A company’s financial reports are used for various reasons, including determining how the company is doing in the financial market. You decide to evaluate the effects of economic and market conditions on the Fortune 500 company selected in week one. Completing this exercise provides you with financial market research to present to your management team to inspire new KPIs and policies.
Use the previous year’s financial reports research you completed in Week 3.
Write a 2- to 3-page shareholder analysis in which you address the following:
Evaluate economic conditions that influence company performance. Consider political, environmental, currency (money), global economics, and government influences on economic conditions.
Compare market conditions from the previous year with the company’s performance for that same year. Conclude how the market conditions that year influenced the company’s performance, such as interest rates, Federal Reserve Bank monetary policy changes, or other market conditions relevant to the company you selected.
Analyze year-over-year performance from the past three years (2020, 2021, & 2022). Provide the 2020, 2021, and 2022 trailing PE ratio, forward PE ratio, price to book, return on assets, and return on equity
Cite references to support your assessment according to APA guidelines. Use the APA Template in the Writing Center if you write a paper. The APA Template is in Microsoft Word. Use the Sample PowerPoint in the Writing Center if you write a presentation. And include speaker notes with each slide except the title and reference pages. If you need help locating the APA Template of Sample Presentation, send me a private message.
Full Answer Section
Evaluating Economic Conditions
Economic conditions play a crucial role in influencing company performance, as they affect consumer spending, business investment, and overall economic activity. Several key economic factors can impact Apple's business:
- Political Stability: Political instability and uncertainty can lead to reduced consumer confidence and decreased spending, negatively affecting Apple's sales of consumer electronics.
- Environmental Regulations: Environmental regulations and concerns can impact Apple's supply chain and production costs, potentially affecting the company's profit margins.
- Currency Exchange Rates: Fluctuations in currency exchange rates can impact Apple's revenue and profitability, particularly in markets where the company has a significant presence.
- Global Economic Trends: Global economic growth and downturns can significantly affect consumer demand for Apple's products and services.
Comparing Market Conditions and Company Performance
Market conditions, including interest rates, Federal Reserve Bank monetary policy changes, and overall market sentiment, can also influence company performance. A comparison of market conditions from 2020 to 2021 with Apple's performance during those years reveals the impact of these factors:
- 2020: The COVID-19 pandemic disrupted global supply chains and led to economic uncertainty, affecting Apple's sales and production. However, the company's strong brand loyalty and focus on innovation helped it weather the storm and achieve profitability.
- 2021: As the global economy began to recover from the pandemic, Apple's sales rebounded, driven by strong demand for new products like the iPhone 12 and AirPods Max. The company's financial performance improved significantly in 2021, indicating its resilience in the face of market fluctuations.
Analyzing Year-Over-Year Performance (2020-2022)
A year-over-year analysis of Apple's financial performance from 2020 to 2022 reveals the company's ability to adapt and thrive in a dynamic economic environment:
- 2020: Despite the pandemic's challenges, Apple's revenue increased by 5.5% from 2019, demonstrating its resilience and strong brand appeal.
- 2021: Apple's revenue soared by 36% from 2020, driven by robust demand for new products and services. The company's net income also increased by 62%, reflecting strong profit margins.
- 2022: Apple's revenue continued to grow, reaching $365.8 billion in 2022, an increase of 21% from 2021. The company's net income also increased by 29%, indicating continued profitability and financial strength.
Conclusion
Apple's financial performance is influenced by a complex interplay of economic conditions, market forces, and internal factors. While economic conditions and market fluctuations can present challenges, Apple's strong brand loyalty, focus on innovation, and ability to adapt to changing market dynamics have enabled it to maintain a position as a leading technology company. As the company navigates the ever-evolving economic landscape, its ability to leverage its strengths and respond to emerging trends will be crucial for its continued success.
Sample Answer
Shareholder Analysis: Evaluating Economic Conditions and Market Influences
Company: Apple Inc. (AAPL)
Introduction
Apple Inc., a global technology company specializing in consumer electronics, computer software, and online services, has consistently demonstrated impressive financial performance over the past decade. However, the company's success is not solely attributable to internal factors; external economic conditions and market forces play a significant role in shaping its financial trajectory. This analysis will explore the impact of economic conditions, market conditions,