ACCT 102 - Chapter 13 - Analysis of Apple Computer Financial Statements The purpose of this activity is to give students a practical exercise at calculating the various profitability and liquidity ratios presented on page 511 (Exhibit 13.16) of the textbook. These are the ratios used by most financial professionals in evaluating the investment potential of both public and private Corporations. On the attached pages, are the financial statements for Apple Computer for the most three years along with some other information necessary to make the calculations. Also attached, are worksheets that present the formulas to calculate: 1 Current Ratio 11 2 12 Working Capital Quick Ratio (Acid Test Ratio) Accounts Receivable Turnover 3 4 13 14 5 15 Debt to Equity Ratio Profit Margin Ratio Gross Margin Ratio Return on Total Assets Return on Stockholder's Equity Book Value per Share Earnings per Share Price Earnings Ratio (P/E) Dividend Yield 6 Days Sales Uncollected Inventory Turnover Days Sales in Ending Inventory Asset Turnover 16 7 17 8 18 9 Debt Ratio 19 10 Equity Ratio Using the financial statements provided, calculate these ratios for the most current two years. In Millions Apple, Inc. Income Statement (Vertical Analysis) For the year ended September 2019 2018 Amount % Amount % $ 260,174 100.0% $ 265,595 100.0% $ 161,782 62.2% 163,756 61.7% 98,392 37.8% 101,839 38.3% 2017 Amount 229,234 141,048 88,186 % 100.0% 61.5% 38.5% Sales Cost of Goods Sold Gross Profit Operating Expenses: Research and Development Selling and Administrative Operating Income Other Income/Expense Income Tax Expense Net Income 16,217 18,245 63,930 1,807 10,481 55,256 6.2% 7.0% 24.6% 0.7% 4.0% 21.2% $ 14,236 16,705 70,898 2,005 13,372 59,531 5.4% 6.3% 26.7% 0.8% 5.0% 22.4% $ 11,581 15,261 61,344 2,745 15,738 48,351 5.1% 6.7% 26.8% 1.2% 6.9% 21.1% $ Other Information: Shares Outstanding (millions) 2019 4,443 2018 4,755 Cash Dividends paid (millions) 14,129 13,735 Market Price per share 225.00 165.00 Screen Shot 2019-05-01 at 11.41.52 AM Apple, Inc. Balance Sheet (Vertical Analysis) As of September 30 2019 2018 Amount % Amount In Millions 2017 Amount % % Assets: Currents Assets: Cash $ 48,844 14.4% $ 25,913 7.1% $ 20,289 5.4% 51,713 15.3% 11.0% 14.4% 53,892 35,673 45,804 13.5% 13.4% 9.5% Short Term Investments Accounts Receivable Inventory Other Current Assets 40,388 48,995 3,956 12,087 1.2% 1.1% 1.3% 4,106 12,352 4,855 13,936 3.6% 3.3% 3.7% 48.1% 35.9% 128,645 34.3% 162,819 105,341 37,378 31.1% 131,339 170,799 41,304 46.7% 194,714 51.9% 11.0% 11.3% 33,783 9.0% Total Current Assets Long Term Investments Property and Equipment Goodwill Other Long Term Assets Total Assets 0.0% 0.0% 0.0% 32,978 9.7% 22,283 6.1% 18,177 4.8% $ 338,516 100.0% $ 365,725 100.0% $ 375,319 100.0% 2019 2018 2017 Amount % Amount % Amount % Liabilities: $ 46,236 19.9% Current Liabilities: Accounts Payable Current Portion of LTD Other Current Liabilities 10,260 49,222 13.7% $ 67,852 3.0% 8,784 14.5% 40,230 18.6% $ 74,793 2.4% 18,473 11.0% 7,548 4.9% 2.0% Total Cu ent Lia es 105,718 31.2% 116,866 32.0% 26.9% 27.1% 93,735 25.6% Long Term Debt Other Liabilities 25.9% 100,814 97,207 43,251 91,807 50,503 14.9% 47,977 13.1% 11.5% Total Liabilities 248,028 73.3% 258,578 70.7% 241,272 64.3% 13.3% 11.0% 9.6% Stockholders' Equity: Common Stock Retained Earnings Total Stockholders' Equity Total Liabilities and Stockholders' Equity 45,174 45,314 40,201 66,946 107,147 35,867 98,180 13.4% 18.3% 26.2% 90,488 26.7% 35.7% 29.3% 134,047 100.0% $ 375,319 $ 338,516 100.0% $ 365,725 100.0% Apple, Inc. Financial Statement Analysis (in millions) 2019 2018 1 Current Ratio: Current Assets Current Liabilities 2 Working Capital: Current Assets Current Liabilities Working Capital 3 Quick Ratio: Cash Short term investments Accounts Receivable Total Quick Assets Current liabilities = 4 Accounts Receivable Turnover: Sales Average Accounts Receivable Accounts Receivable, Beginning Accounts Receivable, Ending Average 5 Days Sales Uncollected Accounts Receivable Net Sales Days in a year Daily Sales Days uncollected 6 Inventory Turnover: Cost of Goods Sold Average Inventory Inventory, Beginning Inventory, Ending Average 2018 Apple, Inc. Financial Statement Analysis (in millions) 2019 7 Days sales in ending inventory Inventory Cost of Goods Sold Days in a year Daily Cost of Goods sold Days sales in ending inventory 8 Asset turnover: Net Sales Average Total Assets Assets, Beginning Assets, Ending Average 9 Debt Ratio: Total Liabilities Total Assets 10 Equity Ratio: Total Equity Total Assets 11 Debt to Equity Ratio: Total Liabilities Total Equity Screen Shot 2019-05-01 at 11.41.52 AM 12 Net Income percent (Profit Margin Ratio): Net Income Net Sales 13 Gross Profit Percent (Gross Margin Ratio): Gross Profit Net Sales 14 Return on Total Assets: Apple, Inc. Financial Statement Analysis (in millions) 2019 Net Income Average Total Assets 2018 15 Return on Common Stockholders Equity: Net Income Average Common Stockholders Equity Common Equity, Beginning Common Equity, Ending Average Common Stockholders Equity 16 Book value per common share: Common stockholders equity Number of shares outstanding 17 Earnings per share: Net Income Number of shares outstanding 18 Price Earnings Ratio: Market price per share Earnings per share 19 Dividend Yield: Cash Dividends per share Market price per share Dividends Paid 2018 1.12 14,473 0.99 6.3 67 37.2 8.8 Apple, Inc. Financial Statement Analysis (amounts in millions) Check Figures: 2019 1 Current Ratio: 1.54 2 Working Capital: 57,101 3 Quick Ratio: 1.38 4 Accounts Receivable Turnover: 5.5 5 Days Sales Uncollected 64 6 Inventory Turnover: 40.1 7 Days sales in ending inventory 9.3 8 Asset turnover: 0.74 9 Debt Ratio: 0.73 10 Equity Ratio: 0.27 11 Debt to Equity Ratio: 2.74 12 Net Income percent (Profit Margin Ratio): 21.2% 13 Gross Profit Percent (Gross Margin Ratio): 37.8% 14 Return on Total Assets: 15.7% 15 Return on Common Stockholders Equity: 55.9% 16 Book value per common share: 20.37 17 Earnings per share: 12.44 18 Price Earnings Ratio: 18.1 19 Dividend Yield: 1.41% 0.72 0.71 0.29 2.41 22.4% 38.3% 16.1% 49.4% 22.53 12.52 13.2 1.75%