The Dupont Analysis Of Apple And Microsoft

1055 words - 4 pages

Apple vs Microsoft
Apple Inc. originated out of California in 1976. Steve Jobs and Steve Wozniak dropped out of college together to begin making technology in their garage. Apple’s technology skyrocketed becoming one of the top technology producing companies. They fell short in the nineties though, companies began to catch up and now there was more competition than before. Apple released their ipod in 2001, putting them back in the leadof the technology industry (The History of Apple). Presently, Apple is still exceeding other companies in the technology industry, such as Microsoft, Blackberry, Google and Hewlett Packard. Microsoft is Apple’s largest competitor, which is revealed through the Dupont analysis and other activity ratios, these particular ratios also make known that Apple’s numbers are not all accurate.
The Dupont analysis includes the asset turnover ratio, the profit margin percantage, return on shareholder’s equity percentage, return on assets, and the equity multiplier (Spiceland, Sepe, and Nelson 258-264). The asset turnover ratio is the amount of revenue received for every one dollar of assets, it reveals how efficiently the company is distributing assets. Apple’s asset turnover ratio is 60.43 which means for every one dollar Apple has in assets, they receive approximately sixty cents (Apple Inc). Microsoft’s asset turnover ratio is 13.17 so for every dollar they only receive about thirteen cents (Microsoft Inc). Apple is doing significantly better in this category. The profit margin is just how much of a company’s sales they keep as a profit. Apple’s profit margin is 21.67% while Microsoft has a 28% profit margin so Microsoft is accumulating more profit off each sale but their sales are lower. The return on shareholder’s equity reveals how much a company makes with the money the owners invested. Apple’s ratio is 29.98% compared to Microsoft’s 30.09%, they are just about equal but Apple is doing slightly better. The return on assets proves the efficiency of how assets are being used to create revenues. Apple’s return on assets percentage is 17.89% while Microsoft’s is 16.58% (Apple Inc). Microsoft may not be far behind but Apple still has them beat. The equity multiplier is similar to the debt ratio, revealing what percentage of of purchases is gained through debt or equity. Apple’s equity multiplier is a mere 1.67 with Microsoft agead producing a 1.81 multiplier (Microsoft Inc). The lower the multiplier is, the better a company is doing which means Apple wins again (Spiceland, Sepe, and Nelson 258-264). According to the Dupont analysis, Apple is being closely trailed by Microsoft, making them a threat.
Along with Dupont analysis, activity ratios are used in order to analyze the success of a company and its competitors (Spiceland, Sepe, and Nelson 258-264). Activity ratios include receivables turnover ratio, average collections period, inventory turnover ratio, and average days in inventory. The receivables turnover ratio...

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