September 24, 2016 $ Apple Inc. CONSOLIDATED BALANCE SHEETS (In millions, except number of shares which are reflected in thousands and par value) September 30, 2017 ASSETS Current assets Cush and cash equivalents 20,289 Short-term marketable securities 53,892 Accounts receivable, loss allowances of $58 and $53, respectively 17,874 Inventories 4,855 Vendor non-trade receivables 17,799 Other current assets 13.936 Total current assets 128,645 Long-term marketable securities 194,714 Property, plant and equipment, net 33,783 Goodwill 5.717 Acquired intangible assets, net 2,298 Other non-current assets 10,162 Total assets 375,319 20,484 46,671 15,754 2,132 13,545 8,283 106,869 170,430 27.010 5,414 3,206 8,757 321,686 49,019 $ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts puyable Accrued expenses Deferred revenue Commercial paper Current portion of long term debt Total current liabilities Deferred revenue, non-current Long-term det Other non-current liabilities Total liabilities Commitments and contingencies Shareholders equity Common stock and additional paid in capital, 5000001 par value: 12,600,000 shares wuthorited: 5.126.201 und 5.336,166 shares issued and outding, respectively Retained earnings Accumulated other comprehensive income (os) Total shareholders' equity Total abilities and shareholder equity See accompanying Notes to Consolidated Financial Statements 25.744 7.548 11.977 6,496 100,814 2,36 97,207 40.415 241.272 37,294 22,027 8,080 8,105 3,500 79,006 2,930 75.427 36,074 193,437 35.867 98.330 (150) 134,047 375,319 31.251 96.164 614 128,249 321,656 COV September 26, 2015 s 233,715 140,089 93.626 Apple Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except number of shares which are reflected in thousands and per share amounts) Years ended September 30, 2017 September 24, 2016 Net sales 229,234 $ 215,639 Cost of sales 141,048 131,376 Gross margin 88,186 84.263 Operating expenses Research and development 11,581 10,045 Selling, general and administrative 15,261 14.194 Total operating expenses 26,842 24,239 Operating income 61,344 60,024 Other income (expense), nct 2.745 1,348 Income before provision for income taxes 64,089 61,372 Provision for income taxes 15.738 15,685 Net income 48,351 45,687 8,067 14.329 22,396 71.230 1.285 72.515 19.121 53,394 S 5 s 5 9.28 9.22 Earnings per share Basic 9.27 835 Dilated 9.21 8.31 Share used in computing earnings per share: Basic 5,217.242 5,470,820 Diluted 5,251,692 5.500,281 Cash dividends declared per share See accompanying Notes to Consolidated Financial Statements. 5,753,421 5,793,069 1.98 2.40 $ 2.18 $ Apple Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) Years ended September 30, 2017 September 24, 2016 September 26, 2015 Net income 48,351 $ 45,687 5 53,394 Other comprehensive income (loss) Change in foreign currency translation, net of tax effects of 5(77). 58 and $201. respectively 224 75 Change in unrealized gaini/losses on derivative instrumenti Change in fair value of derivatives, net of tax benefit (expense) of S(478), 5(?) and (441), respectively 1.315 7 2.905 Adjustment for nel (gains) es realised and included in net income, net of tax expense be of $475,5131 and 5630, respectively (1.477 7741 0.497 Total change in uncalized gins/losses on derivativo instruments, net of tax (162) 5923 Chunge in unrealized and/osses on marketable securities Change in fair value of marketable securities, net of tax benefit (expense) of $425, 5(863) and $264, respectively (782) 1.562 (483) Adjustment for netais) los realized and included in net income, net of tax expense bencht) of 535,50!), and (2), respectively 16-0 59 - 100% + OS (424 Total change in unrealized gains/losses on marketable securities, net of tax (846) Total other comprehensive income (los) 784 Total comprehensive income 47,567 See accompanying Notes to Consolidated Financial Statements 1.638 979 46,6665 (1,427 51.967 -47856 DA A1-A17.indd 3 O 9/19/15 12.50 FINAL PAGES aptari A-4 Appendix A Financial Statement information APPLE 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 Pald-In Capital Retained Income Shareholders Shares Amount Farnings Los Equity Balances us of September 27, 2014 5.866,1615 23313 5 87.1525 1.050 5 111.547 Net income 5214 Other comprehensive income oss) (1.427 (1427 Dividends and dividend equivalente declared (11.627) (1142) Repurchase of common stock (125,032) (36,026 16.006) Share-based compensation 30555 Common stock issued.net of shares withheld for employees 37.624 (231) (540) Tax benefit from equity wwands, including transfer pricing adjustments 743 7 Balances as of September 26, 2015 5.578.7535 27.416 5 92.284 5 (345) 5 119.155 Na 35657 S 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 Pald-In Capital Retained Income Shareholders Shares Amount Earnings (Loss) Equity Balances as of September 27, 2014 5,866,161 $ 23,313 $ 87,152 $ 1,082 $ 111.547 Net income 53.394 53,394 Other comprehensive income (loss) |(1,427) (1.427) Dividends and dividend equivalents declared (11,627 (11.627) Repurchase of common stock (325,032) (36,026) (36,026) Share-based compensation 3,586 3,586 Common stock issued, net of shares withheld for employee taxes 37,624 (231) (609) (840) Tax benefit from equity awards, including transfer pricing adjustments 748 748 Balances as of September 26, 2015 5,578,753 $ 27,416 $ 92.284 (345) S 119,355 Net income 45,687 45,687 Other comprehensive income (loss) 979 979 Dividends and dividend equivalents declared (12,188) (12.188) Repurchase of common stock (279,609) (29.000) (29,000) Share-based compensation 4,262 4,262 Common stock issued, niet of shares withheld for employee taxes 37,022 (806) (419) (1.225) Tax benefit from equity awards, including transfer pricing adjustments 379 379 Balances as of September 24, 2016 5.336,166 $ 31,251 $ 96,364 S 634 $ 128.249 Net income 48,351 48,351 Other comprehensive income (loss) (784) (784) Dividends and dividend equivalents declared (12,803) (12,803) Repurchase of common stock (246,496) (33,001) (33.001) Share-based compensation 4,909 4,909 Common stock issued, net of shares withheld for employee taxes 36,531 (913) (581) (1.494) Tax benefit from equity awards, including transfer pricing adjustments 620 620 Balances as of September 30, 2017 5,126,2015 35,867 $ 98.330 $ (150) 5 134,047 See accompanying Notes to Consolidated Financial Statements 1 ADDIE Apple Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Years ended September 30, 2017 September 24, 2016 September 26, 2015 Cash and cash equivalents, beginning of the year 20.484 $ 21.120 S 13,844 Operating activities: 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 4938 1.382 Other (166) 486 385 Changes in operating assets and liabilities: Accounts receivable, net (2.093) 527 417 Inventories (2,723) 217 (238) Vendor non-trade receivables (4.254 (51) (3.735 Other current and non-current assets (5,318) 1.055 (283) Accounts payable 9,618 1.837 5,001 Deferred revenue (626) (1.554) 1,042 Other current and non-current liabilities (154) 2.033 9,058 Cash generated by operating activities 63.598 65.824 81.266 Investing activities Purchases of marketable securities (159486) (142,428) (166,402 Proceeds from maturities of marketable securities 31.775 21.258 14578 Proceeds from sales of marketable securities 94.564 90 536 107 447 Payments made in connection with business acquisitions, net (329) (297) (343) Payments for acquisition of property, plant and equipment (12,451) (12.734) (11,247) Payments for acquisition of intangible assets (344) (814) (241) Payments for strategic investments, net (395) (1,385 Other 220 (110) (26) Cash usod in investing activities (46.446) (45.977) (56,274) Financing activities Proceeds from issonnce of common stock 543 Excess tax benefits from equity awards 107 749 Payments for taxes related to not sure settlement of equity awards (1.874) (1.520 (1499 Payments for dividends and dividend equivalent (12,769) (17.150 (11.361 Repurchases of common stock (32.900) (29,722) 33.253 Proceeds from man of term det net 28.663 24.054 Repayments of term debt (3.500 2.500) Change in commercial paper, bet 3.55 2.191 Cash used in financing activities (17.47 20.483) (17,716) Increase (decrease in cash and cash equivalents (195) 636 7270 20.289 5 20,484 Cash and cash equivalents, end of the year 21120 555 195 ZZO) 21,258 90,536 (297) (12,734) (814) (1,388) (110) (45,977) TO 14,538 107,447 (343) (11.247) (241) (26) (56,274) 495 5 / 17 100% + e OS PUCHOSS mic securites TONYA . Proceeds from maturities of marketable securities 31.775 Proceeds from sales of marketable securities 94,564 Payments made in connection with business acquisitions, net (329) Payments for acquisition of property, plant and cquipment (12,451) Payments for acquisition of intangible assets (344) Payments for strategic investments, net (395) Other 220 Cash used in investing activities (46,446) Financing activities: Proceeds from issuance of common stock 555 Excess tax benefits from equity awards 627 Payments for taxes related to net share settlement of equity awards (1.874) Payments for dividends and dividend equivalents (12,769) Repurchases of common stock (32,900) Proceeds from issuance of term debt, net 28,662 Repayments of term debt (3,500) Change in commercial paper, net 3.852 Cash used in financing activities (17.347) Increase (decrease) in cash and cash equivalents (195) Cash and cash equivalents, end of the year 20,289 Supplemental cash flow disclosure Cash paid for income taxes, net 11,591 S Cash paid for interest $ See accompanying Notes to Consolidated Financial Statements. 543 749 (1,499) (11.561) (35,253) 27.114 407 (1.570) (12.150) (29,722) 24,954 (2,500) (397) (20,483) (636) 20,484 2,191 (17.716) 7,276 21,120 10,444 1,316 $ $ 13.252 514 2,092 As of December 31, 2017 10,715 91.156 101.871 18,336 369 749 2.983 124308 7.813 680 42.383 2.692 16.747 2,672 197,295 Google Inc. (Alphabet Inc.) CONSOLIDATED BALANCE SHEETS (In millions, except share and par value amounts which are reflected in thousands, and par value per share amounts) As of December 31, 2016 Assets Current assets Cash and cash equivalents S 12,918 Marketable securities 73.415 Total cash, cash equivalents, and marketable securities 86.133 Accounts receivable, net of allowance of $467 and 8674 14,137 Income taxes receivable, not 95 Inventory 268 Other current assets 4,575 Total current assets 105,408 Non-marketable investments 5,878 Deferred income taxes 383 Property and equipment, act 34,234 Intangible assets, net 3,307 Goodwill 16,468 Other non-current assets 1.819 Total assets 167,497 Liabilities and Stockholders' Equity Current liabilities Accounts payable 2,041 $ Accrued compensation and benefits 3.976 Accrued expenses and other current liabilities 6,144 Accrued revenue share 2.942 Deferred revenue 1.099 Income taxes payable, net 554 Total current liabilities 16,756 Long-term debt 3,935 Deferred revenue, non-current 202 Income taxes payable, non-current 4.697 Defcrred income taxes 226 Other long-term liabilities 2,665 Total liabilities 28,461 Commitments and continencies Stockholders' equity Convertible preferred stock. 50.001 par value per stue, 100.000 Shares wuthorired, no shares issued and outstanding 0 Class A and Class B common stock, and Class C capital stock and additional paid in capital, 50001 par value per share: 15,000,000 shares authorized (Class A 9,000,000, Class B 3,000,000, Class C 3,000,000): 691.293 (Class A 296.992. Claus B 47437 Class C 346,864) and 694,783 (Classe A 298,470. Class B 46972 Class C 349.341) shares issued and outstanding 36,307 Accumulated other comprehensive tous 2.402 GOOGLE 3.137 4.551 10.177 3975 1432 24.183 3.969 340 122812 430 3,059 4.793 40,247 11 / 17 - 100% + a Class C 349,341) shares issued and outstanding Accumulated other comprehensive loss Retained earnings Total stockholders' equity Total liabilities and stockholders' equity Google is part of Alphabet, but we loosely refer to Alphabet as "Google" because of its global familiarity and that Google provides 99% of Alphabet's $110,855 billion in revenues. Sec accompanying notes 36 307 2.402) 105.131 139,036 167497 40.247 (992) 113.247 192.502 197.295 7856A_A1 A17.indd 10 18 125 FINAL PAGES aptar Appendix A Fancial Statement information A-11 Google Inc. (Alphabet Inc.) CONSOLIDATED STATEMENTS OF INCOME (In millions) 2016 2015 74,989 2017 TORS 5 Year Ended December 31 Revenue Costs and expenses Cost of revenues Research and development Sales and marketing General and administrative European Commission fine Total costs and expenses Income from operation Other income expense), net Income before income taxes Provision for income Net income 35,138 13.94 10485 6.985 20.164 12.282 9047 6.13 0 55.62 19.160 291 1981 3303 161 45.383 16.625 12.93 6872 2.736 56.709 26.146 1067 27.193 66.556 23.716 3415 4.72 19. 11 12662 11/17 100% + 1 ODS Research and development Sales and marketing General and administrative European Commission fine Total costs and expenses Income from operations Other income (expense), niet Income before income taxes Provision for income taxes Net income Less: Adjustment Payment to Class C capital stockholders Net Income available to all stockholders. "Google is part of Alphabet, but we loosely refer to Alphabet as "Google" because of its global familiarity and that Google provides 99% of Alphabet's $110.855 billion in revenues. See accompanying notes 12.282 9,047 6,136 0 55,629 19,360 291 19,651 3,303 16,348 522 15,826 13.948 10,485 6,985 0 66,556 23,716 434 24.150 4,672 19,478 0 19,478 16,625 12,893 6,872 2.736 84,709 26,146 1,047 27,193 14.531 12,662 0 12,662 s S GOOGLE 2016 19.478 2017 12.662 s (599) 1,543 208 Google Inc. (Alphabet Inc.) CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) Year Ended December 31 2015 Net income 16,348 $ Other comprehensive income (los) Change in foreign currency translation adjustment (1.067) Available for sale investments: Change in net unrcalized gains (lossos) (715) Less: reclassification adjustment for net (gains) losses included in net income Net change (net of tax effect of $29, 50, and $0) (507) Cash flow hodges Change in net unrealized gains dosses) Less: reclassification adjustment for net(gains) losses included in net income (1.003) Net change (net of tax effect of 115.564, and $247) (327 Other comprehensive income (loss) (1.901) Comprehensive income 14,447 Google is part of Alphabet, but we loosely refer to Alphabet as "Google" because of its global familiarity and that Google provides 99% of Alphabet's 5110,855 billion in revenues, See accompanying notes (314) 221 (93) 307 105 412 676 315 (351) 164 (528) 18.950 (638) 93 (545) 1:410 14,072 0 0 815 0 0 0 0 0 Google Inc. (Alphabet Inc.) CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In millions, except share amounts which are reflected in thousands) Class A and Class B Common Stock, Class C Accumulated Capital Stock and Other Total Additional Pald-In Capital Comprehensive Retained Stockholders' Shares Amount Income (Loss) Earnings Equity Balance as of December 31, 2014 680,172 $ 28,767 $ 27 $ 75,066 5 103,860 Common and capital stock issued 8,714 664 0 664 Stock-based compensation expense 5.151 0 0 5.151 Stock-based compensation tax benefits 0 815 Tax withholding related to vesting of restricted stock units 0 (2,779) 0 (2,779) Repurchases of capital stock (2,391) (111) 0 (1.669) (1,780) Adjustment Puyment to Class C capital stockholders 853 475 0 (522) (47) Net income 0 0 16,348 16,348 Other comprehensive loss 0 (1,901) 0 (1.901) Balance as of December 31, 2015 687,348 32,982 (1,874) 89.223 120,331 Cumulative effect of accounting change 180 (133) 47 Common and capital stock issued 9,106 298 298 Stock-based compensation expense 0 6,700 6,700 Tix withholding related to vesting of restricted stock units 0 (3.597) 0 (3,597) Repurchases of capital sock (5,161) (256) 0 (3,437) (3.693) Net income 0 19.478 19,478 Other comprehensive loss 0 (528) 0 (528) Balance as of December 31, 2016 691,293 36,307 (2.402) 105.131 139,036 Cumulative effect of accounting change (15) (15) Common and capital stock issued 8,652 212 212 Stock-based compensation expense 7.694 7,694 Tax withholding related to vesting of restricted stock units (4.373) (4,373) Repurchases of capital stock (5.162) (315) (4,531) (4.846) Sale of subsidiary shares 722 722 Net income 0 0 0 12,662 12,662 Other comprehensive loss 0 1410 1.410 Balance as of December 31, 2017 694.7833 40.247 S (992) 113.2475 152,502 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2015 2016 2017 16,348 $ 19,478 S 12,662 4,132 931 5.203 (179) 334 212 5,267 877 6,703 (38) 275 174 6,103 812 7,679 258 194 137 (2,094) (179) 318) 203 1.597 339 43 26,572 (2.578) 3.125 312 110 1.515 593 223 36,036 (3.768) 8,211 (2.164) 731 4.891 955 390 37,091 (In millions) Year Ended December 31 Operating activities Net income Adjustments: Depreciation and impairment of property and equipment Amortization and impairment of intangible assets Stock-based compensation expense Deferred income taxes Loss on marketable and non-marketable investments, net Other Changes in assets and liabilities, net of effects of acquisitions: Accounts receivable Income taxes, nct Other assets Accounts payable Accrued expenses and other liabilities Accrued revenue share Deferred revenue Net cash provided by operating activities Investing activities Purchases of property and equipment Proceeds from disposals of property and equipment Purchases of marketable securities Maturities and sales of marketable securities Purchases of non-marketable investments Maturities and sales of non-marketable investments Cash collateral related to securities lending Investments in reverse repurchase agreements Acquisitions, net of cash acquired, and purchase of intangible assets Proceeds from collection of notes receivable Net cash used in investing activities Financing activities Net payments related to stock-based award activities Adjustment Payment to Class Capital sockholders Repurchases of capital stock Proceeds from indance of debt act of costs Repayments of debt Proceeds from sale of subsidiary shares Net cash used in financing activities Effect of exchange rate changes on cash and cash equivalents Net decrease in cash and cash equivalents Cash and cash equivalente a beginning of period Cash and cash equivalents at end of period (9.950) 35 (74,368) 62.905 (2.326) 154 (350) 425 (236) 0 (23.711) (10.212) 240 (84,509) 66,895 (1.109) 494 (2,428) 450 1986) 0 (31,165) (13.184) 99 192,195) 73.959 (1,745) 513 0 0 (287) 1.419 31.401) GOOGLE (2.375) (47) (1.780) 13.705 (13.728) (3.300) 0 4693) 8.729 (10,05-0 0 (332) (170) 2631 16,349 12018 (4.166) 0 (4.846) 4.291 (4.377) 300 (4.225 (434) (1980 AM (24203 12.018 1071 1659 5 $ Supplemental disclosures of cash flow Information Cash paid for the ofreunde Cash paid for interes net of monestled 5 3851 1600 $ 5 5 5 191 Apple and Google work to maintain high-quality and low-cost operations. One ratio routinely computed for this assessment is the cost of goods sold divided by total expenses. A decline in this ratio can mean that the company is spending too much on selling and administrative activities. An increase in this ratio beyond a reasonable level can mean that the company is not spending enough on selling activities. Use Apple's financial statements in Aprendix A. (Assume for this analysis that total expenses equal the cost of goods sold plus total operating expenses.) Required 1. For Apple and Google.compute the ratios of cost of goods sold to total expenses for Apple and Google during the fiscal years 2017 and 2016 2. Which company had a greater percentage reduction in selling and administrative expenses in 2017? Complete this question by entering your answers in the tabs below. Required 1 Required 2 For Apple and Google, compute the ratios of cost of goods sold to total expenses for Apple and Google during the fiscal Years 2017 and 2016. (Record answers as percents, rounded to one decimal.) Apple 2017 2016 Google 2107 2016 Ratio of cost of goods sold to total expenses Required 2 >
