1.

Having a board of directors dominated by insiders or cronies of the CEO? *

2.

How has this company returned cash to its owners? Has it paid dividends, bought back stock or
spun off assets? *

3.

Was there any change in terms of compensation contract to benefit existing managers, with or
without stockholder approval? *

4.

Does the company have listings in foreign markets? Through Depository Receipts. *

5.

Compare the ROE of the firm to the expected return of shareholder *

6.

Relative to the sector to which this firm belongs, does it pay too much or too little in dividends?
(Do a regression, if necessary) *

7.

Who is the CEO of the company? How long has he or she been CEO? How the CEO and his team
are compensated? Will that cause any agential problems in terms of earnings distributions? *
What percent of the stock is held by employees overall? (Include the holdings by employee
pension plans) *
How well have the managers of the firm picked investments, historically? *
Was there any rejection of higher price in a takeover battle, while accepting a lower price? *
How much has this company paid in dividends over the last few years? *
How much the firm has returned to stockholders in the past? Assess, from a qualitative trade off,
whether it should return more or less? *
Was there any drastic change in the shareholders pattern in this firm across time? *

8.
9.
10.
11.
12.
13.

14. How this firm is classified - value versus growth, small versus large cap? *
A: Apple may be classified as growth firm due to huge growth in rate of earning (85%) and sales (65%)
compared to S&P 500 and NASDAQ performances before Sep 2012, but after Sep 2012 it may be
considered as a value firm as growth firms believe more in acquisition of asset rather than dividend
payout.
Apple is a large Cap firm as the value of the firm is much larger than $10 Billion (approx $560 Bn on
Sept 2012)
15. Was there voting and non-voting classes of shares? Where the voting shares are
disproportionately held by managers? *
A: Both Voting and non voting classes of shares were issued by Apple, Common shares and Preferred
shares.
16. Given the relationship between dividends and free cash flows to equity, and the trust you have in
the management of this firm, would you change this firm's dividend policy? *
A: The company should change its dividend policy primarily due to there is huge cash available with
the company but the shareholders are not seeing any benefit from that. Neither company is using the
money to innovate and increase share value nor paying back the money to shareholders. It is creating
sense of distress in the shareholders.
17. What role do the insiders play in running the company? *

A: Insiders play major role in designing, operation, controlling the company policies to take care for its
manufacturing and financial operations.
18. In the set of analysts who are following this firm, what is the proportion of buy side, sell side, and
independent analysts? *
A: There is no list of analysts in the given case, but as per NASDAQ the 71% analysts are in buy side,
29% are holding and 0% is on sale side.
19. How responsive is management to stockholders? *
A: The Shareholder return was decreased for Apple from 2011 to 2013. In 2011 the return was $378
Millions which is 34% while in 2013 the shareholder return is -25%. It is clarifying that the
responsiveness of management to shareholders is not good.
20. Were the managers are responsive to stockholders? *
A: All Managers are not directly responsive but the top management.

21. How the markets have reacted for this firm during announcement of financial results? Dividend
declaration, earnings announcements, Stock splits, bonus stock announcements? *
A: In Mar 2012 Apple announced a quarterly dividend of $2.65 per share, a three years share
repurchase of $ 10 Billions . But shareholders confidence was not boost up by this. As a result the
stock price of Apple fall continuously.
22. If invested in this firms stock what returns you would have made on this stock over the last 5
years? *
A:
23. Estimate Dividends to FCFE, Dividends to FCFF, and Dividends to OCF for past few years and give
interpretation on the same *
A: The Dividend for 2012 is $ 2.65 per share, FCFE is $ 30917 Million, FCFF is $ 59873 Millions, OCF is $
50856 Millions. So the Dividends to FCFE is greater than dividend to OCF is greater than Dividend to
FCFF.
24. Compare the return with ROCE, ROA, and ROE of the firm during the same period *
A: In the period of 2010, 2011, 2012 the ROCE are 0.34, 0.38, 0.40 respectively, ROA are 0.19, 0.22, 0.24
respectively, ROE are 0.29, 0.34, 0.35 respectively.

25. Map the shareholders to income seeking and capital gain seeking group. Justify with detailed
explanation *
A:

Direct Holders (Forms 3 and 4)

Name

Shares

COOK TIMOTHY D

1,170,191

LEVINSON ARTHUR D

1,133,283

FEDERIGHI CRAIG
CUE EDUARDO H

439,728
0

AHRENDTS ANGELA J

95,042

GORE ALBERT JR

62,523

RICCIO DANIEL J.

54,343

SCHILLER PHILIP W

SEWELL D BRUCE

47,593

JUNG ANDREA

14,595

Name

Shares

Institutional Holders
Holder

Shares

Vanguard Group, Inc. (The)

329,338,821

State Street Corporation

217,192,051

FMR, LLC

167,611,009

BlackRock Institutional
Trust Company, N.A.

148,878,516

Northern Trust Corporation

77,185,456

Bank of New York Mellon

Corporation

73,504,685

BlackRock Fund Advisors

68,218,907

JP Morgan Chase &

Company

63,936,734

Invesco Ltd.

60,641,764

Icahn, Carl, C.

52,760,848

26. If the firm has been a recent target of social criticism, how has it responded? *
A: The company taken step to neutralize the pressure from shareholders by providing quarterly
dividend, share repurchase plan and I pref.
27. How much trading volume is there on this stock? *
A: Outstanding share volume on Sept 2012 are 939.2 Millions.
28. What is the percent of estimate the percent of the stock held by non-domestic investors? *
29. Compare return on stock to expected return of shareholder *
30. How many analysts follow the firm? *

A: 20 Analysts
31. What percent of the stock is held by insiders in the company? *
32. How much could this firm have returned to its stockholders over the last few years? How much did
it actually return? *
33. How many of the directors are CEOs of other companies? Provide details *
34. Given this dividend policy and the current cash balance of this firm, would you push the firm to
change its dividend policy (return more or less cash to its owners)?*
35. What were the ~returns derived by the firm during the buyback at different point of time? Should be
checked by comparing the price at which it was bought back and what price it was reissued or
used? *
36. What are your comment / advice / opinion / Suggestion for this firm in terms of financial
efficiency? *
37. When analysts following the firm and the managers of the firm duel to control the market reaction
to the announcement? *
38. How does this firm's dividend policy compare to those of its peer group and to the rest of the
market? *
39. List some significant news item about Infosys that appeared in the media during past few months *
40. Have insiders been buying or selling stock in this company in the most recent year? *
41. How easily can the firm convey information to financial markets? In other words, how necessary is
it for them to use dividend policy as a signal? *
42. How much cash did the firm actually return to its owners over the last few years? *
43. Is the CEO part of the promoters? If not, what career path did the CEO take to get to the top? (Did
he come from within the organization or from outside?) How that can affect the earnings
distribution process? *
44. Given this firm's characteristics today, how would you recommend that they return cash to
stockholders? Explain your stand elaborately, backed with required analysis *
45. Who holds stock in this company? *
46. Who is on the board of directors of the company? How long have they served as directors? *
47. What percent of the stock is held by institutional investors? *
48. Was there any pushing for and passing anti-takeover amendments? *
49. What is profile of buy / sell / hold recommendations made by the analysts? *
50. How does this firm view its social obligations and manage its image in society? *
51. How much did the CEO make last year? What form did the compensation take? (Break down by
salary, bonus and option components) *
52. Relative to the rest of the firms in the market, does it pay too much or too little in dividends? (Use
the market regression, if necessary) *
53. Is there any reason to believe that future investments of this firm will be different from the
historical record? *
54. Describe the historical details of the ESOP programme of the firm? What were the terms in those
ESOPs? What is its status now? *
55. Are there differences in voting rights across shares? If so, do incumbent managers own a
disproportionate share of the voting shares? *

56. How many stockholders does the company have? *

57. Was there any evidence of significant increases in compensation while stock price is dropping? *
58. Does the firm have a particularly good or bad reputation as a corporate citizen? If it does, how has
it earned this reputation? *
59. How does this firm interact with financial markets? How do markets get information on the firm? *
60. How many of the directors have other connections to the firm (as suppliers, clients, customers..)?
Provide details. *
61. Who is the marginal investor in this stock? What will be their expectations in terms of earnings
distribution? *
62. Is this a company where there is a separation between management and ownership? *
63. How much stock has this company bought back over the last few years? *
64. What were the free cash flows to equity that this firm had over the last few years? *
65. How effective is this firm in managing income taxes? *

66. How does this firm compare with other firms in the sector in terms of dividend policy? *
67. What is the capital gain an investor would have got if he would have held the stock since
inception? (consider splits, stock dividends while estimating) *
68. What is the current cash balance for this firm? *
69. Do any of the directors have large stockholdings or represent those who do? *
70. How many of the directors are insider directors? (i.e. employees or managers of the company) *
71. Who is the average stockholder in this firm? Does he or she like dividends or would they prefer
stock buybacks? *

72. Are there any significant other stakeholders covenants that you know of on the firm's dividend
policy? *
73. Who are the insiders in this company? (Besides the managers and directors, anyone with more
than 5% is treated as an insider) *
74. What is the cost of excess cash? *
75. In your opinion is the marginal investor well diversified? *

76. Compare the proportional volume of trading of this firms stock with those of the peer group *

77. How well can this firm forecast its future financing needs? How valuable is preserving flexibility to
this firm? *