Your parents are considering investing in Apple Inc. common stock. They ask you, as an accounting expert, to make an analysis of the company for them. Financial statements of Apple are presented in Appendix A. Instructions for accessing and using the company’s complete annual report, including the notes to its fi nancial statements, are also provided in Appendix A.

Instructions

(a) Make a 5-year trend analysis, using 2010 as the base year, of (1) net sales and (2) net income. Comment on the signifi cance of the trend results.

(b) Compute for 2014 and 2013 the (1) debt to assets ratio and (2) times interest earned.

(See Note 3 for interest expense.) How would you evaluate Apple’s long-term solvency?

(c) Compute for 2014 and 2013 the (1) profi t margin, (2) asset turnover, (3) return on assets, and (4) return on common stockholders’ equity. How would you evaluate Apple’s profi tability? Total assets at September 29, 2012, were $176,064 million and LO15 total stockholders’ equity at September 29, 2012, was $118,210 million.

(d) What information outside the annual report may also be useful to your parents in making a decision about Apple?

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