Simple case study

Don’t think only about stable growth in the “income statement.” Asset growth is also a positive signal for investors, as its growth is reflected in its assets and investment activity. Below are spotted short-term assets (current assets) vs. short-term liabilities (current liabilities) of Apple. TCA vs. TCL. TLA vs. TLL and Equity. 

Source: Own calculation

Note the difference between Apple’s TCA and TCL. The years 2013 – 2014 are evaluated negatively in terms of short-term liquidity. In 2015 – 2019 we can see a definite trend of building the excess of TCA over TCL. Since 2019, the TCA surplus has been declining significantly from this point of view. This doesn’t look very good at first glance, but if Apple has low long-term debt, it shouldn’t endanger the company’s health at all. Therefore, make sure that the TCAs are not smaller than the TCLs. The difference between TCA and TCL is called Working Capital.

Let’s take a brief look at total assets vs. total liability and equity. This view is also critical and also has something to offer us. 

Source: Own calculation

The basic accounting instruction is that assets = liabilities + equity. Liabilities consist of Total Current Liabilities and Non-Current Liabilities. So the difference between assets and liabilities is Equity. 

According to Gurufocus: “This is Residual interest, including minority interest, that remains in the assets of the enterprise after deducting its liabilities. Equity is increased by owners’ investments and by comprehensive income, and it is reduced by distributions to the owners.”

A positive signal for the stock is when its assets grow over the long term. A very positive sign is when its Equity grows as well. In the case of Apple, this trend stopped in 2017. Subsequently, it is necessary to find out for reasons. In the chapter that will deal with the Balance sheet in detail, we will show the individual research and go deeper. We will also show you essential indicators for the balance sheet, which will help us make the right investment decisions.