Financial Comparison of Apple Inc. and Microsoft

Apple is a technology company that focuses on producing electronic devices and
software for computers and other online services. When revenue is put into consideration, Apple
is the most significant technological company. The organization trades with the AAPL ticker
symbol in the market. It was founded in 1976 located in California, United States. Microsoft
Corporation is a crucial competitor to Apple Inc. since there are in the same industry. The
services being provided in Microsoft are similar to those of Apple. The company uses MSFT as
its ticker symbol to trade in the stocks market. Their revenue is slightly lower when compared to
Apple Inc.

Quick Ratio

The quick percentage signifies a company’s ability to repay its short-term liabilities from
its cash assets. This metric demonstrated the company’s solvency, which is crucial in financing
its activities. The quick ratio recorded in 2019 was 1.38, indicating Apple has one and a third of
the required cash assets in servicing its current liabilities. There was a significant increase in
quick ratio from 2018, which was recorded at 0.99 to 2019, registered at 1.38 (NASDAQ:
AAPL, n.p). Microsoft, on the other hand, had a much higher quick ratio of 2.05 in 2019. The
amount is an increase from 2.0 in 2018, and it is anticipated to increase in the future. A
comparison between the two companies indicates that Microsoft has a much better short-term
strength than Apple Inc.

Return on Equity

Return on equity signifies the company’s efficiency in converting shareholders’ wealth
into profit. Apple’s ROE was registered at 61.06%, which was a remarkable increase from the
previous year of 55.6% (Macrotrend, n.d). As a result, apple’s equity is attractive to shareholders,

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given the company puts shareholders’ wealth into good use. The return on equity for Microsoft in
the last 12 months is 47.1%. From 2017 to 2021, Microsoft’s average Return on Equity Ratio is
36.2% (Microsoft Corporation, 2019). A comparison of the two companies indicates that Apple
Inc. has a much higher ROE than Microsoft. Therefore, it is safe to conclude that the
shareholders in Apple are in a much better position in yielding excellent outcomes.

Gross Profit Margin

Gross Profit Margin is a profitability margin that measures the remaining revenue
obtained from sales after paying the goods’ cost (Smith, 2010). Apple’s gross margin was
recorded at 37.817, which increased from the previous year to 38.3. Over the past five years, the
highest gross margin attained was 40, and the lowest was 38. Therefore, the cost of goods sold
comprises 60% of the total revenue earned over a period. The gross profit margin for Microsoft
stands at 68.9% as of the 2020 financial year (Microsoft Corporation, 2019). It is much higher
than that of Apple Inc., implying the profits being generated from selling an extra unit of their
commodity is much higher.

Financial Statement (Income Statement)
Items Microsoft Corporation Apple Inc.
Operation Cash Flow 43,884,000 77,434,000
Investing Cash Flow -6,061,000 16,006,000
Financing Cash Flow -33,590,000 -87,876,000
End Cash Position 11,946,000 25,913,000
Capital Expenditure -11,632,000 -13,313,000
Issuance of Capital Stock 1.002,000 669,000
Issuance of Debt 7,183,000 6,969,000

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Repayment of Debt -10,060,000 -6,500,000
Repurchase of Capital Stock -10,721,000 -72,738,000
Free Cash Flow 32,252,000 64,121,000

The data used in the spreadsheet is for the 2019 financial years for both companies. It is evident
that Apple Inc. is performing better than Microsoft since they have a much higher free cash flow.
In addition, the operating cash flow for Apple Inc. is much higher, showing the number of
investors is high, and there is a great chance for yielding favorable outputs.

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References

Macrotrend (n.d). Apple Financial Ratios for Analysis 2005-2020 | AAPL. Retrieved from
https://www.macrotrends.net/stocks/charts/AAPL/apple/financial-ratios
Microsoft Corporation. (2019). 2019 Annual Report.
Smith, P., (2010). Performance Indicators and Outcomes in the Public Sector. Journal of Public
Money and Management, 15(4). 13–16.
Stock Analysis on Net. Apple Inc. (NASDAQ:AAPL). Retrieved from https://www.stock-
analysis-on.net/NASDAQ/Company/Apple-Inc/Ratios/Profitability/Quarterly-Data.