Disclosure Analysis Paper The publicly held company selected to use as the basis for this paper is Apple Inc. Apple Inc. designs, manufactures and markets mobile communication and media devices, personal computers, and portable digital music players, and sells a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications.
The Company’s business strategy leverages its unique ability to design and develop its own operating systems, hardware, application software, and services to provide its customers new products and solutions with superior ease-of-use, seamless integration, and innovative design. The Company believes continual investment in research and development and marketing and advertising is critical to the development and sale of innovative products and technologies. (Form 10-K, 2011, p. 1) Apple’s Cash and Cash Equivalents
Allowance for Doubtful Accounts disclosure which locates in Note 1 – Summary of Significant Accounting Policies, explains that the Company records its allowance for doubtful accounts based upon its assessment of various factors. The Company considers historical experience, the age of the accounts receivable balances, credit quality of the Company’s customers, current economic conditions, and other factors that may affect customers’ ability to pay. In Note 2- Financial Instruments, Apple Inc. indicates the components of receivables: Trade Receivables
The Company has considerable trade receivables outstanding with its third-party cellular network carriers, wholesalers, retailers, value-added resellers, small and mid-sized businesses, and education, enterprise and government customers. The Company generally does not require collateral from its customers; however, the Company will require collateral in certain instances to limit credit risk. In addition, when possible, the Company attempts to limit credit risk on trade receivables with credit insurance for certain customers or by requiring third-party financing, loans or leases to support credit exposure.
These credit-financing arrangements are directly between the third-party financing company and the end customer. As such, the Company generally does not assume any recourse or credit risk sharing related to any of these arrangements. As of September 24, 2011, there were no customers that accounted for 10% or more of the Company’s total trade receivables. Trade receivables from two of the Company’s customers accounted for 15% and 12% of total trade receivables as of September 25, 2010.
The Company’s cellular network carriers accounted for 52% and 64% of trade receivables as of September 24, 2011 and September 25, 2010, respectively. The additions and write-offs to the Company’s allowance for doubtful accounts during 2011, 2010 and 2009 were not significant. Vendor Non-Trade Receivables The Company has non-trade receivables from certain of its manufacturing vendors resulting from the sale of components to these manufacturing vendors who manufacture sub-assemblies or assemble final products for the Company. The Company purchases these components directly from suppliers.
Vendor non-trade receivables from two of the Company’s vendors accounted for 53% and 29% of total non-trade receivables as of September 24, 2011 and vendor non-trade receivables from two of the Company’s vendors accounted for 57% and 24% of total non-trade receivables as of September 25, 2010. The Company does not reflect the sale of these components in net sales and does not recognize any profits on these sales until the related products are sold by the Company, at which time any profit is recognized as a reduction of cost of sales. Form 10-K, 2011, p. 59) Apple’s Inventories Apple Inc. reports inventories are $776 million, which make up 0. 7 percent of total assets in 2011. In Note 1- Summary of Significant Accounting Policies, company states that inventories are stated at the lower of cost, computed using the first-in, first-out method, or market. If the cost of the inventories exceeds their market value, provisions are made currently for the difference between the cost and the market value.
The Company’s inventories consist primarily of components and finished goods for all periods presented. (Form 10-K, 2011, p. 52) By analyzing cash and cash equivalents, receivables, and inventories of Apple Inc. ’s in 2011, which are the specific components of Apple’s assets, we can get that Apple Inc. ’s sales are high, but the level of inventories and receivables are very low. It provides the company adequate cash flows. Therefore, it is a good position for the company to be in. Apple Inc. can meet its short-term debt obligations with no stress.