found. THE BASICS 1. Accounts Receivable (a) What is the amount of the company's accounts receivable? Before subtracting the allowance for doubtful accounts (gross accounts receivable): This year This year Last year After subtracting the allowance for doubtful accounts (net accounts receivable): This year Last year (b) What is the amount of the allowance for doubtful accounts? This year Last year Page What percentage of the gross accounts receivables are considered bad debts? The credit risk ratio: Allowance for doubtful accounts Gross accounts receivable Last year Page 2. Inventories and Cost of Goods Sold (a) What is the amount of inventory? This year (b) What is the amount of cost of goods sold? This year Last year (c) What inventory costing method has the company chosen? FURTHER ANALYSIS Analysis of Current Assets 3. Calculate the following ratios: Show your computations (a) Receivables tumover = (d) What other information does the company provide in the note about its inventory? Page (b) Average collection period (c) Inventory turnover = Sales Average net receivables Last year (d) Average days inventories held = (b) Cost of goods sold Average inventory 365 Turnover 365 Turnover 4. Explain what information each of these ratios provides. (a) Page 35 Page 2 years ago Page (c) (d) INFORMATION FOR DECISION MAKING 6. Evaluate the company's receivables collection. In your answer, consider the type of pro- duct(s) the company sells, the industry in which the company operates and the type of cus- tomer it serves. Refer to the information obtained in the preceding questions, 7. Evaluate the company's inventory management. In your answer, consider the type of product(s) the company sells, the industry in which the company operates and the type of cus- tomer it serves. Refer to the information obtained in the preceding questions. Net sales: Products Services Apple Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except number of shares which are reflected in thousands and per share amounts) Total net sales Cost of sales: Products Services Total cost of sales Gross margin Operating expenses: Research and development Selling general and administrative Total operating expenses Operating income Other income/(expense), net Income before provision for income taxes Provision for income taxes Net income Earnings per share: Basic Diluted Shams used in computing earnings per share: Basic Diluted Years ended September 28. September 29, 2019 2018 213,883 $ 46,291 260,174 144,996 16,786 161,782 98,392 16,217 18,245 34,462 63,930 1,807 65,737 10,481 55,256 $ 11.97 $ 11.89 $ 4,617,834 4,648,913 See accompanying Notes to Consolidated Financial Statements. 225,847 $ 39,748 265,595 148,164 15,592 163,756 101,839 14,236 16,705 30,941 September 30, 2017 70,898 2,005 72,903 13,372 59,531 $ 12.01 $ 11.91 $ 4,955,377 5,000,109 196,534 32,700 229,234 126,337 14,711 141,048 88,186 11,581 15,261 26,842 61,344 2,745 64,089 15,738 48,351 9.27 921 5,217,242 5,251,692 Apple Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME in millions) Net income Other comprehensive income/loss): Change in foreign currency translation, net of tax Change in unrealized gains/losses on derivative instruments, net of tax Change in fair value of derivatives Adjustment for net (gains)/losses realized and included in net income Total change in unrealized gains/losses on derivative instruments Change in unrealized gains/losses on marketable securities, net of tax: Change in tair value of marketable securities Adjustment for net (gains)Mosses realized and included in net income Total change in unrealized gains/losses on marketable securites Total other comprehensive income/(loss) Total comprehensive income September 28, 2019 55,256 (408) (661) 23 (638) 3,802 25 3,827 2,781 58,037 Years ended September 29, 2018 59,531 See accompanying Notes to Consolidated Financial Statements. (525) 523 382 905 (3,407) (3,406) (3,026) 56,505 September 30, 2017 48,351 224 1,315 (1477) (162) (782) (64) (846) (784) 47.567 Net sales: Products Services Apple Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except number of shares which are reflected in thousands and per share amounts) Total net sales Cost of sales: Products Services Total cost of sales Gross margin Operating expenses: Research and development Selling general and administrative Total operating expenses Operating income Other income/(expense), net Income before provision for income taxes Provision for income taxes Net income Earnings per share: Basic Diluted Shams used in computing earnings per share: Basic Diluted Years ended September 28. September 29, 2019 2018 213,883 $ 46,291 260,174 144,996 16,786 161,782 98,392 16,217 18,245 34,462 63,930 1,807 65,737 10,481 55,256 $ 11.97 $ 11.89 $ 4,617,834 4,648,913 See accompanying Notes to Consolidated Financial Statements. 225,847 $ 39,748 265,595 148,164 15,592 163,756 101,839 14,236 16,705 30,941 September 30, 2017 70,898 2,005 72,903 13,372 59,531 $ 12.01 $ 11.91 $ 4,955,377 5,000,109 196,534 32,700 229,234 126,337 14,711 141,048 88,186 11,581 15,261 26,842 61,344 2,745 64,089 15,738 48,351 9.27 921 5,217,242 5,251,692 Current assets: Cash and cash equivalents Marketable securities Accounts receivable, net Inventories Vendor non-trade receivables Other current assets Apple Inc. CONSOLIDATED BALANCE SHEETS (In millions, except number of shares which are reflected in thousands and par value) Total current assets Non-current assets Marketable securities Property, plant and equipment, net Other non-current assets Total non-current assets Total assets Current liabilities: Accounts payable Other current liabilises Deferred revenue Commercial paper Term debt Total current liabilities Non-current liabilities: Term debt Other non-current liabilities Total non-current liabilities Total abes LIABILITIES AND SHAREHOLDERS' EQUITY ASSETS: Commitments and contingencies Shareholders equity Common stock and additional paid-in capital, 50.00001 par value: 12,500,000 shares authonzed; 4,443,236 and 4,754,986 shares issued and outstanding, respectively Retained earnings Accumulated other comprehensive income (loss) Total shareholders equity Total liabilities and shareholders equity September 28, 2019 See accompanying Notes to Consolidated Financial Statements Apple Inc. (2019 Fom 10K (31 48,844 $ 51,713 22,926 4,106 22,878 12,352 162,819 105,341 37,378 32,978 175.697 338.516 $ 46,236 $ 37,720 5,522 5,980 10,260 105,718 91,807 50,503 142,310 248,028 September 29, 2018 45,174 45,898 (584) 90,488 338,516 25,913 40,388 23,186 3,956 25,809 12,087 131,339 170,799 41,304 22,283 234,386 365,725 55,888 33,327 5,966 11,964 8,784 115.929 93,735 48.914 142.649 258,578 40,201 70,400 (3,454) 107,147 365,725 Total shareholders equity, beginning balances Common stock and additional paid-in capital: Beginning balances Common stock issued Common stock withheld related to net share settlement of equity awards Apple Inc. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (in millions, except per share amounts) Share-based compensation Tax benefit from equity awards, including transfer pricing adjustments Ending balances Retained earings: Beginning balances Net income Dividends and dividend equivalents declared Common stock withheld related to net share settlement of equity awards Common stock repurchased Cumulative effects of changes in accounting principles Ending balances Accumulated other comprehensive income (loss): Beginning balances Other comprehensive income/loss) Cumulative effects of changes in accounting principles Ending balances Total shareholders equity, ending balances Dividends and dividend equivalents declared per share or RSU September 28. 2019 107.147 40,201 781 (2002) 6,194 45,174 70,400 55,256 (14,129) (1,029) (67,101) 2,501 45,898 (3,454) 2,781 89 (584) Years ended September 29, 2018 134,047 90,488 $ 3.00 $ See accompanying Notes to Consolidated Financial Statements. 35,867 669 (1,778) 5,443 40.201 98,330 59.531 (13.735) (948) (73,056) 278 70,400 (150) (3,026) (278) (3,454) September 30, 2017 128,249 107,147 S 2.72 $ 31.251 555 (1468) 4.909 620 35,867 96,364 48,351 (12,803) (581) (33,001) 98,330 634 (784) (150) 134,047 2.40 Cash, cash equivalents and restricted cash, beginning balances Operating activities: Net income Apple Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Adjustments to reconcile net income to cash generated by operating activities: Depreciation and amortization Share-based compensation expense Deferred income tax expense/(benefit Other Changes in operating assets and liabilities: Accounts receivable, net Inventories Vendor non-trade receivables Other current and non-current assets Accounts payable Deferred revenue Other current and non-current liabilities Cash generated by operating activities Investing activities: Purchases of marketable securities Proceeds from maturities of marketable securities Proceeds from sales of marketable securities Payments for acquisition of property, plant and equipment Payments made in connection with business acquisitions, net Purchases of non-marketable securities Proceeds from non-marketable securities Other Cash generated by used in) investing activities Financing activities: Proceeds from issuance of common stock Payments for taxes related to not share settlement of equity awards Payments for dividends and dividend equivalents Repurchases of common stock Proceeds from issuance of term debt, not Repayments of term debt Proceeds from/(Repayments of commercial paper, net Other Cash used in financing activities Increase/(Decrease) in cash, cash equivalents and restricted cash Cash, cash equivalents and restricted cash, ending balances Supplemental cash flow disclosure: Cash paid for income taxes, not Cash paid for interest See amm September 28, 2019 25,913 S 55,256 12.547 6.068 (3:40) (652) 245 (289) 2,931 873 (1,923) (625) (4.700) 69.391 (39,630) 40,102 56,988 (10,495) (624) (1,001) 1,634 (1078) 45.896 781 (2817) (14,119) (66,897) 6.963 (8.805) (5.977) (105) (90.976) Years ended September 29, 2018 24.311 50,224 S $ $ Notes to Consolidated Financial Statement 15,263 S 3,423 S 20,299 S 59.531 10,903 5.340 (32,500) (444) (5,302) 828 (8,010) (423) 9.175 (3) 38,449 77,434 (71,356) 55,881 47,838 (13,313) (721) (1,871) 353 (745) 16,066 September 30, 2017 660 (2.527) (13,712) (72,738) 6,900 (6.500) (37) (87,876) 5,624 25.913 $ 10,417 S 3,022 S 20,484 48.351 10,157 4.840 5.900 (166) (2.000) (2.723) (4254) (5.318) 8,966 (593) 1,092 64.225 (150 486) 31,775 94,564 (12.451) (329) (521) 126 (124) (46.446) 555 (1874) (12,769) (32.900) 29,662 (3,500) 3.852 (17.974) (195) 20289 11.591 2.092 Total net sales Net income Earnings per share: Basic Diluted Cash dividends declared per share Shams used in computing earnings per share: Basic Diluted 2019 2018 2017 $ 260,174 $ 265,595 $229,234 55,256 $ 59,531 $ 48,351 $ Non-current portion of term debt Other non-current liabilities 11.97 $ 11.89 $ 3.00 $ Total cash, cash equivalents and marketable securities $ 205,898 Total assets 12.01 $ 9.27 $ 11.91 $ 9.21 $ 4,617,834 4,955,377 4,648,913 2015 2016 $215.639 $ 233,715 45,687 $ 53,394 2.72 $ 2.40 $ 8.35 $ 8.31 $ $ 338,516 $365,725 $ 375,319 $ $ 97,207 $ $ 44,212 $ 91,807 $ 93,735 $ 50,503 $ 48,914 $ 2.18 $ 9.28 9.22 5,217,242 5,470,820 5,753,421 5,000,109 5,251,692 5,500,281 5,793,069 1.98 $ 237,100 $ 268,895 $ 237,585 $ 205,666 321,686 $ 290,345 75,427 $ 39,986 $ 53,329 38,104 Gross Margin Products and Services gross margin and gross margin percentage for 2019, 2018 and 2017 were as follows (dollars in millions): 2019 2018 2017 Gross margin: Products Services Total gross margin Gross margin percentage: Products Services Total gross margin percentage 68,887 29,505 98,392 32.2% 63.7% 37.8% $ 77,683 24,156 101,839 34.4% 60.8% 38.3% 70,197 17,989 88,186 35.7% 55.0% 38.5% Operating Expenses Operating expenses for 2019, 2018 and 2017 were as follows (dollars in millions): Change Research and development Percentage of total net sales Selling general and administrative Percentage of total net sales Total operating expenses Percentage of total net sales $ $ 2019 16,217 6% 18,245 7% 34,462 13% 14% $ 9% $ 11% $ 2018 14,236 5% 16,705 6% 30,941 12% Change 23% $ 9% $ 15% $ 2017 11,581 5% 15,261 7% 26,842 12% Contractual Obligations The following table presents certain payments due by the Company as of September 28, 2019, and excludes amounts aiready recorded on the Consolidated Balance Sheet, except for term debt and the deemed repatriation tax payable (in millions): Term debt Operating leases Manufacturing purchase obligations Other purchase obligations Deemed repatriation tax payable Total Payments due In 2020 10,270 1,306 40,076 3,744 Payments due in 2021-2022 55.396 $ Payments due In 2023 2024 19,329 1,746 808 572 8,501 30,956 $ 18,278 S 2,413 1,974 2271 4,350 29286 $ Payments due after 2024 $ 53,802 $ 5,373 69 41 16,655 75,940 $ Total 101,579 10,838 42,927 6.628 29,506 191.578 Liquidity and Capital Resources The following table presents selected financial information and statistics as of and for the years ended September 28, 2019, September 29, 2018 and September 30, 2017 (in millions): Cash, cash equivalents and marketable securities () Property, plant and equipment, net Commercial paper Total term debt Working capital Cash generated by operating activities Cash generated by/(used in) investing activities Cash used in financing activities $ $ $ $ $ $ 2019 205,898 $ 37,378 $ 5,980 $ 102,067 $ 57,101 $ 69,391 $ 45,896 $ (90,976) $ 2018 237,100 $ 41,304 $ 11,964 $ 102,519 $ 15,410 $ 77.434 $ 16,066 $ (87,876) $ 2017 268,895 33,783 11,977 103,703 28,792 64,225 (46,446) (17,974) Term Debt As of September 28, 2019, the Company had outstanding floating- and fixed-rate notes with varying maturities for an aggregate principal amount of $101.7 billion (collectively the "Notes"). The Notes are senior unsecured obligations and interest is payable in armars. The following table provides a summary of the Company's term debt as of September 28, 2019 and September 29, 2018: 2019 2018 2013-2018 debt issuances: Roating-rate notes Fixed-rate 0.350% -4.050% notes 2019 debtissuance Fixed-rate 1.700 % -2.950% nobs Total tarm debt Uhamortized premium(discount) and issuance costs, net Hedge accounting fair value adjustments Lass: Current portion of term debt Total non-current portion of term debt Amount Maturities (calendar year) (in millions) 2020 2022 $ 2019 - 2047 2022 2049 4,250 90,429 7,000 101,079 (224) 012 (10,200) 91,807 Effective Interest Rate Amount (in millions) 220% 3.28% S 7,107 0.28% 4.78% 97,000 1.71% 2.99% 104,193 (218) (1,450) (8,784) 93,735 Effective Interest Rate 1.07% 3.44% 028% -4.78% Total net sales Net income Earnings per share: Basic Diluted Cash dividends declared per share Shams used in computing earnings per share: Basic Diluted 2019 2018 2017 $ 260,174 $ 265,595 $229,234 55,256 $ 59,531 $ 48,351 $ Non-current portion of term debt Other non-current liabilities 11.97 $ 11.89 $ 3.00 $ 2.72 $ 4,617,834 4,648,913 Total cash, cash equivalents and marketable securities $ 205,898 Total assets 12.01 $ 11.91 $ 2015 2016 $215,639 $ 233,715 45,687 $ 53,394 9.27 $ 9.21 $ 2.40 $ 4,955,377 5,217,242 5,000,109 5,251,692 8.35 $ 8.31 $ 2.18 $ 9.28 9.22 1.98 5,470,820 5,753,421 5,500,281 5,793,069 75,427 $ 39,986 $ $ 237,100 $ 268,895 $237,585 $ 205,666 $ 338,516 $365,725 $ 375,319 $ 321,686 $ 290,345 $ 97,207 $ 91,807 $ 93,735 $ 50,503 $ 48,914 $ 53,329 38,104 $ 44,212 $ found. THE BASICS 1. Accounts Receivable (a) What is the amount of the company's accounts receivable? Before subtracting the allowance for doubtful accounts (gross accounts receivable): This year This year Last year After subtracting the allowance for doubtful accounts (net accounts receivable): This year Last year (b) What is the amount of the allowance for doubtful accounts? This year Last year Page What percentage of the gross accounts receivables are considered bad debts? The credit risk ratio: Allowance for doubtful accounts Gross accounts receivable Last year Page 2. Inventories and Cost of Goods Sold (a) What is the amount of inventory? This year (b) What is the amount of cost of goods sold? This year Last year (c) What inventory costing method has the company chosen? FURTHER ANALYSIS Analysis of Current Assets 3. Calculate the following ratios: Show your computations (a) Receivables tumover = (d) What other information does the company provide in the note about its inventory? Page (b) Average collection period (c) Inventory turnover = Sales Average net receivables Last year (d) Average days inventories held = (b) Cost of goods sold Average inventory 365 Turnover 365 Turnover 4. Explain what information each of these ratios provides. (a) Page 35 Page 2 years ago Page (c) (d) INFORMATION FOR DECISION MAKING 6. Evaluate the company's receivables collection. In your answer, consider the type of pro- duct(s) the company sells, the industry in which the company operates and the type of cus- tomer it serves. Refer to the information obtained in the preceding questions, 7. Evaluate the company's inventory management. In your answer, consider the type of product(s) the company sells, the industry in which the company operates and the type of cus- tomer it serves. Refer to the information obtained in the preceding questions. Net sales: Products Services Apple Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except number of shares which are reflected in thousands and per share amounts) Total net sales Cost of sales: Products Services Total cost of sales Gross margin Operating expenses: Research and development Selling general and administrative Total operating expenses Operating income Other income/(expense), net Income before provision for income taxes Provision for income taxes Net income Earnings per share: Basic Diluted Shams used in computing earnings per share: Basic Diluted Years ended September 28. September 29, 2019 2018 213,883 $ 46,291 260,174 144,996 16,786 161,782 98,392 16,217 18,245 34,462 63,930 1,807 65,737 10,481 55,256 $ 11.97 $ 11.89 $ 4,617,834 4,648,913 See accompanying Notes to Consolidated Financial Statements. 225,847 $ 39,748 265,595 148,164 15,592 163,756 101,839 14,236 16,705 30,941 September 30, 2017 70,898 2,005 72,903 13,372 59,531 $ 12.01 $ 11.91 $ 4,955,377 5,000,109 196,534 32,700 229,234 126,337 14,711 141,048 88,186 11,581 15,261 26,842 61,344 2,745 64,089 15,738 48,351 9.27 921 5,217,242 5,251,692 Apple Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME in millions) Net income Other comprehensive income/loss): Change in foreign currency translation, net of tax Change in unrealized gains/losses on derivative instruments, net of tax Change in fair value of derivatives Adjustment for net (gains)/losses realized and included in net income Total change in unrealized gains/losses on derivative instruments Change in unrealized gains/losses on marketable securities, net of tax: Change in tair value of marketable securities Adjustment for net (gains)Mosses realized and included in net income Total change in unrealized gains/losses on marketable securites Total other comprehensive income/(loss) Total comprehensive income September 28, 2019 55,256 (408) (661) 23 (638) 3,802 25 3,827 2,781 58,037 Years ended September 29, 2018 59,531 See accompanying Notes to Consolidated Financial Statements. (525) 523 382 905 (3,407) (3,406) (3,026) 56,505 September 30, 2017 48,351 224 1,315 (1477) (162) (782) (64) (846) (784) 47.567 Net sales: Products Services Apple Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except number of shares which are reflected in thousands and per share amounts) Total net sales Cost of sales: Products Services Total cost of sales Gross margin Operating expenses: Research and development Selling general and administrative Total operating expenses Operating income Other income/(expense), net Income before provision for income taxes Provision for income taxes Net income Earnings per share: Basic Diluted Shams used in computing earnings per share: Basic Diluted Years ended September 28. September 29, 2019 2018 213,883 $ 46,291 260,174 144,996 16,786 161,782 98,392 16,217 18,245 34,462 63,930 1,807 65,737 10,481 55,256 $ 11.97 $ 11.89 $ 4,617,834 4,648,913 See accompanying Notes to Consolidated Financial Statements. 225,847 $ 39,748 265,595 148,164 15,592 163,756 101,839 14,236 16,705 30,941 September 30, 2017 70,898 2,005 72,903 13,372 59,531 $ 12.01 $ 11.91 $ 4,955,377 5,000,109 196,534 32,700 229,234 126,337 14,711 141,048 88,186 11,581 15,261 26,842 61,344 2,745 64,089 15,738 48,351 9.27 921 5,217,242 5,251,692 Current assets: Cash and cash equivalents Marketable securities Accounts receivable, net Inventories Vendor non-trade receivables Other current assets Apple Inc. CONSOLIDATED BALANCE SHEETS (In millions, except number of shares which are reflected in thousands and par value) Total current assets Non-current assets Marketable securities Property, plant and equipment, net Other non-current assets Total non-current assets Total assets Current liabilities: Accounts payable Other current liabilises Deferred revenue Commercial paper Term debt Total current liabilities Non-current liabilities: Term debt Other non-current liabilities Total non-current liabilities Total abes LIABILITIES AND SHAREHOLDERS' EQUITY ASSETS: Commitments and contingencies Shareholders equity Common stock and additional paid-in capital, 50.00001 par value: 12,500,000 shares authonzed; 4,443,236 and 4,754,986 shares issued and outstanding, respectively Retained earnings Accumulated other comprehensive income (loss) Total shareholders equity Total liabilities and shareholders equity September 28, 2019 See accompanying Notes to Consolidated Financial Statements Apple Inc. (2019 Fom 10K (31 48,844 $ 51,713 22,926 4,106 22,878 12,352 162,819 105,341 37,378 32,978 175.697 338.516 $ 46,236 $ 37,720 5,522 5,980 10,260 105,718 91,807 50,503 142,310 248,028 September 29, 2018 45,174 45,898 (584) 90,488 338,516 25,913 40,388 23,186 3,956 25,809 12,087 131,339 170,799 41,304 22,283 234,386 365,725 55,888 33,327 5,966 11,964 8,784 115.929 93,735 48.914 142.649 258,578 40,201 70,400 (3,454) 107,147 365,725 Total shareholders equity, beginning balances Common stock and additional paid-in capital: Beginning balances Common stock issued Common stock withheld related to net share settlement of equity awards Apple Inc. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (in millions, except per share amounts) Share-based compensation Tax benefit from equity awards, including transfer pricing adjustments Ending balances Retained earings: Beginning balances Net income Dividends and dividend equivalents declared Common stock withheld related to net share settlement of equity awards Common stock repurchased Cumulative effects of changes in accounting principles Ending balances Accumulated other comprehensive income (loss): Beginning balances Other comprehensive income/loss) Cumulative effects of changes in accounting principles Ending balances Total shareholders equity, ending balances Dividends and dividend equivalents declared per share or RSU September 28. 2019 107.147 40,201 781 (2002) 6,194 45,174 70,400 55,256 (14,129) (1,029) (67,101) 2,501 45,898 (3,454) 2,781 89 (584) Years ended September 29, 2018 134,047 90,488 $ 3.00 $ See accompanying Notes to Consolidated Financial Statements. 35,867 669 (1,778) 5,443 40.201 98,330 59.531 (13.735) (948) (73,056) 278 70,400 (150) (3,026) (278) (3,454) September 30, 2017 128,249 107,147 S 2.72 $ 31.251 555 (1468) 4.909 620 35,867 96,364 48,351 (12,803) (581) (33,001) 98,330 634 (784) (150) 134,047 2.40 Cash, cash equivalents and restricted cash, beginning balances Operating activities: Net income Apple Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Adjustments to reconcile net income to cash generated by operating activities: Depreciation and amortization Share-based compensation expense Deferred income tax expense/(benefit Other Changes in operating assets and liabilities: Accounts receivable, net Inventories Vendor non-trade receivables Other current and non-current assets Accounts payable Deferred revenue Other current and non-current liabilities Cash generated by operating activities Investing activities: Purchases of marketable securities Proceeds from maturities of marketable securities Proceeds from sales of marketable securities Payments for acquisition of property, plant and equipment Payments made in connection with business acquisitions, net Purchases of non-marketable securities Proceeds from non-marketable securities Other Cash generated by used in) investing activities Financing activities: Proceeds from issuance of common stock Payments for taxes related to not share settlement of equity awards Payments for dividends and dividend equivalents Repurchases of common stock Proceeds from issuance of term debt, not Repayments of term debt Proceeds from/(Repayments of commercial paper, net Other Cash used in financing activities Increase/(Decrease) in cash, cash equivalents and restricted cash Cash, cash equivalents and restricted cash, ending balances Supplemental cash flow disclosure: Cash paid for income taxes, not Cash paid for interest See amm September 28, 2019 25,913 S 55,256 12.547 6.068 (3:40) (652) 245 (289) 2,931 873 (1,923) (625) (4.700) 69.391 (39,630) 40,102 56,988 (10,495) (624) (1,001) 1,634 (1078) 45.896 781 (2817) (14,119) (66,897) 6.963 (8.805) (5.977) (105) (90.976) Years ended September 29, 2018 24.311 50,224 S $ $ Notes to Consolidated Financial Statement 15,263 S 3,423 S 20,299 S 59.531 10,903 5.340 (32,500) (444) (5,302) 828 (8,010) (423) 9.175 (3) 38,449 77,434 (71,356) 55,881 47,838 (13,313) (721) (1,871) 353 (745) 16,066 September 30, 2017 660 (2.527) (13,712) (72,738) 6,900 (6.500) (37) (87,876) 5,624 25.913 $ 10,417 S 3,022 S 20,484 48.351 10,157 4.840 5.900 (166) (2.000) (2.723) (4254) (5.318) 8,966 (593) 1,092 64.225 (150 486) 31,775 94,564 (12.451) (329) (521) 126 (124) (46.446) 555 (1874) (12,769) (32.900) 29,662 (3,500) 3.852 (17.974) (195) 20289 11.591 2.092 Total net sales Net income Earnings per share: Basic Diluted Cash dividends declared per share Shams used in computing earnings per share: Basic Diluted 2019 2018 2017 $ 260,174 $ 265,595 $229,234 55,256 $ 59,531 $ 48,351 $ Non-current portion of term debt Other non-current liabilities 11.97 $ 11.89 $ 3.00 $ Total cash, cash equivalents and marketable securities $ 205,898 Total assets 12.01 $ 9.27 $ 11.91 $ 9.21 $ 4,617,834 4,955,377 4,648,913 2015 2016 $215.639 $ 233,715 45,687 $ 53,394 2.72 $ 2.40 $ 8.35 $ 8.31 $ $ 338,516 $365,725 $ 375,319 $ $ 97,207 $ $ 44,212 $ 91,807 $ 93,735 $ 50,503 $ 48,914 $ 2.18 $ 9.28 9.22 5,217,242 5,470,820 5,753,421 5,000,109 5,251,692 5,500,281 5,793,069 1.98 $ 237,100 $ 268,895 $ 237,585 $ 205,666 321,686 $ 290,345 75,427 $ 39,986 $ 53,329 38,104 Gross Margin Products and Services gross margin and gross margin percentage for 2019, 2018 and 2017 were as follows (dollars in millions): 2019 2018 2017 Gross margin: Products Services Total gross margin Gross margin percentage: Products Services Total gross margin percentage 68,887 29,505 98,392 32.2% 63.7% 37.8% $ 77,683 24,156 101,839 34.4% 60.8% 38.3% 70,197 17,989 88,186 35.7% 55.0% 38.5% Operating Expenses Operating expenses for 2019, 2018 and 2017 were as follows (dollars in millions): Change Research and development Percentage of total net sales Selling general and administrative Percentage of total net sales Total operating expenses Percentage of total net sales $ $ 2019 16,217 6% 18,245 7% 34,462 13% 14% $ 9% $ 11% $ 2018 14,236 5% 16,705 6% 30,941 12% Change 23% $ 9% $ 15% $ 2017 11,581 5% 15,261 7% 26,842 12% Contractual Obligations The following table presents certain payments due by the Company as of September 28, 2019, and excludes amounts aiready recorded on the Consolidated Balance Sheet, except for term debt and the deemed repatriation tax payable (in millions): Term debt Operating leases Manufacturing purchase obligations Other purchase obligations Deemed repatriation tax payable Total Payments due In 2020 10,270 1,306 40,076 3,744 Payments due in 2021-2022 55.396 $ Payments due In 2023 2024 19,329 1,746 808 572 8,501 30,956 $ 18,278 S 2,413 1,974 2271 4,350 29286 $ Payments due after 2024 $ 53,802 $ 5,373 69 41 16,655 75,940 $ Total 101,579 10,838 42,927 6.628 29,506 191.578 Liquidity and Capital Resources The following table presents selected financial information and statistics as of and for the years ended September 28, 2019, September 29, 2018 and September 30, 2017 (in millions): Cash, cash equivalents and marketable securities () Property, plant and equipment, net Commercial paper Total term debt Working capital Cash generated by operating activities Cash generated by/(used in) investing activities Cash used in financing activities $ $ $ $ $ $ 2019 205,898 $ 37,378 $ 5,980 $ 102,067 $ 57,101 $ 69,391 $ 45,896 $ (90,976) $ 2018 237,100 $ 41,304 $ 11,964 $ 102,519 $ 15,410 $ 77.434 $ 16,066 $ (87,876) $ 2017 268,895 33,783 11,977 103,703 28,792 64,225 (46,446) (17,974) Term Debt As of September 28, 2019, the Company had outstanding floating- and fixed-rate notes with varying maturities for an aggregate principal amount of $101.7 billion (collectively the "Notes"). The Notes are senior unsecured obligations and interest is payable in armars. The following table provides a summary of the Company's term debt as of September 28, 2019 and September 29, 2018: 2019 2018 2013-2018 debt issuances: Roating-rate notes Fixed-rate 0.350% -4.050% notes 2019 debtissuance Fixed-rate 1.700 % -2.950% nobs Total tarm debt Uhamortized premium(discount) and issuance costs, net Hedge accounting fair value adjustments Lass: Current portion of term debt Total non-current portion of term debt Amount Maturities (calendar year) (in millions) 2020 2022 $ 2019 - 2047 2022 2049 4,250 90,429 7,000 101,079 (224) 012 (10,200) 91,807 Effective Interest Rate Amount (in millions) 220% 3.28% S 7,107 0.28% 4.78% 97,000 1.71% 2.99% 104,193 (218) (1,450) (8,784) 93,735 Effective Interest Rate 1.07% 3.44% 028% -4.78% Total net sales Net income Earnings per share: Basic Diluted Cash dividends declared per share Shams used in computing earnings per share: Basic Diluted 2019 2018 2017 $ 260,174 $ 265,595 $229,234 55,256 $ 59,531 $ 48,351 $ Non-current portion of term debt Other non-current liabilities 11.97 $ 11.89 $ 3.00 $ 2.72 $ 4,617,834 4,648,913 Total cash, cash equivalents and marketable securities $ 205,898 Total assets 12.01 $ 11.91 $ 2015 2016 $215,639 $ 233,715 45,687 $ 53,394 9.27 $ 9.21 $ 2.40 $ 4,955,377 5,217,242 5,000,109 5,251,692 8.35 $ 8.31 $ 2.18 $ 9.28 9.22 1.98 5,470,820 5,753,421 5,500,281 5,793,069 75,427 $ 39,986 $ $ 237,100 $ 268,895 $237,585 $ 205,666 $ 338,516 $365,725 $ 375,319 $ 321,686 $ 290,345 $ 97,207 $ 91,807 $ 93,735 $ 50,503 $ 48,914 $ 53,329 38,104 $ 44,212 $ found. THE BASICS 1. Accounts Receivable (a) What is the amount of the company's accounts receivable? Before subtracting the allowance for doubtful accounts (gross accounts receivable): This year This year Last year After subtracting the allowance for doubtful accounts (net accounts receivable): This year Last year (b) What is the amount of the allowance for doubtful accounts? This year Last year Page What percentage of the gross accounts receivables are considered bad debts? The credit risk ratio: Allowance for doubtful accounts Gross accounts receivable Last year Page 2. Inventories and Cost of Goods Sold (a) What is the amount of inventory? This year (b) What is the amount of cost of goods sold? This year Last year (c) What inventory costing method has the company chosen? FURTHER ANALYSIS Analysis of Current Assets 3. Calculate the following ratios: Show your computations (a) Receivables tumover = (d) What other information does the company provide in the note about its inventory? Page (b) Average collection period (c) Inventory turnover = Sales Average net receivables Last year (d) Average days inventories held = (b) Cost of goods sold Average inventory 365 Turnover 365 Turnover 4. Explain what information each of these ratios provides. (a) Page 35 Page 2 years ago Page (c) (d) INFORMATION FOR DECISION MAKING 6. Evaluate the company's receivables collection. In your answer, consider the type of pro- duct(s) the company sells, the industry in which the company operates and the type of cus- tomer it serves. Refer to the information obtained in the preceding questions, 7. Evaluate the company's inventory management. In your answer, consider the type of product(s) the company sells, the industry in which the company operates and the type of cus- tomer it serves. Refer to the information obtained in the preceding questions. Net sales: Products Services Apple Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except number of shares which are reflected in thousands and per share amounts) Total net sales Cost of sales: Products Services Total cost of sales Gross margin Operating expenses: Research and development Selling general and administrative Total operating expenses Operating income Other income/(expense), net Income before provision for income taxes Provision for income taxes Net income Earnings per share: Basic Diluted Shams used in computing earnings per share: Basic Diluted Years ended September 28. September 29, 2019 2018 213,883 $ 46,291 260,174 144,996 16,786 161,782 98,392 16,217 18,245 34,462 63,930 1,807 65,737 10,481 55,256 $ 11.97 $ 11.89 $ 4,617,834 4,648,913 See accompanying Notes to Consolidated Financial Statements. 225,847 $ 39,748 265,595 148,164 15,592 163,756 101,839 14,236 16,705 30,941 September 30, 2017 70,898 2,005 72,903 13,372 59,531 $ 12.01 $ 11.91 $ 4,955,377 5,000,109 196,534 32,700 229,234 126,337 14,711 141,048 88,186 11,581 15,261 26,842 61,344 2,745 64,089 15,738 48,351 9.27 921 5,217,242 5,251,692 Apple Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME in millions) Net income Other comprehensive income/loss): Change in foreign currency translation, net of tax Change in unrealized gains/losses on derivative instruments, net of tax Change in fair value of derivatives Adjustment for net (gains)/losses realized and included in net income Total change in unrealized gains/losses on derivative instruments Change in unrealized gains/losses on marketable securities, net of tax: Change in tair value of marketable securities Adjustment for net (gains)Mosses realized and included in net income Total change in unrealized gains/losses on marketable securites Total other comprehensive income/(loss) Total comprehensive income September 28, 2019 55,256 (408) (661) 23 (638) 3,802 25 3,827 2,781 58,037 Years ended September 29, 2018 59,531 See accompanying Notes to Consolidated Financial Statements. (525) 523 382 905 (3,407) (3,406) (3,026) 56,505 September 30, 2017 48,351 224 1,315 (1477) (162) (782) (64) (846) (784) 47.567 Net sales: Products Services Apple Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except number of shares which are reflected in thousands and per share amounts) Total net sales Cost of sales: Products Services Total cost of sales Gross margin Operating expenses: Research and development Selling general and administrative Total operating expenses Operating income Other income/(expense), net Income before provision for income taxes Provision for income taxes Net income Earnings per share: Basic Diluted Shams used in computing earnings per share: Basic Diluted Years ended September 28. September 29, 2019 2018 213,883 $ 46,291 260,174 144,996 16,786 161,782 98,392 16,217 18,245 34,462 63,930 1,807 65,737 10,481 55,256 $ 11.97 $ 11.89 $ 4,617,834 4,648,913 See accompanying Notes to Consolidated Financial Statements. 225,847 $ 39,748 265,595 148,164 15,592 163,756 101,839 14,236 16,705 30,941 September 30, 2017 70,898 2,005 72,903 13,372 59,531 $ 12.01 $ 11.91 $ 4,955,377 5,000,109 196,534 32,700 229,234 126,337 14,711 141,048 88,186 11,581 15,261 26,842 61,344 2,745 64,089 15,738 48,351 9.27 921 5,217,242 5,251,692 Current assets: Cash and cash equivalents Marketable securities Accounts receivable, net Inventories Vendor non-trade receivables Other current assets Apple Inc. CONSOLIDATED BALANCE SHEETS (In millions, except number of shares which are reflected in thousands and par value) Total current assets Non-current assets Marketable securities Property, plant and equipment, net Other non-current assets Total non-current assets Total assets Current liabilities: Accounts payable Other current liabilises Deferred revenue Commercial paper Term debt Total current liabilities Non-current liabilities: Term debt Other non-current liabilities Total non-current liabilities Total abes LIABILITIES AND SHAREHOLDERS' EQUITY ASSETS: Commitments and contingencies Shareholders equity Common stock and additional paid-in capital, 50.00001 par value: 12,500,000 shares authonzed; 4,443,236 and 4,754,986 shares issued and outstanding, respectively Retained earnings Accumulated other comprehensive income (loss) Total shareholders equity Total liabilities and shareholders equity September 28, 2019 See accompanying Notes to Consolidated Financial Statements Apple Inc. (2019 Fom 10K (31 48,844 $ 51,713 22,926 4,106 22,878 12,352 162,819 105,341 37,378 32,978 175.697 338.516 $ 46,236 $ 37,720 5,522 5,980 10,260 105,718 91,807 50,503 142,310 248,028 September 29, 2018 45,174 45,898 (584) 90,488 338,516 25,913 40,388 23,186 3,956 25,809 12,087 131,339 170,799 41,304 22,283 234,386 365,725 55,888 33,327 5,966 11,964 8,784 115.929 93,735 48.914 142.649 258,578 40,201 70,400 (3,454) 107,147 365,725 Total shareholders equity, beginning balances Common stock and additional paid-in capital: Beginning balances Common stock issued Common stock withheld related to net share settlement of equity awards Apple Inc. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (in millions, except per share amounts) Share-based compensation Tax benefit from equity awards, including transfer pricing adjustments Ending balances Retained earings: Beginning balances Net income Dividends and dividend equivalents declared Common stock withheld related to net share settlement of equity awards Common stock repurchased Cumulative effects of changes in accounting principles Ending balances Accumulated other comprehensive income (loss): Beginning balances Other comprehensive income/loss) Cumulative effects of changes in accounting principles Ending balances Total shareholders equity, ending balances Dividends and dividend equivalents declared per share or RSU September 28. 2019 107.147 40,201 781 (2002) 6,194 45,174 70,400 55,256 (14,129) (1,029) (67,101) 2,501 45,898 (3,454) 2,781 89 (584) Years ended September 29, 2018 134,047 90,488 $ 3.00 $ See accompanying Notes to Consolidated Financial Statements. 35,867 669 (1,778) 5,443 40.201 98,330 59.531 (13.735) (948) (73,056) 278 70,400 (150) (3,026) (278) (3,454) September 30, 2017 128,249 107,147 S 2.72 $ 31.251 555 (1468) 4.909 620 35,867 96,364 48,351 (12,803) (581) (33,001) 98,330 634 (784) (150) 134,047 2.40 Cash, cash equivalents and restricted cash, beginning balances Operating activities: Net income Apple Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Adjustments to reconcile net income to cash generated by operating activities: Depreciation and amortization Share-based compensation expense Deferred income tax expense/(benefit Other Changes in operating assets and liabilities: Accounts receivable, net Inventories Vendor non-trade receivables Other current and non-current assets Accounts payable Deferred revenue Other current and non-current liabilities Cash generated by operating activities Investing activities: Purchases of marketable securities Proceeds from maturities of marketable securities Proceeds from sales of marketable securities Payments for acquisition of property, plant and equipment Payments made in connection with business acquisitions, net Purchases of non-marketable securities Proceeds from non-marketable securities Other Cash generated by used in) investing activities Financing activities: Proceeds from issuance of common stock Payments for taxes related to not share settlement of equity awards Payments for dividends and dividend equivalents Repurchases of common stock Proceeds from issuance of term debt, not Repayments of term debt Proceeds from/(Repayments of commercial paper, net Other Cash used in financing activities Increase/(Decrease) in cash, cash equivalents and restricted cash Cash, cash equivalents and restricted cash, ending balances Supplemental cash flow disclosure: Cash paid for income taxes, not Cash paid for interest See amm September 28, 2019 25,913 S 55,256 12.547 6.068 (3:40) (652) 245 (289) 2,931 873 (1,923) (625) (4.700) 69.391 (39,630) 40,102 56,988 (10,495) (624) (1,001) 1,634 (1078) 45.896 781 (2817) (14,119) (66,897) 6.963 (8.805) (5.977) (105) (90.976) Years ended September 29, 2018 24.311 50,224 S $ $ Notes to Consolidated Financial Statement 15,263 S 3,423 S 20,299 S 59.531 10,903 5.340 (32,500) (444) (5,302) 828 (8,010) (423) 9.175 (3) 38,449 77,434 (71,356) 55,881 47,838 (13,313) (721) (1,871) 353 (745) 16,066 September 30, 2017 660 (2.527) (13,712) (72,738) 6,900 (6.500) (37) (87,876) 5,624 25.913 $ 10,417 S 3,022 S 20,484 48.351 10,157 4.840 5.900 (166) (2.000) (2.723) (4254) (5.318) 8,966 (593) 1,092 64.225 (150 486) 31,775 94,564 (12.451) (329) (521) 126 (124) (46.446) 555 (1874) (12,769) (32.900) 29,662 (3,500) 3.852 (17.974) (195) 20289 11.591 2.092 Total net sales Net income Earnings per share: Basic Diluted Cash dividends declared per share Shams used in computing earnings per share: Basic Diluted 2019 2018 2017 $ 260,174 $ 265,595 $229,234 55,256 $ 59,531 $ 48,351 $ Non-current portion of term debt Other non-current liabilities 11.97 $ 11.89 $ 3.00 $ Total cash, cash equivalents and marketable securities $ 205,898 Total assets 12.01 $ 9.27 $ 11.91 $ 9.21 $ 4,617,834 4,955,377 4,648,913 2015 2016 $215.639 $ 233,715 45,687 $ 53,394 2.72 $ 2.40 $ 8.35 $ 8.31 $ $ 338,516 $365,725 $ 375,319 $ $ 97,207 $ $ 44,212 $ 91,807 $ 93,735 $ 50,503 $ 48,914 $ 2.18 $ 9.28 9.22 5,217,242 5,470,820 5,753,421 5,000,109 5,251,692 5,500,281 5,793,069 1.98 $ 237,100 $ 268,895 $ 237,585 $ 205,666 321,686 $ 290,345 75,427 $ 39,986 $ 53,329 38,104 Gross Margin Products and Services gross margin and gross margin percentage for 2019, 2018 and 2017 were as follows (dollars in millions): 2019 2018 2017 Gross margin: Products Services Total gross margin Gross margin percentage: Products Services Total gross margin percentage 68,887 29,505 98,392 32.2% 63.7% 37.8% $ 77,683 24,156 101,839 34.4% 60.8% 38.3% 70,197 17,989 88,186 35.7% 55.0% 38.5% Operating Expenses Operating expenses for 2019, 2018 and 2017 were as follows (dollars in millions): Change Research and development Percentage of total net sales Selling general and administrative Percentage of total net sales Total operating expenses Percentage of total net sales $ $ 2019 16,217 6% 18,245 7% 34,462 13% 14% $ 9% $ 11% $ 2018 14,236 5% 16,705 6% 30,941 12% Change 23% $ 9% $ 15% $ 2017 11,581 5% 15,261 7% 26,842 12% Contractual Obligations The following table presents certain payments due by the Company as of September 28, 2019, and excludes amounts aiready recorded on the Consolidated Balance Sheet, except for term debt and the deemed repatriation tax payable (in millions): Term debt Operating leases Manufacturing purchase obligations Other purchase obligations Deemed repatriation tax payable Total Payments due In 2020 10,270 1,306 40,076 3,744 Payments due in 2021-2022 55.396 $ Payments due In 2023 2024 19,329 1,746 808 572 8,501 30,956 $ 18,278 S 2,413 1,974 2271 4,350 29286 $ Payments due after 2024 $ 53,802 $ 5,373 69 41 16,655 75,940 $ Total 101,579 10,838 42,927 6.628 29,506 191.578 Liquidity and Capital Resources The following table presents selected financial information and statistics as of and for the years ended September 28, 2019, September 29, 2018 and September 30, 2017 (in millions): Cash, cash equivalents and marketable securities () Property, plant and equipment, net Commercial paper Total term debt Working capital Cash generated by operating activities Cash generated by/(used in) investing activities Cash used in financing activities $ $ $ $ $ $ 2019 205,898 $ 37,378 $ 5,980 $ 102,067 $ 57,101 $ 69,391 $ 45,896 $ (90,976) $ 2018 237,100 $ 41,304 $ 11,964 $ 102,519 $ 15,410 $ 77.434 $ 16,066 $ (87,876) $ 2017 268,895 33,783 11,977 103,703 28,792 64,225 (46,446) (17,974) Term Debt As of September 28, 2019, the Company had outstanding floating- and fixed-rate notes with varying maturities for an aggregate principal amount of $101.7 billion (collectively the "Notes"). The Notes are senior unsecured obligations and interest is payable in armars. The following table provides a summary of the Company's term debt as of September 28, 2019 and September 29, 2018: 2019 2018 2013-2018 debt issuances: Roating-rate notes Fixed-rate 0.350% -4.050% notes 2019 debtissuance Fixed-rate 1.700 % -2.950% nobs Total tarm debt Uhamortized premium(discount) and issuance costs, net Hedge accounting fair value adjustments Lass: Current portion of term debt Total non-current portion of term debt Amount Maturities (calendar year) (in millions) 2020 2022 $ 2019 - 2047 2022 2049 4,250 90,429 7,000 101,079 (224) 012 (10,200) 91,807 Effective Interest Rate Amount (in millions) 220% 3.28% S 7,107 0.28% 4.78% 97,000 1.71% 2.99% 104,193 (218) (1,450) (8,784) 93,735 Effective Interest Rate 1.07% 3.44% 028% -4.78% Total net sales Net income Earnings per share: Basic Diluted Cash dividends declared per share Shams used in computing earnings per share: Basic Diluted 2019 2018 2017 $ 260,174 $ 265,595 $229,234 55,256 $ 59,531 $ 48,351 $ Non-current portion of term debt Other non-current liabilities 11.97 $ 11.89 $ 3.00 $ 2.72 $ 4,617,834 4,648,913 Total cash, cash equivalents and marketable securities $ 205,898 Total assets 12.01 $ 11.91 $ 2015 2016 $215,639 $ 233,715 45,687 $ 53,394 9.27 $ 9.21 $ 2.40 $ 4,955,377 5,217,242 5,000,109 5,251,692 8.35 $ 8.31 $ 2.18 $ 9.28 9.22 1.98 5,470,820 5,753,421 5,500,281 5,793,069 75,427 $ 39,986 $ $ 237,100 $ 268,895 $237,585 $ 205,666 $ 338,516 $365,725 $ 375,319 $ 321,686 $ 290,345 $ 97,207 $ 91,807 $ 93,735 $ 50,503 $ 48,914 $ 53,329 38,104 $ 44,212 $ found. THE BASICS 1. Accounts Receivable (a) What is the amount of the company's accounts receivable? Before subtracting the allowance for doubtful accounts (gross accounts receivable): This year This year Last year After subtracting the allowance for doubtful accounts (net accounts receivable): This year Last year (b) What is the amount of the allowance for doubtful accounts? This year Last year Page What percentage of the gross accounts receivables are considered bad debts? The credit risk ratio: Allowance for doubtful accounts Gross accounts receivable Last year Page 2. Inventories and Cost of Goods Sold (a) What is the amount of inventory? This year (b) What is the amount of cost of goods sold? This year Last year (c) What inventory costing method has the company chosen? FURTHER ANALYSIS Analysis of Current Assets 3. Calculate the following ratios: Show your computations (a) Receivables tumover = (d) What other information does the company provide in the note about its inventory? Page (b) Average collection period (c) Inventory turnover = Sales Average net receivables Last year (d) Average days inventories held = (b) Cost of goods sold Average inventory 365 Turnover 365 Turnover 4. Explain what information each of these ratios provides. (a) Page 35 Page 2 years ago Page (c) (d) INFORMATION FOR DECISION MAKING 6. Evaluate the company's receivables collection. In your answer, consider the type of pro- duct(s) the company sells, the industry in which the company operates and the type of cus- tomer it serves. Refer to the information obtained in the preceding questions, 7. Evaluate the company's inventory management. In your answer, consider the type of product(s) the company sells, the industry in which the company operates and the type of cus- tomer it serves. Refer to the information obtained in the preceding questions. Net sales: Products Services Apple Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except number of shares which are reflected in thousands and per share amounts) Total net sales Cost of sales: Products Services Total cost of sales Gross margin Operating expenses: Research and development Selling general and administrative Total operating expenses Operating income Other income/(expense), net Income before provision for income taxes Provision for income taxes Net income Earnings per share: Basic Diluted Shams used in computing earnings per share: Basic Diluted Years ended September 28. September 29, 2019 2018 213,883 $ 46,291 260,174 144,996 16,786 161,782 98,392 16,217 18,245 34,462 63,930 1,807 65,737 10,481 55,256 $ 11.97 $ 11.89 $ 4,617,834 4,648,913 See accompanying Notes to Consolidated Financial Statements. 225,847 $ 39,748 265,595 148,164 15,592 163,756 101,839 14,236 16,705 30,941 September 30, 2017 70,898 2,005 72,903 13,372 59,531 $ 12.01 $ 11.91 $ 4,955,377 5,000,109 196,534 32,700 229,234 126,337 14,711 141,048 88,186 11,581 15,261 26,842 61,344 2,745 64,089 15,738 48,351 9.27 921 5,217,242 5,251,692 Apple Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME in millions) Net income Other comprehensive income/loss): Change in foreign currency translation, net of tax Change in unrealized gains/losses on derivative instruments, net of tax Change in fair value of derivatives Adjustment for net (gains)/losses realized and included in net income Total change in unrealized gains/losses on derivative instruments Change in unrealized gains/losses on marketable securities, net of tax: Change in tair value of marketable securities Adjustment for net (gains)Mosses realized and included in net income Total change in unrealized gains/losses on marketable securites Total other comprehensive income/(loss) Total comprehensive income September 28, 2019 55,256 (408) (661) 23 (638) 3,802 25 3,827 2,781 58,037 Years ended September 29, 2018 59,531 See accompanying Notes to Consolidated Financial Statements. (525) 523 382 905 (3,407) (3,406) (3,026) 56,505 September 30, 2017 48,351 224 1,315 (1477) (162) (782) (64) (846) (784) 47.567 Net sales: Products Services Apple Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except number of shares which are reflected in thousands and per share amounts) Total net sales Cost of sales: Products Services Total cost of sales Gross margin Operating expenses: Research and development Selling general and administrative Total operating expenses Operating income Other income/(expense), net Income before provision for income taxes Provision for income taxes Net income Earnings per share: Basic Diluted Shams used in computing earnings per share: Basic Diluted Years ended September 28. September 29, 2019 2018 213,883 $ 46,291 260,174 144,996 16,786 161,782 98,392 16,217 18,245 34,462 63,930 1,807 65,737 10,481 55,256 $ 11.97 $ 11.89 $ 4,617,834 4,648,913 See accompanying Notes to Consolidated Financial Statements. 225,847 $ 39,748 265,595 148,164 15,592 163,756 101,839 14,236 16,705 30,941 September 30, 2017 70,898 2,005 72,903 13,372 59,531 $ 12.01 $ 11.91 $ 4,955,377 5,000,109 196,534 32,700 229,234 126,337 14,711 141,048 88,186 11,581 15,261 26,842 61,344 2,745 64,089 15,738 48,351 9.27 921 5,217,242 5,251,692 Current assets: Cash and cash equivalents Marketable securities Accounts receivable, net Inventories Vendor non-trade receivables Other current assets Apple Inc. CONSOLIDATED BALANCE SHEETS (In millions, except number of shares which are reflected in thousands and par value) Total current assets Non-current assets Marketable securities Property, plant and equipment, net Other non-current assets Total non-current assets Total assets Current liabilities: Accounts payable Other current liabilises Deferred revenue Commercial paper Term debt Total current liabilities Non-current liabilities: Term debt Other non-current liabilities Total non-current liabilities Total abes LIABILITIES AND SHAREHOLDERS' EQUITY ASSETS: Commitments and contingencies Shareholders equity Common stock and additional paid-in capital, 50.00001 par value: 12,500,000 shares authonzed; 4,443,236 and 4,754,986 shares issued and outstanding, respectively Retained earnings Accumulated other comprehensive income (loss) Total shareholders equity Total liabilities and shareholders equity September 28, 2019 See accompanying Notes to Consolidated Financial Statements Apple Inc. (2019 Fom 10K (31 48,844 $ 51,713 22,926 4,106 22,878 12,352 162,819 105,341 37,378 32,978 175.697 338.516 $ 46,236 $ 37,720 5,522 5,980 10,260 105,718 91,807 50,503 142,310 248,028 September 29, 2018 45,174 45,898 (584) 90,488 338,516 25,913 40,388 23,186 3,956 25,809 12,087 131,339 170,799 41,304 22,283 234,386 365,725 55,888 33,327 5,966 11,964 8,784 115.929 93,735 48.914 142.649 258,578 40,201 70,400 (3,454) 107,147 365,725 Total shareholders equity, beginning balances Common stock and additional paid-in capital: Beginning balances Common stock issued Common stock withheld related to net share settlement of equity awards Apple Inc. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (in millions, except per share amounts) Share-based compensation Tax benefit from equity awards, including transfer pricing adjustments Ending balances Retained earings: Beginning balances Net income Dividends and dividend equivalents declared Common stock withheld related to net share settlement of equity awards Common stock repurchased Cumulative effects of changes in accounting principles Ending balances Accumulated other comprehensive income (loss): Beginning balances Other comprehensive income/loss) Cumulative effects of changes in accounting principles Ending balances Total shareholders equity, ending balances Dividends and dividend equivalents declared per share or RSU September 28. 2019 107.147 40,201 781 (2002) 6,194 45,174 70,400 55,256 (14,129) (1,029) (67,101) 2,501 45,898 (3,454) 2,781 89 (584) Years ended September 29, 2018 134,047 90,488 $ 3.00 $ See accompanying Notes to Consolidated Financial Statements. 35,867 669 (1,778) 5,443 40.201 98,330 59.531 (13.735) (948) (73,056) 278 70,400 (150) (3,026) (278) (3,454) September 30, 2017 128,249 107,147 S 2.72 $ 31.251 555 (1468) 4.909 620 35,867 96,364 48,351 (12,803) (581) (33,001) 98,330 634 (784) (150) 134,047 2.40 Cash, cash equivalents and restricted cash, beginning balances Operating activities: Net income Apple Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Adjustments to reconcile net income to cash generated by operating activities: Depreciation and amortization Share-based compensation expense Deferred income tax expense/(benefit Other Changes in operating assets and liabilities: Accounts receivable, net Inventories Vendor non-trade receivables Other current and non-current assets Accounts payable Deferred revenue Other current and non-current liabilities Cash generated by operating activities Investing activities: Purchases of marketable securities Proceeds from maturities of marketable securities Proceeds from sales of marketable securities Payments for acquisition of property, plant and equipment Payments made in connection with business acquisitions, net Purchases of non-marketable securities Proceeds from non-marketable securities Other Cash generated by used in) investing activities Financing activities: Proceeds from issuance of common stock Payments for taxes related to not share settlement of equity awards Payments for dividends and dividend equivalents Repurchases of common stock Proceeds from issuance of term debt, not Repayments of term debt Proceeds from/(Repayments of commercial paper, net Other Cash used in financing activities Increase/(Decrease) in cash, cash equivalents and restricted cash Cash, cash equivalents and restricted cash, ending balances Supplemental cash flow disclosure: Cash paid for income taxes, not Cash paid for interest See amm September 28, 2019 25,913 S 55,256 12.547 6.068 (3:40) (652) 245 (289) 2,931 873 (1,923) (625) (4.700) 69.391 (39,630) 40,102 56,988 (10,495) (624) (1,001) 1,634 (1078) 45.896 781 (2817) (14,119) (66,897) 6.963 (8.805) (5.977) (105) (90.976) Years ended September 29, 2018 24.311 50,224 S $ $ Notes to Consolidated Financial Statement 15,263 S 3,423 S 20,299 S 59.531 10,903 5.340 (32,500) (444) (5,302) 828 (8,010) (423) 9.175 (3) 38,449 77,434 (71,356) 55,881 47,838 (13,313) (721) (1,871) 353 (745) 16,066 September 30, 2017 660 (2.527) (13,712) (72,738) 6,900 (6.500) (37) (87,876) 5,624 25.913 $ 10,417 S 3,022 S 20,484 48.351 10,157 4.840 5.900 (166) (2.000) (2.723) (4254) (5.318) 8,966 (593) 1,092 64.225 (150 486) 31,775 94,564 (12.451) (329) (521) 126 (124) (46.446) 555 (1874) (12,769) (32.900) 29,662 (3,500) 3.852 (17.974) (195) 20289 11.591 2.092 Total net sales Net income Earnings per share: Basic Diluted Cash dividends declared per share Shams used in computing earnings per share: Basic Diluted 2019 2018 2017 $ 260,174 $ 265,595 $229,234 55,256 $ 59,531 $ 48,351 $ Non-current portion of term debt Other non-current liabilities 11.97 $ 11.89 $ 3.00 $ Total cash, cash equivalents and marketable securities $ 205,898 Total assets 12.01 $ 9.27 $ 11.91 $ 9.21 $ 4,617,834 4,955,377 4,648,913 2015 2016 $215.639 $ 233,715 45,687 $ 53,394 2.72 $ 2.40 $ 8.35 $ 8.31 $ $ 338,516 $365,725 $ 375,319 $ $ 97,207 $ $ 44,212 $ 91,807 $ 93,735 $ 50,503 $ 48,914 $ 2.18 $ 9.28 9.22 5,217,242 5,470,820 5,753,421 5,000,109 5,251,692 5,500,281 5,793,069 1.98 $ 237,100 $ 268,895 $ 237,585 $ 205,666 321,686 $ 290,345 75,427 $ 39,986 $ 53,329 38,104 Gross Margin Products and Services gross margin and gross margin percentage for 2019, 2018 and 2017 were as follows (dollars in millions): 2019 2018 2017 Gross margin: Products Services Total gross margin Gross margin percentage: Products Services Total gross margin percentage 68,887 29,505 98,392 32.2% 63.7% 37.8% $ 77,683 24,156 101,839 34.4% 60.8% 38.3% 70,197 17,989 88,186 35.7% 55.0% 38.5% Operating Expenses Operating expenses for 2019, 2018 and 2017 were as follows (dollars in millions): Change Research and development Percentage of total net sales Selling general and administrative Percentage of total net sales Total operating expenses Percentage of total net sales $ $ 2019 16,217 6% 18,245 7% 34,462 13% 14% $ 9% $ 11% $ 2018 14,236 5% 16,705 6% 30,941 12% Change 23% $ 9% $ 15% $ 2017 11,581 5% 15,261 7% 26,842 12% Contractual Obligations The following table presents certain payments due by the Company as of September 28, 2019, and excludes amounts aiready recorded on the Consolidated Balance Sheet, except for term debt and the deemed repatriation tax payable (in millions): Term debt Operating leases Manufacturing purchase obligations Other purchase obligations Deemed repatriation tax payable Total Payments due In 2020 10,270 1,306 40,076 3,744 Payments due in 2021-2022 55.396 $ Payments due In 2023 2024 19,329 1,746 808 572 8,501 30,956 $ 18,278 S 2,413 1,974 2271 4,350 29286 $ Payments due after 2024 $ 53,802 $ 5,373 69 41 16,655 75,940 $ Total 101,579 10,838 42,927 6.628 29,506 191.578 Liquidity and Capital Resources The following table presents selected financial information and statistics as of and for the years ended September 28, 2019, September 29, 2018 and September 30, 2017 (in millions): Cash, cash equivalents and marketable securities () Property, plant and equipment, net Commercial paper Total term debt Working capital Cash generated by operating activities Cash generated by/(used in) investing activities Cash used in financing activities $ $ $ $ $ $ 2019 205,898 $ 37,378 $ 5,980 $ 102,067 $ 57,101 $ 69,391 $ 45,896 $ (90,976) $ 2018 237,100 $ 41,304 $ 11,964 $ 102,519 $ 15,410 $ 77.434 $ 16,066 $ (87,876) $ 2017 268,895 33,783 11,977 103,703 28,792 64,225 (46,446) (17,974) Term Debt As of September 28, 2019, the Company had outstanding floating- and fixed-rate notes with varying maturities for an aggregate principal amount of $101.7 billion (collectively the "Notes"). The Notes are senior unsecured obligations and interest is payable in armars. The following table provides a summary of the Company's term debt as of September 28, 2019 and September 29, 2018: 2019 2018 2013-2018 debt issuances: Roating-rate notes Fixed-rate 0.350% -4.050% notes 2019 debtissuance Fixed-rate 1.700 % -2.950% nobs Total tarm debt Uhamortized premium(discount) and issuance costs, net Hedge accounting fair value adjustments Lass: Current portion of term debt Total non-current portion of term debt Amount Maturities (calendar year) (in millions) 2020 2022 $ 2019 - 2047 2022 2049 4,250 90,429 7,000 101,079 (224) 012 (10,200) 91,807 Effective Interest Rate Amount (in millions) 220% 3.28% S 7,107 0.28% 4.78% 97,000 1.71% 2.99% 104,193 (218) (1,450) (8,784) 93,735 Effective Interest Rate 1.07% 3.44% 028% -4.78% Total net sales Net income Earnings per share: Basic Diluted Cash dividends declared per share Shams used in computing earnings per share: Basic Diluted 2019 2018 2017 $ 260,174 $ 265,595 $229,234 55,256 $ 59,531 $ 48,351 $ Non-current portion of term debt Other non-current liabilities 11.97 $ 11.89 $ 3.00 $ 2.72 $ 4,617,834 4,648,913 Total cash, cash equivalents and marketable securities $ 205,898 Total assets 12.01 $ 11.91 $ 2015 2016 $215,639 $ 233,715 45,687 $ 53,394 9.27 $ 9.21 $ 2.40 $ 4,955,377 5,217,242 5,000,109 5,251,692 8.35 $ 8.31 $ 2.18 $ 9.28 9.22 1.98 5,470,820 5,753,421 5,500,281 5,793,069 75,427 $ 39,986 $ $ 237,100 $ 268,895 $237,585 $ 205,666 $ 338,516 $365,725 $ 375,319 $ 321,686 $ 290,345 $ 97,207 $ 91,807 $ 93,735 $ 50,503 $ 48,914 $ 53,329 38,104 $ 44,212 $