AA 6-1 Company Analysis LO C2, A3 Use Apple's financial statements in Appendix A to answer the following. Required: 1. What amount of inventories did Apple report as a current asset (a) on September 30, 2017? (b) On September 24, 2016? 2. Inventories make up what percent of total assets (a) on September 30, 2017? (b) On September 24, 2016? 3. Assuming Apple has enough inventory to meet demand, does Apple prefer inventory to be a lower or higher percentage of total assets? 4. Compute (a) inventory turnover for fiscal year ended September 30, 2017, and (b) days' sales in inventory as of September 30, 2017. Complete this question by entering your answers in the tabs below. Required 3 Required 1 Required 2 Required 4 Compute (a) inventory turnover for fiscal year ended September 30, 2017, and (b) days' sales in inventory as of September 30, 2017. (Round "Inventory turnover" to 1 decimal place and "Days' sales in inventory" to 2 decimal places.) |(a) Inventory turnover times days Days' sales in inventory (b) Apple Inc. CONSOLIDATED BALANCE SHEETS (In millions, except number of shares which are reflected in thousands and par value) September 30, 2017 September 24, 2016 ASSETS Current assets Cash and cash equivalents 2$ 20.484 20,289 Short-term marketable securities 53,892 46,671 Accounts receivable, less allowances of $58 and $53, respectively 17,874 15,754 Inventories 4,855 2,132 Vendor non-trade receivables 17,799 13,545 13.936 8,283 Other current assets Total current assets 106,869 128,645 Long-term marketable securities Property, plant and equipment, net 170,430 194,714 27,010 33,783 5,717 Goodwill 5,414 3,206 Acquired intangible assets, net 2,298 Other non-current assets 10,162 8,757 Total assets 375,319 321,686 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable 37,294 49.049 Accrued expenses 22,027 25,744 Deferred revenue 8,080 7,548 Commercial paper 11,977 8,105 Current portion of long-term debt 6,496 3,500 79,006 Total current liabilities 100,814 2,930 Deferred revenue, non-current 2,836 75,427 Long-term debt 97,207 Other non-current liabilities 36,074 40,415 Total liabilities 241,272 193,437 Commitments and contingencies Shareholders' equity Common stock and additional paid-in capital, $0.00001 par value: 12,600,000 shares authorized; 5,126,201 and 5,336,166 shares issued and outstanding, respectively 35,867 31,251 Retained earnings 98,330 96,364 Accumulated other comprehensive income (loss) (150) 634 Total shareholders' equity 128,249 134,047 2$ Total liabilities and shareholders' equity 321,686 375,319 See accompanying Notes to Consolidated Financial Statements. Apple Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except number of shares which are reflected in thousands and per share amounts) September 30, 2017 229,234 Years ended September 24, 2016 September 26, 2015 233,715 Net sales 2$ 215,639 Cost of sales 141,048 131,376 140,089 Gross margin 88,186 84,263 93,626 Operating expenses Research and development 11,581 10,045 8,067 Selling, general and administrative Total operating expenses 14,194 24,239 14,329 22,396 15,261 26,842 Operating income Other income (expense), net 71,230 61,344 60,024 2,745 1,348 1,285 Income before provision for income taxes 64,089 61,372 72,515 Provision for income taxes 15,738 15,685 19,121 45,687 Net income 48,351 53,394 Earnings per share: Basic 24 9.27 8.35 9.28 24 Diluted 9.21 8.31 9.22 Shares used in computing earnings per share: Basic 5,217,242 5,470,820 5,753,421 Diluted 5,251,692 5,500,281 5,793,069 Cash dividends declared per share 24 2.40 2.18 1.98 See accompanying Notes to Consolidated Financial Statements. Apple Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) September 24, 2016 Years ended September 30, 2017 September 26, 2015 2$ Net income 48,351 45,687 53,394 Other comprehensive income (loss): Change in foreign currency translation, net of tax effects of S(77), $8 and $201, respectively 224 75 (411) Change in unrealized gains/losses on derivative instruments: Change in fair value of derivatives, net of tax benefit (expense) of S(478), $(7) and $(441), respectively 1,315 2,905 Adjustment for net (gains) losses realized and included in net income, net of tax expense (benefit) of $475, $131 and S630, respectively (1,477) (741) (3,497) Total change in unrealized gains/losses on derivative instruments, net of tax (162) (734) (592) Change in unrealized gains/losses on marketable securities: Change in fair value of marketable securities, net of tax benefit (expense) of $425, S(863) and $264, respectively (782) 1,582 (483) Adjustment for net (gains) losses realized and included in net income, net of tax expense (benefit) of $35, $(31), and $(32), respectively (64) 56 59 Total change in unrealized gains/losses on marketable securities, (424) net of tax (846) 1,638 (1,427) Total other comprehensive income (loss) (784) 979 51,967 Total comprehensive income 47,567 46,666 See accompanying Notes to Consolidated Financial Statements. Apple Inc. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (In millions, except number of shares which are reflected in thousands) Accumulated Other Common Stock and Comprehensive Total Additional Paid-In Capital Shareholders' Retained Income Shares Amount Earnings (Loss) Equity 111,547 Balances as of September 27, 2014 5,866,161 $ 23,313 $ 87,152 $ 1,082 S 53,394 Net income 53,394 Other comprehensive income (loss) (1,427) (1,427) Dividends and dividend equivalents declared (11,627) (11,627) Repurchase of common stock Share-based compensation (325,032) (36,026) (36,026) 3,586 3,586 Common stock issued, net of shares withheld for employee taxes Tax benefit from equity awards, including transfer pricing adjustments 37,624 (231) (609) (840) 748 748 2$ (345) S 119,355 Balances as of September 26, 2015 5,578,753 $ 27,416 $ 92,284 45,687 Net income 45,687 Other comprehensive income (loss) 979 979 (12,188) (12,188) Dividends and dividend equivalents declared (279,609) Repurchase of common stock (29,000) (29,000) Share-based compensation 4,262 4,262 Common stock issued, net of shares withheld for employee taxes Tax benefit from equity awards, including transfer pricing adjustments 37,022 (806) (419) (1,225) 379 379 31,251 $ 2$ 634 S 128,249 Balances as of September 24, 2016 5,336,166 S 96,364 48,351 Net income 48,351 Other comprehensive income (loss) (784) (784) (12,803) (12,803) Dividends and dividend equivalents declared (246,496) (33,001) (33,001) Repurchase of common stock Share-based compensation 4,909 4,909 Common stock issued, net of shares withheld (1,494) for employee taxes Tax benefit from equity awards, including transfer pricing adjustments 36,531 (913) (581) 620 620 Balances as of September 30, 2017 5,126,201 S 35,867 $ 98,330 (150) S 134,047 See accompanying Notes to Consolidated Financial Statements. Apple Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Years ended September 30, 2017 20,484 September 24, 2016 September 26, 2015 Cash and cash equivalents, beginning of the year Operating activities: 2$ 21,120 13,844 Net income 48,351 45,687 53,394 Adjustments to reconcile net income to cash generated by operating activities: Depreciation and amortization 10,157 10,505 11,257 Share-based compensation expense 4,840 4,210 3,586 Deferred income tax expense 5,966 4,938 1,382 Other (166) 486 385 Changes in operating assets and liabilities: Accounts receivable, net (2,093) 527 417 Inventories (238) (2,723) 217 (3,735) Vendor non-trade receivables (4,254) (51) Other current and non-current assets 1,055 (283) (5,318) Accounts payable 9,618 1,837 5,001 Deferred revenue (626) 1,042 (1,554) 9,058 Other current and non-current liabilities (154) (2,033) Cash generated by operating activities 63,598 65,824 81,266 Investing activities: (159,486) Purchases of marketable securities (142,428) (166,402) 31,775 Proceeds from maturities of marketable securities 21,258 14,538 Proceeds from sales of marketable securities 94,564 90,536 107,447 (329) Payments made in connection with business acquisitions, net (297) (343) (11,247) Payments for acquisition of property, plant and equipment (12,451) (12,734) Payments for acquisition of intangible assets (344) (814) (241) Payments for strategic investments, net (395) (1,388) Other 220 (110) (26) Cash used in investing activities (46,446) (45,977) (56,274) Financing activities: Proceeds from issuance of common stock 555 495 543 Excess tax benefits from equity awards 627 407 749 Payments for taxes related to net share settlement of equity awards (1,874) (1,570) (1,499) Payments for dividends and dividend equivalents (12,769) (12,150) (11,561) Repurchases of common stock (32,900) (29,722) (35,253) Proceeds from issuance of term debt, net 28,662 24,954 27,114 Repayments of term debt (3,500) (2,500) 2,191 Change in commercial paper, net 3,852 (397) Cash used in financing activities (17,347) (20,483) (17,716) Increase (decrease) in cash and cash equivalents (195) (636) 7,276 Cash and cash equivalents, end of the year 24 20,289 20,484 21,120 Supplemental cash flow disclosure: 10,444 Cash paid for income taxes, net 11,591 13,252 2$ 2$ Cash paid for interest 2,092 1,316 514 See accompanying Notes to Consolidated Financial Statements