CT13.1) Your parents are considering investing in Apple Inc. common stock. They ask you, as an accounting expert, to make an analysis of the company for them. Financial statements of Apple are presented in Appendix A. The complete annual report, including the notes to its financial statements, is available at the companys website.

Instructions:

A) Make a 5-year trend analysis, using 2014 as the base year, of (1) net sales and (2) net income. Comment on the significance of the trend results.

B) Compute for 2018 and 2017 the (1) debt to assets ratio and (2) times interest earned. (See Note 3 for interest expense.) How would you evaluate Apples long-term solvency?

C) Compute for 2018 and 2017 the (1) profit margin, (2) asset turnover, (3) return on assets, and (4) return on common stockholders equity. How would you evaluate Apples profitability? Total assets at September 24, 2016, were $321,686 million and total stockholders equity at September 24, 2016, was $128,249 million.

D) What information outside the annual report may also be useful to your parents in making a decision about Apple?

*Please ensure that ALL sections are labeled and answered (A, B, C, and D). Thank you for all your help!

Appendix A Specimen Financial Statements: Apple Inc. Once each year, a corporation communicates to its stockholders and other interested parties by issuing a complete set of audited financial statements. The annal report, as this : communication is called, summarizes the financial results of the company's operations for the year and its plans for the future. Many annual reports are attractive, malticolored, glossy public relations pieces, containing pictures of corporate officers and directors as well as photos and descriptions of new products and new builidings. Yet the basic function of every annual report is to report financial information, almost all of which is a product of the corporation's accounting system. The content and organization of corporate annual reports have become fairly standardized. Excluding the public relations part of the report (pictures, products, ete), the following are the traditional financial portions of the annual report: - Financial Highlights - Letter to the Stockholders - Management's Discussion and Analysis - Financial Statements - Notes to the Financial Statements - Management's Responsibility for Financial Reporting - Management's Report on Isternal Control over Financial Reporting - Report of Independent Registered Public Accounting Firm - Selected Financial Data The official SeC filing of the annaal report is called a Form 10-K, which oftes omits the public relations pieces found in most standard ansual reports. Oa the following pages, we present Apple Ine. Consolidated Statements of Operations (in millions. excent number of shares which are reflected in thousands and ber shate amounts) Apple Inc. Consolidated Statements of Comprehensive Income (in millions) Net income Other comprehensive income/(loss): Change in foreign currency translation, net of tax effects of $(1),$(77) and $8, respectively Change in unrealized gains/losses on derivative instruments: Change in fair value of derivatives, net of tax benefit/(expense) of $(149),$(478) and $(7), respectively Adjastment for net (gains)/losses realized and incloded in net income, net of tax expense/(benefit) of $(104), $475 and $131, respectively Total change in unrealixed gains/losses on derivative instruments, net of tax Change in unrealized gains/losses on marketable securities: Change in fair value of marketable securities, net of tax benefit/(expense) of $1,156,$425 and $(863), respectively Adjustment for net (eains)/losses realized and included in net income, net of tax expense/(benefit) of $21,$35 and $(31), respectively Total ehange in unrealized gains/losses on marketable securities, net of tax Total other comprehensive income/(loss) Total comprehensive income See accompanyies Notes to Consolidated Finandal Statemente. Apple ine. Consolidated Balance Sheets (in millions, exeept number of shares which are reflected in thousands and par value) September 29, September 30, wois See accoenpanying Notes to Consolidated Financial Statements. Apple Ine. Consolidated Balance Shcets (in millions, exeept number of shares which are reflected in thousands and par value) ASSETS: Non-current assets: Marketable securities Property, plant and equipment, net Other non-current assets Total non-current assets Total assets LIABIIITIS AND SHAREHOLDERS' EQUTTY; Current liabilities: Accounts payable Other current liabilities Deferred revenue Commercial paper Term debt Total current liabilities Commercial paper Term debt Total current liabtlities Non-current liabilities: Deferred revenue Term debt Other non-current liablities Total non-current liabilities Total liabilities Commitments and contingencies Shareholders' equity: Common stock and additional paid-in capital, $0,00001 par valee: 12,600,000 shares authorized; 4,754,986 and 5.126,201 stares issued and outstanding, respectively Retained earnings Accumulated other comprchensive income/(loss) Total shareholders' equity Total liabilities and shareholders' equity See accompanying Notes to Consolidated Finascial Statemets. Apple Inc. Consolidated Statements of Shareholders' Equity (in millions, except number of shares which are reflected in thousands and per share amounts) Apple Inc. Consolidated Statements of Shareholders' Ranitv Common stock issued, net of shares withheld for employee taxes Tax benefit from equity awards, 36.531(913)(581) including transfer pricing Dividends and dividend equivalents declared at $2.72 per share or RSU Repurchase of common stock Share-based compensation Common stock issued, net of shares withheld for employee taxes Balances as of September 29, 2018 4.754.98634.334 See accompanaying Notes to Consolidated Financial Statemerts. Cash and cash equivalents, beginning of the year Operating activities: Net incoase Adjostments to reconclle net income to cash generated by operating activities: Depreciation and amortiration Share-based compensation expense Deferred income tax expense/(bencfiv) Apple Inc. (in millions) Other Oaher Changes in operating assets and liabilities: 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 cosnection with business acquisitions, net Purchases of non-marketable securities Proceeds from non-marketable securities Other Cash generated by/(used in) investing activities Financing activitiea: Procceds from issuance of common stock 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 eash equivalents Cash and cash equivalents, end of the year Imvesting activities: Purchases of marketable securities Proceeds from maturities of marketable securities Proceeds froms 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: See accompanying Notes to Consolidated Financial Statements