Apple Computer's Loan

Details of requested loan

Apple Computer s needs a loan amounting to one-fourth (25%) of current shareholders’ equity as of December 31, 2002. This translates to $1.024 billion and will raise the company debt level to $3.223 billion. The loan is expected to enable the company carry out long-term asset expansion and will carry an interest at the prime rate plus one percent payable annually at December 31. The principal repayment when the note comes due in ten years (January 2013).

Granting this loan will raise the company’s debt to equity level from the current 54% to 79%. Besides, the note will also reduce the company’s interest coverage ratios especially at this time of relatively high interest rate. However, the company has adequate plans on how to invest the money to ensure it meets the interest obligation. The prime rate is unlikely to increase in the near term following Feds commitment to hold it at the current level of 4.75% bringing the effective rate at 5.75%. This means the company will have the ability to meet the financial obligation arising from the loan.

Company’s financial performance in comparison with Apple and Dell

Apart from the year 2001 when Apple Inc’s sales shrunk, all the other years experienced a consecutive rise in sales as per the horizontal common size financial statements. The company’s sales growth is likely to continue in the foreseeable future as it the benefits of the company’s restructuring efforts and investment in production infrastructure begin to bear fruit. The same has been the case for gross margin for the last 5 years. However, operational expenses are very high resulting in losses for most of the period. This has necessitated apple to initiate restructuring effort to regain profitabili...

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...Gateway is best known for its computer hardware products.

SEC fillings

Apple and Dell are publicly listed companies and are therefore supposed to file form 10k annually. On the other hand, gateway is a subsidiary of Acer Inc and therefore it is not required to make file for form 10k. Instead, its parent company Acer is supposed to file form 10k that includes the reports for Gateway Inc in its consolidated financial statements.

Both Apple and Dell received unqualified auditor’s opinion in their financial statements. This means that the financial position as presented reflected a true and fair view of the financial statements. Gateway’s parent company Acer Inc also received an unqualified opinion on its financial statements including those of its subsidiaries. It is therefore evident that the financial statements for all the three companies reflect a true and fair