analysis, the investor will decide and choose between keeping the money in a bank account with a 5% annual interest rate and investing in stock of a listed company. The analysis will facilitate the investor to make a decision on whether to keep the $100,000 in a savings account earning 5% per annum or invest in additional shares of a company listed in the stock exchange in the United States with a good financial performance and dividend paying history. Further, the company should have good future growth prospects; this is discerned from its current strategies, industry analysis, and the global operating environment. Based on this, Apple, Inc. one of the leading technological companies, not only in the United States but also globally was selected. Apple, Inc. is an American Multinational that specializes in design, manufacture, and marketing of various consumer electronics and supporting products such as the iPhone, iPod, iPad, Mac, Apple Watch, Apple TV, and consumer and professional software that run on most of Apple, Inc.’s devices.

Analysis

Using information gleaned from Apple, Inc.’s website, financial statements, and MarketWatch.com, it is evident that for the last five years, Apple, Inc. has posted continuous growth results in its financial performance. The company has over the years to grow to be the leading technological company in the United States in terms of Market Capitalization and revenues among other parameters; beating Microsoft, Alphabet, Inc., Verizon Communications, Oracle, Corp, AT&T and other leading technological and related companies in the United States. Using the financial statement of the company for the last five years, it is evident that the company has recorded very good performance in revenues, profitability, earnings per share, return on equity, return on assets, return on investment, and the overall valuation of the company. Further, an analysis of these ratios, and comparing with those of another global market leader like Samsung, demonstrates that Apple, Inc. has outperformed the company on various financial grounds. With consistent growth in profitability indicators in the last five years, the company has recorded pre-tax profit margin, gross profit margin, and net profit margin of 29.3%, 39.8%, and 21.5% respectively for FY 2014/15. This indicates that the company has been profitable for the last five years and there is a high likelihood of remaining profitable in future.