The main line of business
The Apple Inc company deals with designing, manufacturing, and marketing a wide range of products such as media devices, personal computers, mobile communication, and portable digital music players. Furthermore, the company sells a wide range of software, networking solutions, applications, peripherals, and third-party digital content. The products sold by the company include Apple TV, iPhone, iPod, iPad, Mac computers, software applications such as the Max OS X and iOS operating systems, and digital content in its iTunes Store.
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The primary geographical markets of the company are the Americas, Japan, Europe, Retail operations, and Asia-Pacific. The Americas consists of both South and North America. Europe consists of European countries, the Middle East, and Africa. Asia-Pacific entails Asia and Australia without Japan. The company has Apple retail stores in eleven countries, and each store sells similar services, hard and software products. The company is a leading innovator of new products that excite consumers as it tries to stay at the cutting edge in the crowded, competitive market.
Types of customers
The company sells its products to creative markets, education, government, SMB enterprise, and individual consumers. Apple products are designed creatively to provide consumers with high-quality products that are unrivaled in the market. The products target customers and offer them well-integrated digital lifestyle products. The company has a product to suit every consumer’s needs.
The company prepares its financial statements together with related disclosures in relation to the guidelines of the U.S generally accepted accounting principles (GAAP). The management of the company must make judgments, estimates, and assumptions that influence the company’s accompanying notes and consolidated financial statements. The financial statement estimates are based on the historical experience and assumptions that are reasonable at that particular time. The circumstances are the basis upon which judgments regarding the carrying liabilities and asset values are made.
The significant accounting estimates and policies are related to “income taxes, revenue recognition, inventory valuation, and inventory purchase commitment, valuation and impairment of marketable securities, warranty costs and legal and other contingencies” (APPLE INC,1).
Key accounting numbers
The research and development expense (R&D) increased to $1.8billlion in 2010 from $449 in 2009. The increment occurred because of the capitalization of software development costs of up to $71 million towards Mac OS X Snow Leopard. R&D investment is significant to Apple Inc because developing new and enhanced products is at the core of the Company’s business strategy.
The Selling, General, and Administrative Expense (SG&A) also went up by 34 percent up to $5.5 billion in 2010 as the company expanded its retail segment, advertising programs, among other costs. In 2009, SG&A went up by 10 percent to $1.4 billion.
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The company measures its performance by calculating its income and expenses. Income and expenses were reduced by fifty-two percent to $155 million from $326 million in 2009. The decline occurred because of declines in interest rates. The company also experienced a reduction in total expenses and income because of higher premium expenses incurred from foreign exchange contracts.
The company anticipates to open new stores about 40 to 50, and half of those stores will be set outside the United States. The new stores will increase the company’s revenue through increased sales due to the expansion of the market. Many people are buying Apple products as witnessed by the long queues during the launch of its new products in the market.
APPLE INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 10-K. 27. 2010. Web.