Case 3.24 LO 3 , 4, 6, 7 Analysis of liquidity' and profitability measures of Apple Inc. The following summarized data (amounts in millions) are taken from the September 27, 2014, and September 28, 2013, comparative financial statements of Apple Inc., a manufacturer of mobile communication and media devices, personal computers, portable digital music players, and seller of a variety of related software, services, accessories, networking solutions, and third-party digital content and applications: (Amounts Expressed in Millions) For the Fiscal Years Ended September 27 and September 28, respectively: 2014 2013 Net sales $182,795 $170,910 Costs of sales 112,258 106,606 Operating income 52,503 48,999 Net income $ 39,510 $ 37,037 At Year End: Assets Current assets: Cash and cash equivalents $ 13,844 $ 14,259 Short-term marketable securities 11,233 26,287 Accounts receivable , less allowances of $84 and $99, respectively 17,460 13,102 Inventories 2,111 1,764 Deferred tax assets 4,318 3,453 Vendor nontrade receivables 9,759 7,539 Other current assets 0,806 6,882 Total current assets 68,531 73,286 Long-term marketable securities 130,162 106,215 Property, plant, and equipment, net 20,624 16,597 Goodwill 4,616 1,577 Acquired intangible assets, net 4,142 4479 Other assets 3,764 5,146 Total assets $231,839 $207,000 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 30,196 $ 22,367 Accrued expenses 18,453 13,856 Deferred revenue 8,491 7,435 Commercial paper 6,308 0 Total current liabilities 63,448 43,658 Deferred revenue-noncurrent 3,031 2,625 Long-term debt 28,987 16,960 Other noncurrent liabilities 24,826 20,208 Total liabilities 120,202 83,451 Shareholders’ equity: Common stock and additional paid-in capital, $0.00001 par value, 12,600,000 shares authorized; 5,866,161 and 6,294,494 shares issued and outstanding, respectively 23,313 19,764 Retained earnings 37,152 104,256 Accumulated other comprehensive income (loss) 1,082 (471) Total shareholders’ equity 7 111,547 123,549 Total liabilities and shareholders’ equity. $231,839 $207,000 At September 29, 2012, total assets were $176,064 and total shareholders' equity was $118,210. Required: Calculate Apple Inc.’s working capital , current ratio , and acid-test ratio at September 27, 2014, and September 28, 2013. Round your ratio answers to one decimal place. Calculate Apple’s ROE for the years ended September 27, 2014, and September 28, 2013. Round your percentage answers to one decimal place. Calculate Apple’s ROI , showing margin and turnover, for the years ended September 27, 2014, and September 28, 2013. Round your turnover calculations to two decimal places. Round your margin and ROI percentages to one decimal place. Evaluate the company’s overall liquidity and profitability. Optional continuation of Case 3.24-trend analysis The following historical data were derived from Apple Inc/s consolidated financial statements (in millions) Note: Past data are not necessarily indicative of the results of future operations. 2014 2013 2012 2011 2010 Net sales $182,795 $170,910 $156,508 $108,249 $65,225 Net income 35,910 37,037 4 L73 3 25,922 14,013 Cash, cash equivalents, and marketable securities 155,239 146,761 121,251 81,570 51,011 Total assets 23i,S39 207,000 176,064 116,371 75AS3 Long-term debt 28,987 16,960 0 0 0 Other long-term obligations* 24.826 20,208 16,664 10,100 5,531 Total shareholders' equity m,547 123,549 118,210 76,615 47,791 *Other long-term obligations exclude noncurrent deferred revenue. Calculate Apple Inc.’s total liabilities for each year presented above. Are the trends expressed in these data generally consistent with each other? In your opinion, which of these trends would be most meaningful to a potential investor in common stock of Apple Inc.? Which trend would be least meaningful? What other data (trend or otherwise) would you like to have access to before making an investment in Apple Inc.?

Value Chain Analysis and Financial Statement Relations. Exhibit 1.25 (page 68) presents common-size income statements and balance sheets for seven firms that operate at various stages in the value chain for the pharmaceutical industry. These common-size statements express all amounts as a percentage of sales revenue. Exhibit 1.25 also shows the cash flow from operations to capital expenditures ratios for each firm. A dash for a particular financial statement item does not necessarily mean the amount is zero. It merely indicates that the amount is not sufficiently large for the firm to disclose it. A list of the seven companies and a brief description of their activities follow. A. Wyeth: Engages in the development, manufacture, and sale of ethical drugs (that is, drugs requiring a prescription). Wyeths drugs represent primarily mixtures of chemical compounds. Ethical-drug companies must obtain approval of new drugs from the U.S. Food and Drug Administration (FDA). Patents protect such drugs from competition until other drug companies develop more effective substitutes or the patent expires. B. Amgen: Engages in the development, manufacture, and sale of drugs based on biotechnology research. Biotechnology drugs must obtain approval from the FDA and enjoy patent protection similar to that for chemical-based drugs. The biotechnology segment is less mature than the ethical-drug industry, with relatively few products having received FDA approval. C. Mylan Laboratories: Engages in the development, manufacture, and sale of generic drugs. Generic drugs have the same chemical compositions as drugs that had previously benefited from patent protection but for which the patent has expired. Generic-drug companies have benefited in recent years from the patent expiration of several major ethical drugs. However, the major ethical-drug companies have increasingly offered generic versions of their ethical drugs to compete against the generic-drug companies. D. Johnson Johnson: Engages in the development, manufacture, and sale of over-thecounter health care products. Such products do not require a prescription and often benefit from brand recognition. E. Covance: Offers product development and laboratory testing services for biotechnology and pharmaceutical drugs. It also offers commercialization services and market access services. Cost of goods sold for this company represents the salaries of personnel conducting the laboratory testing and drug approval services. F. Cardinal Health: Distributes drugs as a wholesaler to drugstores, hospitals, and mass erchandisers. Also offers pharmaceutical benefit management services in which it provides customized databases designed to help customers order more efficiently, contain costs, and monitor their purchases. Cost of goods sold for Cardinal Health includes the cost of drugs sold plus the salaries of personnel providing pharmaceutical benefit management services. G. Walgreens: Operates a chain of drugstores nationwide. The data in Exhibit 1.25 for Walgreens include the recognition of operating lease commitments for retail space. REQUIRED Use the ratios to match the companies in Exhibit 1.25 with the firms listed above.

Financial Accounting CMulford: Financial Statement Analysis: 13 Using Return on Assets and Return on Equity to Compare Performance Across Companies Thiokol Corp. and Wyman-Gordon, Inc. In a recent fiscal year, Thiokol Corp. reported sales of $889.5 million and net income of $51.4 million. For the same year, Wyman-Gordon, reported sales of $499.6 million and net income of $25.2 million, about half the income of Thiokol. Both companies are in the same industry, aerospace and defense. Use the data provided below to compare financial performance for the two companies (amounts in millions). Thiokol $ 889.5 $ 51.4 $ 818.3 $ 447.9 Wyman-Gordon $ 499.6 $ 25.2 $ 375.9 $ 109.9 Sales Net income Total assets Shareholders' equity Calculate: Return on assets Return on equity Why is Return on equity so different for the two companies?

Caculate the following ratios for Apple Inc. Earnings per share Debt to equity ratio Dividend yield Price earnings ratio

Solvency and Profitability Trend Analysis Addai Company has provided the following comparative information: 20Y8 20Y7 20Y6 20Y5 20Y4 Net income $1,078,700 $929,900 $781,400 $667,900 $566,000 Interest expense 366,800 334,800 289,100 220,400 175,500 Income tax expense 345,184 260,372 218,792 173,654 135,840 Total assets (ending balance) 8,226,651 8,779,231 6,276,721 6,620,869 5,020,826 Total stockholders' equity (ending balance) 2,543,681 3,148,667 2,003,133 2,553,135 1,531,881 Average total assets 8,502,941 7,527,976 6,448,795 5,517,391 4,722,930 Average stockholders' equity 2,846,174 2,575,900 2,278,134 2,042,508 1,808,307 You have been asked to evaluate the historical performance of the company over the last five years. Selected industry ratios have remained relatively steady at the following levels for the last five years:…

Solvency and Profitability Trend Analysis Crosby Company has provided the following comparative information: 20Y8 20Y7 20Y6 20Y5 20Y4 Net income $5,571,720 $3,714,480 $2,772,000 $1,848,000 $1,400,000 Interest expense 1,052,060 891,576 768,600 610,000 500,000 Income tax expense 1,225,572 845,222 640,320 441,600 320,000 Total assets (ending balance) 29,378,491 22,598,839 17,120,333 12,588,480 10,152,000 Total stockholders’ equity (ending balance) 18,706,200 13,134,480 9,420,000 6,648,000 4,800,000 Average total assets 25,988,665 19,859,586 14,854,406 11,370,240 8,676,000 Average total stockholders' equity 15,920,340 11,277,240 8,034,000 5,724,000 4,100,000 You have been asked to evaluate the historical performance of the company over the last five years. Selected industry ratios have remained relatively steady at the following levels for the last five years: 20Y4–20Y8…

Solvency and Profitability Trend Analysis Addai Company has provided the following comparative information: 20Υ8 20Y7 20Υ6 20Y5 20Υ4 Net income $273,406 $367,976 $631,176 $884,000 $800,000 Interest expense 616,047 572,003 528,165 495,000 440,000 Income tax expense 31,749 53,560 106,720 160,000 200,000 Total assets (ending balance) 4,417,178 4,124,350 3,732,443 3,338,500 2,750,000 Total stockholders' equity (ending balance) 3,706,557 3,433,152 3,065,176 2,434,000 1,550,000 Average total assets 4,270,764 3,928,396 3,535,472 3,044,250 2,475,000 Average total stockholders' equity 3,569,855 3,249,164 2,749,588 1,992,000 1,150,000 You have been asked to evaluate the historical performance of the company over the last five years. Selected industry ratios have remained relatively steady at the following levels for the last five years: 20Υ4-2ΟY8 Return on total assets 28% Return on stockholders' equity 18% Times interest earned 2.7 Ratio of liabilities to stockholders' equity 0.4 Required: 1.…

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Solvency and Profitability Trend Analysis Addai Company has provided the following comparative information: 20Y8 20Y7 20Y6 20Y5 20Y4 Net income $273,406 $367,976 $631,176 $884,000 $800,000 Interest expense 616,047 572,003 528,165 495,000 440,000 Income tax expense 31,749 53,560 106,720 160,000 200,000 Total assets (ending balance) 4,417,178 4,124,350 3,732,443 3,338,500 2,750,000 Total stockholders’ equity (ending balance) 3,706,557 3,433,152 3,065,176 2,434,000 1,550,000 Average total assets 4,270,764 3,928,396 3,535,472 3,044,250 2,475,000 Average total stockholders' equity 3,569,855 3,249,164 2,749,588 1,992,000 1,150,000 You have been asked to evaluate the historical performance of the company over the last five years. Selected industry ratios have remained relatively steady at the following levels for the last five years: 20Y4–20Y8 Return on total assets 28%…

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Chapter 3 Solutions

(Amounts Expressed in Millions)
For the Fiscal Years Ended September 27 and September 28, respectively:	2014	2013
Net sales	$182,795	$170,910
Costs of sales	112,258	106,606
Operating income	52,503	48,999
Net income	$ 39,510	$ 37,037
At Year End: Assets
Current assets:
Cash and cash equivalents	$ 13,844	$ 14,259
Short-term marketable securities	11,233	26,287
Accounts receivable, less allowances of $84 and $99, respectively	17,460	13,102
Inventories	2,111	1,764
Deferred tax assets	4,318	3,453
Vendor nontrade receivables	9,759	7,539
Other current assets	0,806	6,882
Total current assets	68,531	73,286
Long-term marketable securities	130,162	106,215
Property, plant, and equipment, net	20,624	16,597
Goodwill	4,616	1,577
Acquired intangible assets, net	4,142	4479
Other assets	3,764	5,146
Total assets	$231,839	$207,000
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$ 30,196	$ 22,367
Accrued expenses	18,453	13,856
Deferred revenue	8,491	7,435
Commercial paper	6,308	0
Total current liabilities	63,448	43,658

Deferred revenue-noncurrent	3,031	2,625
Long-term debt	28,987	16,960
Other noncurrent liabilities	24,826	20,208
Total liabilities	120,202	83,451
Shareholders’ equity:
Common stock and additional paid-in capital, $0.00001 par value, 12,600,000 shares authorized; 5,866,161 and 6,294,494 shares issued and outstanding, respectively	23,313	19,764
Retained earnings	37,152	104,256
Accumulated other comprehensive income (loss)	1,082	(471)
Total shareholders’ equity⁷	111,547	123,549
Total liabilities and shareholders’ equity.	$231,839	$207,000

	2014	2013	2012	2011	2010
Net sales	$182,795	$170,910	$156,508	$108,249	$65,225
Net income	35,910	37,037	4 L73 3	25,922	14,013
Cash, cash equivalents, and marketable securities	155,239	146,761	121,251	81,570	51,011
Total assets	23i,S39	207,000	176,064	116,371	75AS3
Long-term debt	28,987	16,960	0	0	0
Other long-term obligations*	24.826	20,208	16,664	10,100	5,531
Total shareholders' equity	m,547	123,549	118,210	76,615	47,791
*Other long-term obligations exclude noncurrent deferred revenue.