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Assessment
You are a young financial analyst and you are given the job to make a choice of investment in the computer industry. You are to make in an in-depth analysis of Apple and Microsoft shares, which will be divided in three parts:
1- A financial statement analysis whose aim is to help you to decide which firm you would prefer to invest in.
2- A portfolio analysis which will should help you to estimate the potential benefits of combining the two stocks in the same portfolio.
3- A valuation analysis which will help you decide if Apple is fairly valued compared to Microsoft.
To help you answer the questions, you should find in appendix most of the data needed. You are also free to use Internet or other sources of information to help you refine your answers (a special bonus for creativity will be awarded!).
FINANCIAL STATEMENT ANALYSIS
1) Assess the financial risk that the two companies bear (liquidity, solvency, leverage...). Which company is, to your mind, the less financially risky company? Give as many arguments as possible.
Apple
Apple is financially well in general. It has recovered very fast given the huge amount of liabilities it has absorbed. In terms of liquidity, the company is very capable of paying its short-term debts. In terms of financing, it could be said that the company has regained the trust of its financers given the fact that the company is being greatly financed by its shareholders which is in fact increasing exponentially every year. Also, the company is doing very well in terms of debt management because it does not use debts anymore to finance its operati ...