ACCT5907 International Financial Statement Analysis, Term 1, 2019
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ACCT5907 International Financial Statement Analysis, Term 1, 2019
Required:
Using the Financial Reporting and Earnings Quality (FREQ) framework, analyse and identify at least 2 uniquely different types of FREQ issues relating to its earnings (net income) or earnings per share (EPS) figures.
Important Note:
- You should analyse each issue as independent,i.e. a stand-alone basis and not together.
- Focus on the US$ numbers and ignore the constant currency numbers.
- Use the attached document at the back the quiz to answer the questions.
Quiz Answer Template:
(A) Analysis of performance: refer to the summary of Apple’s results and to Exhibit 99.1 of Apple’s Form 8-K filing.
Which of the two pieces of information are likely to be most important to you as an investor? Give your reasons (2 marks – 1 mark each)
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(ii) |
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(B) Analysis of performance: refer to Exhibit 99.2 of Apple’s Form 8-K filing.
(1) Which is the worst performing geographic segment and why? (1 marks)
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(2) Which is the best performing product segment (excluding other products) and why? (1 marks)
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(3) What concerns (problem areas) might you have regarding the geographic or product performance? marks)
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(4) What comment can you make about the Company’spricing policy/strategy of iPhones? (1 marks)
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(C) In the financial results conference call, CFO Luca Maestri stated that Apple will in future no longer provide unit sales information (as seen in Exhibit 99.2). His reasoning was because unit sales do not represent a clear indication of the Company’s performance and are less relevant.
Using the Financial Reporting and Earnings Quality (FREQ) framework, analyse the FREQ of this information.
(1) FREQ: principles of financial reporting/ earnings quality addressed. (1 mark)
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(2) TENSION, ADJUST: not required in this Quiz.
(3) INFERENCE: how to detect & understand the problem. (2 marks)
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(4) RESPONSE: how would an investor respond to the problems of Apple Inc. (1 mark)
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A summary of Apple’s results from its earnings announcement that is usually seen from information terminals such as Bloomberg was taken from an article
(https://www.zerohedge.com/news/2018-11-01/apple-slides-soft-guidance-iphone-sales-miss) and reproduced below:
Q4 EPS: 2.91BN, beating Exp. $2.78
. Revenue: $62.9BN, beating Exp. $61.44 billion
. iPhone sales: 46.9 million, missing Exp. 48.4 million
. iPad sales: 9.8 million, missing Exp. 10.5 million, and down from 10.3 million a year ago
. Mac sales: 5.3 million, beating Exp. 4.9 million, and down from 5.4 million a year ago
. iPhone ASP: $793, up from $618, smashing Exp. $729
. Guidance for holiday quarter revenue: $89-$93billion, with the midline below Wall Street estimates of $92.74 billion
2023-09-12