Probability of Financial Distress (%) measures the probability that a company will go bankrupt in the upcoming year given its current financial position. A higher ratio indicates a larger probability of bankruptcy for the company, while a lower ratio indicates a healthier fundamental. As of today, Apple's Probability of Financial Distress (%) is 0.03%.
Like the Altman Z-Score, the PFD measures a company's bankruptcy risk. However, the main drawback of the Z-score is it does not apply to banks and insurance companies. According to Investopedia, the concept of "working capital" does not apply to banks and insurance companies, as financial institutions do not have typical current assets or current liabilities like inventories or accounts payable.
Competitive Comparison
For the Consumer Electronics subindustry, Apple's Probability of Financial Distress (%), along with its competitors' market caps and Probability of Financial Distress (%) data, can be viewed below:
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.
Apple Probability of Financial Distress (%) Distribution
For the Hardware industry and Technology sector, Apple's Probability of Financial Distress (%) distribution charts can be found below:
* The bar in red indicates where Apple's Probability of Financial Distress (%) falls in comparison to its industry or sector. The grey bar indicates the Probability of Financial Distress (%)'s extreme value range as defined by GuruFocus.
Apple Probability of Financial Distress (%) Calculation
Probability of Financial Distress (%) (PFD) was developed by John Campbell, Jens Hilscher and Jan Szilagyi in their Search of Distress Risk. It measures the probability that a company will go bankrupt within the next 12 months given its current financial position.
The Probability of Financial Distress (%) was obtained by a logit probability model based on eight explanatory variables. The logit formula to compute the probability of financial distress (LPFD) is given below:
| LPFD | = | -20.12 * NIMTAAVG | + | 1.60 * TLMTA | - | 7.88 * EXRETAVG | + | 1.55 * SIGMA | - | 0.005 * RSIZE | - | 2.27 * CASHMTA | + | 0.070 * MB | - | 0.09 * PRICE | - | 8.87 |
| = | -8.20 |
The Probability of Financial Distress (%) (PFD) was then obtianed by:
| PFD | = | 1 | / | (1 + e^(-LPFD)) | * | 100% |
| = | 0.03% |
The eight explanatory variables are:
1. NIMTAAVG = Net Income to Market Total Assets
*Note that for companies reported quarterly, geometrically declining weighted quarterly Net Income data in latest four quarters are used.
2. TLMTA = Total liabilities to Market Total Assets
3. CASHMTA = Cash to Market Total Assets
For non-financial companies, CASHMTA is measured as:
4. EXRETAVG = Excess Return compared to the S&P 500
EXRETAVG is the weighted excess return compared to the S&P 500 in past 12 month. Geometrically declining weights are imposed on the monthly excess return to reflect lagged information. The weight is halved each quarter.
5. SIGMA = Standard Deviation of Daily Returns
For sigma, we use the annualized standard deviation of a company's returns over the past 92 days (or 63 trading days).
6. RSIZE = Relative Size
| RSIZE | = | log (Market Cap | / | Total Market Cap of S&P 500 companies) |
7. MB = Market to Adjusted Book Equity Ratio
8. PRICE
PRICE is measured as the log of the stock price, capped at log(15).
Apple (NAS:AAPL) Business Description
Traded in Other Exchanges
Address
One Apple Park Way, Cupertino, CA, USA, 95014
Apple designs a wide variety of consumer electronic devices, including smartphones (iPhone), tablets (iPad), PCs (Mac), smartwatches (Apple Watch), and AirPods, among others. In addition, Apple offers its customers a variety of services such as Apple Music, iCloud, Apple Care, Apple TV+, Apple Arcade, Apple Fitness, Apple Card, and Apple Pay, among others. Apple's products include internally developed software and semiconductors, and the firm is well known for its integration of hardware, software, semiconductors, and services. Apple's products are distributed online as well as through company-owned stores and third-party retailers.
Executives
| Alex Gorsky |
director |
JOHNSON & JOHNSON, ONE JOHNSON & JOHNSON PLAZA, NEW BRUNSWICK NJ 08933 |
| Monica C Lozano |
director |
|
| Deirdre O'brien |
officer: Senior Vice President |
ONE APPLE PARK WAY, CUPERTINO CA 95014 |
| Robert A Iger |
director |
C/O WALT DISNEY CO, 500 S BUENA VISTA STREET, BURBANK CA 91521-1062 |
| Andrea Jung |
director |
C/O APPLE INC, ONE APPLE PARK WAY, CUPERTINO CA 95014 |
| Susan Wagner |
director |
C/O BLACKROCK, INC., 40 EAST 52ND STREET, NEW YORK NY 10022 |
| James A Bell |
director |
C/O THE DOW CHEMICAL COMPANY, 2211 H.H. DOW WAY, MIDLAND MI 48674 |
| Albert Jr Gore |
director |
C/O APPLE INC, 1 INFINITE LOOP, CUPERTINO CA 95014 |
| Ronald D Sugar |
director |
10877 WILSHIRE BLVD., SUITE 1650, LOS ANGELES CA 900274 |
| Katherine L. Adams |
officer: SVP, General Counsel |
APPLE INC., 1 INFINITE LOOP, CUPERTINO CA 95014 |
| Luca Maestri |
officer: Senior Vice President, CFO |
1 INFINITE LOOP, CUPERTINO CA 95014 |
| Angela J Ahrendts |
officer: Senior Vice President |
1 INFINITE LOOP, CUPERTINO CA 95014 |
| Jeffrey E Williams |
officer: COO |
ONE INFINITE LOOP, CUPERTINO CA 95014 |
| Philip W Schiller |
officer: Senior Vice President |
C/O APPLE INC, ONE INFINITE LOOP, CUPERTINO CA 95014 |
| Eduardo H Cue |
officer: Senior Vice President |
1 INFINITE LOOP, CUPERTINO CA 95014 |
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