*** Apple's and Google's income statements in Appendix A both show increasing sales and cost of sales. The gross margin ratio can be used to analyze how well companies control costs as sales increase. Required: 1. Compute the gross margin ratio for Apple for each of the fiscal years ended September 30, 2017, and September 24, 2016. 2. Compute the gross margin ratio for Google for each of the fiscal years ended December 31, 2017, and December 31, 2016. 3. Which company (Apple, Google, or neither) improved its control of costs during 2017, as reflected in the gross margin ratio? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute the gross margin ratio for Apple for each of the fiscal years ended September 30, 2017, and September 24, 2016. (Round your final answers to 3 decimal places.) Year Ended Sept. 30, 2017 Year Ended Sept. 24, 2016 Apple gross margin ratio Required 2 > Apple's and Google's income statements in Arpendix A both show increasing sales and cost of sales. The gross margin ratio ca used to analyze how well companies control costs as sales increase. Required: 1. Compute the gross margin ratio for Apple for each of the fiscal years ended September 30, 2017, and September 24, 2016. 2. Compute the gross margin ratio for Google for each of the fiscal years ended December 31, 2017, and December 31, 2016. 3. Which company (Apple, Google, or neither) improved its control of costs during 2017, as reflected in the gross margin ratio? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute the gross margin ratio for Google for each of the fiscal years ended December 31, 2017, and December 31, 2016. (Round your final answers to 3 decimal places.) Year Ended Dec. 31, 2017 Year Ended Dec. 31, 2016 Google gross margin ratio APPL. 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 Cash and cash equivalents 20.289 Short-term marketable securities 53,892 Accounts receivable, less 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 I 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 s LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable Accrued expenses Deferred revenue Commercial paper Current portion of long-term debt Total current liabilities Deferred revenue, non-current Long-term debt Other non-current liabilities Total liabilities Commitments and contingencies Shareholders' equity Common stock and additional paid-in capital, 0.00001 par vala: 12.600.000 shares authorized: 5,126,201 and 5.336,166 shares issued and outstanding, respectively Retained carning Accumulated other comprehensive income (los) Total shareholders equity Total liabilities and shareholders equity 49.049 25.744 7.548 11.977 6,496 100,814 2,836 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 31.251 96,364 35,867 98.330 (150) 134,047 375,319 128,249 321.686 See accompanying Notes to Consolidated Financial Statements September 2017 $ 229,234 141,048 88,186 September 24, 2015 215,639 131,376 84,263 September 25, 2015 233,715 140,089 93,626 Yearsed Net les 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 11,581 15,261 26,842 61.344 2,745 64,089 15,738 48,351 10,045 14,194 24, 239 60,024 1,348 61,372 15,685 45,687 8,067 14,329 22,396 71,230 1,285 72,515 19,121 53,394 $ $ $ $ 8:35 8.31 9.21 9.28 9.22 $ S Earnings per share: Basic Diluted Shares used in computing camnings per share: Basic Diluted Cash dividends declared per share 5,217,242 5,251,692 2.40 5.470.820 5.500,281 2.18 5,753,421 5,793,069 1.98 $ $ $ See accompanying Notes to Consolidated Financial Statements. I 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 S 53,394 Other comprehensive income (loss): Change in foreign currency translation, net of tax effects of $(77). 58 and 5201, respectively 224 75 (411) Change in unrcalired gains/losses on derivative instrumente Change in fair value of derivatives, net of tax benefit (expense) of $(478), 5(T) and (441), respectively 1,315 Adjustment for net (gains) losses realized and included in net income net of tax expense (benefit of $475, 5131 and 5610, respectively (3.497) Total change in unrealized gainslosses on derivative instruments, net of tax (162) (734) (592) Change in unrealized gainstones on marketable securities Change in fair value of marketable securities, net of tax benefit (expense) of $425, 5(863) and 5264respectively 1.382 (483) Adjustment for net gains) losses realized and included in net income, net of tax expense benefit of $35, 50, and (32), respectively 164 56 59 Total change in unrealized gins/losses on marketable securities net of tax (846) 1,638 (424) Total other comprehensive income (loss) 979 (1427) Total comprehensive income 46.666 51.967 7 2,905 (609) 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 Retained Income Shareholders Shares Amount Earnings (Loss) Equity Balances as of September 27, 2014 5,866,161 S 23,313 $ 87,152 $ 1,082 5 111,547 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) -- (840) Tax benefit from equity awards, including transfer pricing adjustments 748 748 Balances as of September 26, 2015 5,578,753 $ 27.416 S 92.284 $ (345) S 119,355 Net income 45.687 45,687 Other comprehensive income (los) 979 979 Dividends and divas and equivalents declared (12,188) Repurchase of common stock (279,609) (29.000) (29,000) Share-based compensation 4.262 4,262 Common stock issued, net 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 S 31.251s 96,364 5 634 S 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 Common stock issued, net of shares withheld for employee taxes 36,531 (91) 1581) Tax benefit from equity awards, including (1.494) transfer pricing adjustments 620 620 Balances as of September 30, 2017 5,126,2015 35867 98 230 (150) s 134,017 See accompanying Notes to Consolidated Financial Statements (12,188) 4909 September 24, 2016 $ 21,120 September 26, 2015 $ 13,844 45,687 53,394 10,505 4,210 4,938 11,257 3,586 1,382 385 486 (millons) Years ended September 30, 2017 Cash and cash equivalents, beginning of the year $ 20,484 Operating activities: Net income 48,351 Adjustments to reconcile net income to cash generated by operating activities: Depreciation and amortization 10,157 Share based compensation expense 4,840 Deferred income tax expense 5,966 Other (166) Changes in operating assets and liabilities: Accounts receivable, net (2,093) Inventories (2,723) Vendor non-trade receivables (4,254) Other current and non-current assets (5,318) Accounts payable 9,618 Deferred revenue (626) Other current and non-current liabilities (154 Cash generated by operating activities 63,598 Investing activities Purchases of marketable securities (159,486) 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 equipment (12.451) Payments for acquisition of intangible assets (344) Payments for strategic investments, net (395) Other 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 not share settlement of equity awards (1.874) Payments for dividends and dividend equivalents (12.769) Repurchases of common stock Proceeds from issuance of term debt, net (32,900) 28,662 Repayments of term debt (3.500) Change in commercial paper, net Cash used in financing activities 3.852 Increase (decrease in cash and cash equivalents (17,3473 (195) Cash and cash equivalents, end of the year 20.289 527 217 (51) 1.055 1,837 (1,554) (2,033) 65,824 417 (238) 3.735) (283) 5.001 1,042 9,058 81,266 (142,428) 21.258 90,536 (297) (12,734) (814) (1,388) (110) (45,977) (166,402) 14,538 107,447 (343) (11,247) (241) (26) (56,274) 495 407 (1.570) (12,150) (29.722) 24,954 (2.500 543 749 (1,499) 11.561) (35.253) 27.114 120.48,3 (636 20484 2.191 (17.716) 7.276 21.120 Supplemental cash flow disclosure Cash paid for income taxes. Det Cash paid for interest 11.591 2.092 $ 10-14 1.316 S $ 13.252 514 Nates ucation.com As of December 31, 2016 As of December 31, 2017 S $ 12,918 73.415 86.333 14,137 95 268 4,575 105.408 5.878 383 34,234 3,307 16,468 1,819 167.497 10,715 91,156 101.871 18,336 369 749 2,983 124,308 7,813 680 42,383 2,692 16,747 2.672 197,295 $ GOOGLE Assets Current sets Cash and cash equivalents Marketable securities Total cash, cash equivalents, and marketable securities Accounts receivable, net of allowance of $467 and $674 Income taxes receivable, net Inventory Other current assets Total current assets Nom-marketable investments Deferred income taxes Property and equipment, net Intangible assets, net Goodwill Other non-current assets Total assets Liabilities and Stockholders' Equity Current liabilities Accounts payable Accrued compensation and benefits Accrued expenses and other current liabilities Accrued revenue share Deferred revenue Income taxes payable.net Total current liabilities Long-term debt Deferred revenue, non-current Income taxes payable, non-current Deferred income taxes Other long-term liabilities Total liabilities Commitments and contingencies Stockholders' equity Convertible preferred stock, 50.001 par value per share, 100,000 shares authorized to share issued and outstanding Class A and Class B common stock, and Class capital stock and additional paid-in capital, 50.001 par value per share: 15.000.000 shares authorized (Class A 9.000.000. Class B 3.000.000 Class 3,000,000): 691.293 Class A 296.992. Class B 47.437 Claus C346.864) and 694,783 Class A 298,470. Class B 46.072. Class 349.341) share issued and outstanding Accumulated other comprehensive los Retained earning Total stockholders' equity Total liabilities and stockholders equity 2,041 3,976 6,144 2,942 1.099 554 16,756 3,935 202 4,677 226 2.665 28.461 3,137 4.581 10.177 3,975 1,432 881 24,183 3,969 340 12,812 430 3,059 44,793 36.907 (2,4023 105.131 139,036 167.497 40.247 19923 113.247 152.502 197,299 5 5 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 110.55 Willion in Google Inc. (Alphabet Inc.)" CONSOLIDATED STATEMENTS OF INCOME (In millions) 2015 74,989 2016 90,272 2017 110,855 $ S Year Ended December 31 Revenues Costs and expenses Cost of revenues Research and development Sales and marketing General and administrative European Commission fine Total costs and expenses Income from operations Other income (expense), net Income before income taxes Provision for income taxes Net income Less: Adjustment Payment to Class C capital stockholders Net Income available to all stockholders 28,164 12282 9,047 6,136 0 55,629 19,360 291 19.651 3,303 16,348 522 15.826 35,138 13.948 10,485 6,985 0 66,556 23,716 45,583 16,625 12,893 6,872 2.736 84,709 26,146 1,047 27.193 14,531 12,662 S 24.150 4,672 19.478 0 19,478 $ 0 s $ 12.662 "Google is part of Alphabet, but we loosely refer to Alphabet as "Google" because of its globul familiarity and that Google provides 99% of Alphabet's $110,855 billion in revenues. See accompanying notes Google Inc. (Alphabet Inc.) CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) GOOGLE 2015 16.348 2016 19.478 5 2017 12,662 $ (1,067) (599) 1.543 Year Ended December 31 Net income Other comprehensive income (oss) Change in foreign currency translation adjustment Available for sale investments Change in net nalized pains dosses) Les teclassification adjustment for netais) losses included in set income Net change set of tax effect of 529.50 and 50) Cash flow hedges Change is net neained guns doses) Les reclassification adjustment for netais) losses included in set income Net change (set of tax effect of 5115.564, and 5247) Other comprehensive income oss) Comprehensive income (715) 203 (507 307 105 412 515 (351) (638) 93 (545) 1.410 18.950 5 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 $110.55 hilesi ve See accompanying notes 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 Paid-In Capital Comprehensive Retained Stockholders' Shares Amount Income (Loss) Earnings Equity Balance as of December 31, 2014 680,172 $ 28,767 S 27 $ 75,066 $ 103,860 Common and capital stock issued 8,714 664 0 0 664 Stock-based compensation expense 0 5.151 0 0 5,151 Stock-based compensation tax benefits 0 815 0 0 815 Tex withholding related to vesting of restricted stock 0 (2,779) 0 0 (2,779) Repurchases of capital stock (2,391) (111) 0 (1.669) (1.780) Adjustment Payment to Clas capital stockholders 853 475 0 (522) (47) Net income 0 0 0 16,348 16,348 Other comprehensive los 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 0 (133) 47 Common and capital stock issued 9.106 298 0 0 298 Stock-based compensation expense 0 6,700 0 0 6,700 Thux withholding related to vesting of restred stock units 0 (3.597) 0 0 (3.597) Repurchases of capital sock (5.161) (256) 0 Net Income (3.437) (3.693) 0 0 0 19.478 19,478 Other comprehensive loss 0 0 Balance as of December 31, 2016 (528) 0 (528) 691,293 36,107 (2,402) 105.131 139,036 Cumulative effect of accounting change 0 0 Common and capital stock issued 0 (15) 8.652 (15) 212 0 Stock-based compensation expense 212 0 Tex withholding related to resting of restricted stock units 7.694 0 0 7,694 0 (4.373) Repurchases of capital stock 0 (4,373) Sale of subsidiary shares (5.162) (315) 0 (4.531) 0 (4.846) Net income 722 0 0 722 Other comprehensive loss 0 0 0 12,662 0 Balance as of December 31, 2017 0 1.410 12,662 0 1.410 691.783 (992) 113.247 S 152.502 Google is purt of Alphabet, but we loosely refer to Alphabetsoogle" because of its global family and that Google provides of Alphabet's 5110355 billion in revenues GOOGLE D See accompanying notes Google.nc. (Alphinct inc.) CONSOLIDATED STATEMENTS OF CASH FLOWS (In millons) 2015 2016 2017 $ 16,348 $ 19,478 $ 12.662 4,132 931 5.203 (179) 334 212 6,103 812 7,679 5,267 877 6,703 (38) 275 174 258 194 137 (2,094) (179) (318) 203 1,597 339 (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 26,572 Year Ended December 31 Operating activities Not 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, et 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 purchases 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 stockholders Repurchases of capital stock Proceeds from issuance of debt, net 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 equivalents at beginning of period Cash and cash equivalents at end of period (13,184) 19.950) 35 (74,368) 62,905 12.326) 154 (350) 425 (236) 0 (23,711) (10.212) 240 (84,509) 66,895 1,109) 494 (2,428) 450 (986) 192.195) 73.959 (1.745) 533 GOOGLE O 1.419 (31.401) (31.165 (2.375) (3.304) (4,166) (3.693) 1.750) 13.705 (13.728) 0 14.225) 0 (4.816) 4.291 (4.377) 300 (10.060) 0 (1,798 18.347 (170 (3.631) 16,549 12.918 405 (2.203) 12.918 10.715 16 59 $ Supplemental disclosures of cash flow information Cash paid for taxes, net of refunds Cash paid for interest, net of mounts capitalized 3.651 $ 1.643 54 5 $ 6.191 84