This financial statement analysis requires you to make a specific decision about Apple Computer, Inc. in January 2003. You should base your decision on the information available through December 2002, which can be found in Supplement I, and Supplement II, and Appendix A of your text. Use Dell's financial data to benchmark Apple's performance in this case analysis.
Situation: You are a senior loan officer at a multinational bank. Apple Computer's chief financial officer, authorized by the company's Board of Directors, has applied for a ten-year note in the amount equal to one fourth (25%) of existing shareholders' equity as of December 31, 2002. The company seeks financing for long-term asset expansion. Terms call for interest at the prime rate plus one percent payable annually at December 31, with principal repayment when the note comes due in ten years (January 2013). Decision: Your task is to make a recommendation to approve or reject Apple's application to the bank's loan committee. Your recommendation should be based on a thorough examination of Apple's financial statements, their components (e.g., cash flow analysis), related disclosures, performance relative to the competition, state of the economy, and industry conditions. Decision Report Format: Your recommendation should include a comprehensive analysis of Apple Computer, its competitors (Dell), and the industry. The first page of your paper should be a one-page "executive summary" addressed to the loan committee containing your recommendation and its justification.
Project Guidelines
This case focuses on your decision-making process. Either conclusion is valid as long as your recommendation is consistent with your analysis of the data. Use the following criteria as a guide in framing your responses.
This case analysis, like all cases, contains abstractions of reality and simplified assumptions. Use the facts of the case as given in conducting your analysis. Resist the temptation to dispute the facts or assumption. Also, refrain from modifying them to suit your interpretation of reality. (For instance, do not state that the note's structure or interest rate is unrealistic and then proceed to modify them.)
1. Determine the requested loan amount (rounded to the nearest million) and its interest rate.
2. Make a preliminary assessment of the financial condition and performance of Apple, Dell. Begin by comparing the common sized data of the latter two companies' income statements and balance sheets from 1999-2002 to that of Apple's financial statements you created in Lesson 1.