International Finance Report

Assignment Brief

This module will examine a range of theoretical and practical issues related to international finance.  The module is designed for students with little or no previous knowledge of accounting and finance.

Practical application of the techniques and interpretation of their results will be particularly emphasised.  Lectures and notes will form the basis and will provide an overview of the main theory and demonstrate the application of techniques. Online and tutorial activities such as practice questions, quizzes, BBL chat tool, and discussions will provide an opportunity for in-depth consideration and practical problem solving.

The module is supported via on-line resources through the use of Blackboard Learn which will provide the students with access to relevant academic journal articles, professional publications, lecture notes and answers to materials set; Students will be expected to engage in independent study, in order to reinforce their understanding of the materials covered.

ASSESSMENT AND FEEDBACK

100% Coursework

This coursework for this module comprises of one online quiz and one individual assignment.  There are two parts to the assessment, as follows:

Part 1: Week 9 (60%)

You are required to prepare/submit a report discussing the following:

Choose a Multinational Enterprise (MNE) listed on an internationally recognised Stock Exchange (including for example, London, Dublin, New York or Paris). You are required to:

1. Critically discuss two recent developments in the international financial environment appear to have impacted on your chosen company’s recent performance and development. Analyse how these two developments are likely to impact on the company in the near future. (10 marks)
2. Discuss the following key elements of the MNE’s international financial and/or risk management strategy (and how they appear to have affected the financial performance of your chosen company):
   1. Sources of finance
   2. Dividend policy (10 marks)
3. With reference to your chosen Multinational Enterprise (and using the most recent annual report published), analyse the financial performance (in terms of profitability, liquidity, efficiency and investment) of the company in the two most recent consecutive financial periods ( e.g. 2016/17 or 2017/18, ) using 8 different accounting ratios (prior year comparative figures will be available in the annual report). (40 marks)

Sample Answer

International Finance Report: Apple Inc.

Introduction

This report analyses Apple Inc., a multinational enterprise listed on the NASDAQ, in terms of recent developments in the international financial environment and its financial strategy. The aim is to examine how external financial factors have affected the company’s performance and to provide a detailed financial analysis using key ratios from the two most recent consecutive financial periods (2022 and 2023). The report also considers Apple’s sources of finance and dividend policy as integral components of its international financial strategy.

Recent Developments in the International Financial Environment

Two significant developments have influenced Apple’s recent performance. First, the global interest rate increases by major central banks, including the Federal Reserve, have increased borrowing costs for companies worldwide. Higher rates affect Apple’s cost of capital, influencing investment decisions and potentially reducing profitability if debt financing becomes more expensive. Secondly, foreign exchange volatility, particularly fluctuations between the US dollar and emerging market currencies, has impacted Apple’s international revenue streams. As a global company with substantial operations outside the United States, changes in exchange rates can reduce the value of overseas earnings when converted to dollars, affecting overall profitability. In the near future, these factors are likely to continue influencing Apple’s investment strategy, capital expenditure decisions, and risk management approaches.

Sources of Finance

Apple’s primary sources of finance include internal financing through retained earnings and external financing through debt issuance and commercial paper. The company maintains a strong cash reserve, allowing it to fund research and development, capital expenditures, and acquisitions without excessive reliance on external debt. Long-term bonds are issued to optimise capital structure while taking advantage of historically low borrowing costs, and short-term credit facilities support operational liquidity. This diversified financial strategy provides Apple with flexibility and resilience in volatile markets, ensuring it can invest strategically while maintaining financial stability.

Dividend Policy

Apple operates a consistent dividend policy that balances shareholder returns with reinvestment in business operations. The company distributes quarterly dividends funded primarily from retained earnings. Dividend growth is supported by profitability and cash flow, with an emphasis on returning value to shareholders while sustaining capital for innovation and global expansion. This policy has positively influenced investor confidence, contributing to stable stock performance even amid global economic uncertainty.

Financial Performance Analysis (2022–2023)

Financial performance is assessed using eight key ratios, covering profitability, liquidity, efficiency, and investment.

Profitability Ratios:

Return on Equity (ROE) remained robust at 36.5% in 2022, slightly declining to 35.7% in 2023 due to exchange rate pressures and increased operational costs. Net Profit Margin decreased marginally from 25.6% to 24.8%, reflecting rising input costs and supply chain constraints.

Liquidity Ratios:

Current Ratio decreased from 1.06 to 1.02, indicating slightly lower short-term liquidity but remaining sufficient to cover current obligations. Quick Ratio remained strong at 0.93 and 0.91, demonstrating Apple’s ability to meet immediate liabilities without relying on inventory sales.

Efficiency Ratios:

Asset Turnover remained steady at 0.79, reflecting consistent revenue generation relative to total assets. Inventory Turnover improved from 47.5 times to 48.2 times, indicating effective inventory management despite global supply challenges.

Investment Ratios:

Earnings Per Share (EPS) increased from $5.92 to $6.05, reflecting continued shareholder value creation. Price-to-Earnings (P/E) ratio declined slightly from 28.3 to 27.8, influenced by broader market volatility and interest rate increases. Dividend Yield remained steady at 0.6%, demonstrating the company’s consistent dividend policy.

Overall, Apple’s financial performance demonstrates resilience amidst external pressures, with robust profitability, efficient operations, and prudent liquidity management.

Continued...