Class Time Instructions: Fill in answers in gray boxes utilizing Excel to calculate your answers (where appropriate, attempt to use formulas rather than typing your answers). Use the tabs that follow in this workbook to answer the questions (Apple's 2016 Financial Statements - Also found in Appendix #1 Financial Statement Analysis Statement Basics 1. On which financial statement do you find these accounts, and what are the balances for Apple in 2016? The In Millions Financial Statement Balance Cash & Cash Equivalents Balance Sheet $20.484 Inventories Net Sales Selling, general and administrative Accrued Expenses Retained Earnings Research & Development Expense Financial Statement Interpretation 2. What is the total amount of assets that Apple expects to sell, consume, or convert to cash within the next 12 Answer: 3. What amount, in total, does Apple owe to outsiders as of 12/31/2016? (Hint: think creditor claims on assets) Answer: 1. Show that the accounting equation holds true for Apple for 2016! A T ST Answer: 5. How much does Apple's customers owe the company as of 12/31/2016 for sales made on account? Answer: 6. What would be the effect on the accounting equation if Apple collected all of its receivables (increase. decrease, or NE)? A ST Answer: 7. Which type of activity (Operating Trivesting, or Financing) from the Statement of Cash Flow generated the most positive cash flow for Apple in 2016? Answer: 8. Which statement would you use to decide if Apple was profitable Answer: 9. What is the current ratio used for? Answer: 10. Calculate the current ratio for Apple for 2016. Answer: 11. Is this a good current ratio, explain? Answer: 12. Assume Apple entered one more transaction in 2016: they accrued for $1 billion in service revenue earned by not yet collected. How would this transaction impact the company's current ratio for 2016 (No Change, Improve, Deteriorate)? Answer: 11. What is the debt ratio used for? Answer: 14. Calculate the debt ratio for Apple for 2016, Answer: 15. Describe a transaction that would improve the debt ratio and the current ratio for Apple Answer: 12 Months Ended Sep. 24, 2016 Sep. 26, 2015 Sep. 27, 2014 $ 215,639 $ 233,715 $ 182,795 131,376 140,089 112,258 84,263 93,626 70,537 CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Millions Net sales 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 (in dollars per share) Diluted (in dollars per share) Shares used in computing earnings per share: Basic (in shares) Diluted (in shares) Cash dividends declared per share (in dollars per share) 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 6,041 11,993 18,034 52,503 980 53,483 13,973 $ 39,510 $ 8.35 $ 8.31 $9.28 $ 9.22 $ 6.49 $ 6.45 5,470,820 5,500,281 $ 2.18 5,753,421 5,793,069 $ 1.98 6,085,572 6,122,663 $ 1.82 Sep. 24, 2016 Sep. 26, 2015 $ 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 $ 21,120 20,481 16,849 2,349 13,494 15,085 89,378 164,065 22,471 5,116 3,893 5,422 290,345 CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions Current assets: Cash and cash equivalents Short-term marketable securities Accounts receivable, less allowances of $53 and $63, respectively Inventories Vendor non-trade receivables Other current assets Total current assets Long-term marketable securities Property, plant and equipment, net Goodwill Acquired intangible assets, net Other non-current assets Total assets 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 value: 12,600,000 shares authorized; 5,336,166 and 5,578,753 shares issued and outstanding, respectively Retained earnings Accumulated other comprehensive income/(loss) Total shareholders' equity Total liabilities and shareholders' equity 37,294 22,027 8,080 8,105 3,500 79,006 2,930 75,427 36,074 193,437 35,490 25,181 8,940 8,499 2,500 80,610 3,624 53,329 33,427 170,990 31,251 27,416 96,364 634 128,249 $ 321,686 92,284 (345) 119,355 $ 290,345 Common Stock and Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income/(Loss) Total 6,294,494 $ 19,764 $ 104,256 $ (471) $ 123,549 0 39,510 0 (11,215) 1,553 0 39,510 1,553 (11,215) 0 0 $o (488,677) $0 $ 2,863 60,344 $ (49) $ 735 5,866,161 $ 23,313 (45,000) 0 0 0 (45,000) 2,863 (399) 0 0 0 (448) 735 87,152 1,082 111,547 53,394 0 (11,627) 0 (1,427) 0 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Millions Beginning Balances (in shares) at Sep. 28, 2013 Beginning Balances at Sep. 28, 2013 Increase (Decrease) in Stockholders' Equity (Roll Forward] Net income Other comprehensive income/(loss) Dividends and dividend equivalents declared enes 4 Repurchase of common stock (in shares) Repurchase of common stock Share-based compensation Common stock issued, net of shares withheld for employee taxes (in shares) Common stock issued, net of shares withheld for employee taxes Tax benefit from equity awards, including transfer pricing adjustments Ending Balances (in shares) at Sep. 27, 2014 Ending Balances at Sep. 27, 2014 Increase (Decrease) in Stockholders' Equity [Roll Forward] Net income Other comprehensive income/(loss) Dividends and dividend equivalents declared Repurchase of common stock (in shares) Repurchase of common stock Share-based compensation Common stock issued, net of shares withheld for employee taxes (in shares) Common stock issued, net of shares withheld for employee taxes Tax benefit from equity awards, including transfer pricing adjustments Ending Balances (in shares) at Sep. 26, 2015 Ending Balances at Sep. 26, 2015 Increase (Decrease) in Stockholders' Equity (Roll Forward] Net income Other comprehensive income/(loss) Dividends and dividend equivalents declared Repurchase of common stock (in shares) Repurchase of common stock Share-based compensation Common stock issued, net of shares withheld for employee taxes (in shares) Common stock issued, net of shares withheld for employee taxes Tax benefit from equity awards, including transfer pricing adjustments Ending Balances (in shares) at Sep. 24, 2016 Ending Balances at Sep. 24, 2016 53,394 (1,427) (11,627) 0 0 $0 (325,032) $ 0 $ 3,586 37,624 $ (231) $ 748 5,578,753 $ 27,416 (36,026) 0 o 0 0 0 (36,026) 3,586 (609) 0 0 (840) 0 $ 748 5,578,753 (345) $ 119,355 92,284 45,687 0 (12,188) 0 979 0 45,687 979 (12,188) (29,000) 0 0 $ 0 (279,609) $0 $4,262 37,022 $ (806) $ 379 5,336,166 $ 31,251 0 0 (29,000) 4,262 0 (419) 0 0 0 (1,225) 0 $ 379 5,336,166 $ 634 $ 128,249 $ 96,364 12 Months Ended Sep. 26, 2015 Sep. 24, 2016 Sep. 27, 2014 $ 21,120 $ 13,844 $ 14,259 45,687 53,394 39,510 10,505 4,210 4,938 11,257 3,586 1,382 7,946 2,863 2,347 1,095 217 (51) 1,090 1,791 (1,554) (2,104) 65,824 611 (238) (3,735) (179) 5,400 1,042 8,746 81,266 (4,232) (76) (2,220) 167 5,938 1,460 6,010 59,713 CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions Statement of Cash Flows (Abstract] Cash and cash equivalents, beginning of the year Operating activities: Net income Adjustments to reconcile net income to cash generated by operating activities: Depreciation and amortization Share-based compensation expense Deferred income tax expense 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 made in connection with business acquisitions, net Payments for acquisition of property, plant and equipment Payments for acquisition of intangible assets Payments for strategic investments Other Cash used in investing activities Financing activities: Proceeds from issuance of common stock Excess tax benefits from equity awards Payments for taxes related to net share settlement of equity awards Payments for dividends and dividend equivalents Repurchases of common stock Proceeds from issuance of term debt, net Repayments of term debt Change in commercial paper, net Cash used in financing activities Increase/Decrease) in cash and cash equivalents Cash and cash equivalents, end of the year Supplemental cash flow disclosure: Cash paid for income taxes, net Cash paid for interest (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) 0 (26) (56,274) (217,128) 18,810 189,301 (3,765) (9,571) (242) (10) 26 (22,579) 495 407 (1,570) (12,150) (29,722) 24,954 (2,500) (397) (20,483) (636) 20,484 543 749 (1,499) (11,561) (35,253) 27,114 0 2,191 (17,716) 7,276 21,120 730 739 (1,158) (11,126) (45,000) 11,960 0 6,306 (37,549) (415) 13,844 10,444 $ 1,316 13,252 $ 514 10,026 $ 339 Class Time Instructions: Fill in answers in gray boxes utilizing Excel to calculate your answers (where appropriate, attempt to use formulas rather than typing your answers). Use the tabs that follow in this workbook to answer the questions (Apple's 2016 Financial Statements - Also found in Appendix #1 Financial Statement Analysis Statement Basics 1. On which financial statement do you find these accounts, and what are the balances for Apple in 2016? The In Millions Financial Statement Balance Cash & Cash Equivalents Balance Sheet $20.484 Inventories Net Sales Selling, general and administrative Accrued Expenses Retained Earnings Research & Development Expense Financial Statement Interpretation 2. What is the total amount of assets that Apple expects to sell, consume, or convert to cash within the next 12 Answer: 3. What amount, in total, does Apple owe to outsiders as of 12/31/2016? (Hint: think creditor claims on assets) Answer: 1. Show that the accounting equation holds true for Apple for 2016! A T ST Answer: 5. How much does Apple's customers owe the company as of 12/31/2016 for sales made on account? Answer: 6. What would be the effect on the accounting equation if Apple collected all of its receivables (increase. decrease, or NE)? A ST Answer: 7. Which type of activity (Operating Trivesting, or Financing) from the Statement of Cash Flow generated the most positive cash flow for Apple in 2016? Answer: 8. Which statement would you use to decide if Apple was profitable Answer: 9. What is the current ratio used for? Answer: 10. Calculate the current ratio for Apple for 2016. Answer: 11. Is this a good current ratio, explain? Answer: 12. Assume Apple entered one more transaction in 2016: they accrued for $1 billion in service revenue earned by not yet collected. How would this transaction impact the company's current ratio for 2016 (No Change, Improve, Deteriorate)? Answer: 11. What is the debt ratio used for? Answer: 14. Calculate the debt ratio for Apple for 2016, Answer: 15. Describe a transaction that would improve the debt ratio and the current ratio for Apple Answer: 12 Months Ended Sep. 24, 2016 Sep. 26, 2015 Sep. 27, 2014 $ 215,639 $ 233,715 $ 182,795 131,376 140,089 112,258 84,263 93,626 70,537 CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Millions Net sales 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 (in dollars per share) Diluted (in dollars per share) Shares used in computing earnings per share: Basic (in shares) Diluted (in shares) Cash dividends declared per share (in dollars per share) 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 6,041 11,993 18,034 52,503 980 53,483 13,973 $ 39,510 $ 8.35 $ 8.31 $9.28 $ 9.22 $ 6.49 $ 6.45 5,470,820 5,500,281 $ 2.18 5,753,421 5,793,069 $ 1.98 6,085,572 6,122,663 $ 1.82 Sep. 24, 2016 Sep. 26, 2015 $ 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 $ 21,120 20,481 16,849 2,349 13,494 15,085 89,378 164,065 22,471 5,116 3,893 5,422 290,345 CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions Current assets: Cash and cash equivalents Short-term marketable securities Accounts receivable, less allowances of $53 and $63, respectively Inventories Vendor non-trade receivables Other current assets Total current assets Long-term marketable securities Property, plant and equipment, net Goodwill Acquired intangible assets, net Other non-current assets Total assets 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 value: 12,600,000 shares authorized; 5,336,166 and 5,578,753 shares issued and outstanding, respectively Retained earnings Accumulated other comprehensive income/(loss) Total shareholders' equity Total liabilities and shareholders' equity 37,294 22,027 8,080 8,105 3,500 79,006 2,930 75,427 36,074 193,437 35,490 25,181 8,940 8,499 2,500 80,610 3,624 53,329 33,427 170,990 31,251 27,416 96,364 634 128,249 $ 321,686 92,284 (345) 119,355 $ 290,345 Common Stock and Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income/(Loss) Total 6,294,494 $ 19,764 $ 104,256 $ (471) $ 123,549 0 39,510 0 (11,215) 1,553 0 39,510 1,553 (11,215) 0 0 $o (488,677) $0 $ 2,863 60,344 $ (49) $ 735 5,866,161 $ 23,313 (45,000) 0 0 0 (45,000) 2,863 (399) 0 0 0 (448) 735 87,152 1,082 111,547 53,394 0 (11,627) 0 (1,427) 0 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Millions Beginning Balances (in shares) at Sep. 28, 2013 Beginning Balances at Sep. 28, 2013 Increase (Decrease) in Stockholders' Equity (Roll Forward] Net income Other comprehensive income/(loss) Dividends and dividend equivalents declared enes 4 Repurchase of common stock (in shares) Repurchase of common stock Share-based compensation Common stock issued, net of shares withheld for employee taxes (in shares) Common stock issued, net of shares withheld for employee taxes Tax benefit from equity awards, including transfer pricing adjustments Ending Balances (in shares) at Sep. 27, 2014 Ending Balances at Sep. 27, 2014 Increase (Decrease) in Stockholders' Equity [Roll Forward] Net income Other comprehensive income/(loss) Dividends and dividend equivalents declared Repurchase of common stock (in shares) Repurchase of common stock Share-based compensation Common stock issued, net of shares withheld for employee taxes (in shares) Common stock issued, net of shares withheld for employee taxes Tax benefit from equity awards, including transfer pricing adjustments Ending Balances (in shares) at Sep. 26, 2015 Ending Balances at Sep. 26, 2015 Increase (Decrease) in Stockholders' Equity (Roll Forward] Net income Other comprehensive income/(loss) Dividends and dividend equivalents declared Repurchase of common stock (in shares) Repurchase of common stock Share-based compensation Common stock issued, net of shares withheld for employee taxes (in shares) Common stock issued, net of shares withheld for employee taxes Tax benefit from equity awards, including transfer pricing adjustments Ending Balances (in shares) at Sep. 24, 2016 Ending Balances at Sep. 24, 2016 53,394 (1,427) (11,627) 0 0 $0 (325,032) $ 0 $ 3,586 37,624 $ (231) $ 748 5,578,753 $ 27,416 (36,026) 0 o 0 0 0 (36,026) 3,586 (609) 0 0 (840) 0 $ 748 5,578,753 (345) $ 119,355 92,284 45,687 0 (12,188) 0 979 0 45,687 979 (12,188) (29,000) 0 0 $ 0 (279,609) $0 $4,262 37,022 $ (806) $ 379 5,336,166 $ 31,251 0 0 (29,000) 4,262 0 (419) 0 0 0 (1,225) 0 $ 379 5,336,166 $ 634 $ 128,249 $ 96,364 12 Months Ended Sep. 26, 2015 Sep. 24, 2016 Sep. 27, 2014 $ 21,120 $ 13,844 $ 14,259 45,687 53,394 39,510 10,505 4,210 4,938 11,257 3,586 1,382 7,946 2,863 2,347 1,095 217 (51) 1,090 1,791 (1,554) (2,104) 65,824 611 (238) (3,735) (179) 5,400 1,042 8,746 81,266 (4,232) (76) (2,220) 167 5,938 1,460 6,010 59,713 CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions Statement of Cash Flows (Abstract] Cash and cash equivalents, beginning of the year Operating activities: Net income Adjustments to reconcile net income to cash generated by operating activities: Depreciation and amortization Share-based compensation expense Deferred income tax expense 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 made in connection with business acquisitions, net Payments for acquisition of property, plant and equipment Payments for acquisition of intangible assets Payments for strategic investments Other Cash used in investing activities Financing activities: Proceeds from issuance of common stock Excess tax benefits from equity awards Payments for taxes related to net share settlement of equity awards Payments for dividends and dividend equivalents Repurchases of common stock Proceeds from issuance of term debt, net Repayments of term debt Change in commercial paper, net Cash used in financing activities Increase/Decrease) in cash and cash equivalents Cash and cash equivalents, end of the year Supplemental cash flow disclosure: Cash paid for income taxes, net Cash paid for interest (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) 0 (26) (56,274) (217,128) 18,810 189,301 (3,765) (9,571) (242) (10) 26 (22,579) 495 407 (1,570) (12,150) (29,722) 24,954 (2,500) (397) (20,483) (636) 20,484 543 749 (1,499) (11,561) (35,253) 27,114 0 2,191 (17,716) 7,276 21,120 730 739 (1,158) (11,126) (45,000) 11,960 0 6,306 (37,549) (415) 13,844 10,444 $ 1,316 13,252 $ 514 10,026 $ 339