Expand Your Critical Thinking Financial Reporting Problem: Apple Inc. CT8.1 Refer to the financial statements of Apple Inc. in Appendix A. Instructions a. Calculate the accounts receivable turnover and average collection period for 2017. (Assume all sales were credit sales.) b. Did Apple have any potentially significant credit risks in 2017? c. What conclusions can you draw from the information in parts (a) and (b)? Comparative Analysis Problem: Columbia Sportswear Company vs. VFR Corporation AA 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 annual 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, multicolored, glossy public relations pieces, containing pictures of corporate officers and directors as well as photos and descriptions of new products and new buildings. 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, etc.), 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 Internal Control over Financial Reporting Report of Independent Registered Public Accounting Firm Selected Financial Data The official SEC filing of the annual report is called a Form 10-K, which often omits the public relations pieces found in most standard annual reports. On the following A-1 3 Apple Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (In Millions, except number of shares which are reflected in thousands and per share amounts) $ Years ended September 24 2016 215,639 $ 131,376 84.263 September 30, 2017 229.234 141,048 88,186 September 26, 2015 233,715 140,089 93,626 Net sales Cost of sales Gross margin Operating expenses Research and development Selling, general and administrative Total operating expenses 11,581 15.261 26.842 10,045 14,194 24,239 8,067 14,329 22,396 Operating income Other incomel (expense), net Income before provision for income taxes Provision for income taxes Net Income 61.344 2,745 54,089 15,738 48,351 60.024 1,348 61,372 15,685 45,687 71.230 1,285 72,515 19.121 53,394 $ $ $ Earnings por share: Basic Diluted $ S 927 9.21 8.35 8.31 $ $ 9.28 9.22 $ Shares used in computing earnings per share: Basic Diluted 5,217.242 5.251,692 5.753,421 5.793.069 5,470,820 5,500 281 2.40 2.18 1.90 $ $ S Cash dividends declared per share See accompanying Notes to Consolidated Financial Statements Apple Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in milions) September 30, 2017 48,351 Years onded September 24, 2016 45,687 September 26 2015 53394 Net Income $ Other comprehensive incomallow): Change in foreign currency translation, net of tax affects of $177). 58 and 5201 respectively 224 75 (411) - 1 1.315 7 2005 Change in unrealized gains fosses on derivative Instruments Change in tale value of derivatives, not of tax benedilexpense) of $4478), 667) and $(441), respectively Adjustment for not connesses realized and included in net income, net of tax expense benefit of $475, 5131 and 5630, respectively Total change in realized in son derivative Instruments, net of tax (1477) (162) (741) (734) (3497) (592) 8-1 (762) 1.52 (483) Change in unrealized gans/es on marketable securities Change in tal value of marketable securities, net of tax benefexpense) 5425 (063) and 5264, respectively Adjustment for regninoses realized and included in net income, not of expenselbene) of $35, 601) and (32),rospectively Total change in unrealized gaines on marketable securities, net of tax 9.1 004) (40) 50 1.030 0 (424) Total other comprehensive incompas) Total comprehensive income (784) 47.507 970 48.606 (142) 51.27 $ 10-1 See accompanying Notes to Consolidated Financial Statements September 30, 2017 Septemt 2011 ASSETS: $ Current assets: Cash and cash equivalents Short-term marketable securities Accounts receivable, less allowances of 558 and $53, respectively Inventories Vendor non-trade receivables Other current assets Total current assets 20.289 53,892 17,874 4,855 17.799 13,936 128.645 20.484 46,671 15,754 2,132 13,545 8,283 106,869 Long-term marketable secunities Property, plant and equipment, net Goodwin Acquired intangible assets, net Other non-current assets Total assets 194,714 33,783 5,717 2,298 10,162 375,319 170,430 27.010 5,414 3.206 8,757 321.686 $ LIABILITIES AND SHAREHOLDERS' EQUITY: 37.294 22,027 Current liabilities: Accounts payable Accrued expenses Deferred revenue Commercial paper Current portion of long-term debt Total current liabilities 49,049 25.744 7,548 11.977 6,496 100,814 8.080 8,105 3.500 79,006 Deferred revenue, non-current Long-term debt Other non-current liabilities Total liabilities 2,836 97,207 40,415 241,272 2.930 75,427 36,074 193,437 Commitments and contingencies Shareholders' equity Common stock and additional paid.in capital, 50.00001 par value: 12,600,000 shares authorized: 5,126 201 and 5,336,166 shares issued and outstanding, respectively Retained earnings Accumulated other comprehensive income (18) Total shareholders' equity Total liabilities and shareholders equity 35.667 08 330 (150) 134,047 375,319 $ 31.251 96,364 034 120.249 325.000 A-3 Apple Inc. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (In Millions, except number of shares which are reflected in thousands) Common Stock and Additional Pald-in Capital Shares Amount 5,868,161 $ 23,313 S Retained Earnings 87,152 $ 53,394 Accumulated Other Comprehensive Income (Loss) 1,082 (1.427) Total Shareholders Equity $ 111,547 53,394 (1.427) (11,627) (36,026) 3,586 (11,627) (36,026) (325,032) 3,586 (840) 1 1 37,624 (231) (609) 748 (345) 5,578,753 27,416 92284 45,687 979 748 119,355 45,687 979 (12,188) (29,000) 4,202 2.188) (29.000) (279,609) Balances as of September 27, 2014 Net Income Other comprehensive income/llosa) Dividends and dividend equivalents declared Repurchase of common stock Share-based compensation Common stock issued, net of shares withheld for employee taxes Tax benefit from equity awards, including transfer pricing adjustments Balances as of September 26, 2015 Not income Other comprehensive income (1088) Dividends and dividend equivalents declared Repurchase of common stock Share-based compensation Common stock issued, net of shares withheld for employee taxes Tax benefit from equity awards, including transfer pricing adjustments Balances as of September 24, 2016 Net Income Other comprehensive income/(los) Dividends and dividend equivalents declared Repurchase of common stock Share-based compensation Common stock issued, net of shares withheld for employee taxes Tax benefit from equity awards, including transfer pricing adjustments Balances as of September 30, 2017 4,262 (1225) 37,022 (806) (419) 379 31,251 634 5,336,166 96,364 48,351 (784) 379 128.249 48,351 (784) (12,803) (33,001) 4.909 (12,803) (33.001) (246,496) 4,900 (1.494) 36,531 (913) (581) 620 35,867 820 134.047 $ $ (150) 90.330 5,126,201 S See accompanying Notes to Consolidated Financial Statements September 30, 2017 20.454 Years onded September 24, 2015 21,120 Septem 2013 13,844 $ $ 43.351 45,687 53.394 10,157 10.505 4.210 4.840 5.986 (166) 11.257 3,586 1.382 385 4.939 486 527 (2,095) (2.723) (4.254) (5.318) 9,610 (626) (154) 63,598 217 (51) 1,055 1.837 (1.554) (2.033) 65.824 417 (238) (3.735) (283) 5.001 1.002 9.058 81.266 Cash and cash equivalents, beginning of the year Operating activities: Not Income Adjustments to reconcile net income to cash generated by operating activities: Depreciation and amortization Share-based compensation expense Deferred income tax expense Other 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 Canh 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, nel Payments for acquisition of property, plant and equipment Payments for acquisition of intangible assets Payments for strategic investments, net Other Cash used in investing activities Financing activities Proceeds from sunce of common stock Excess tax benefits from equity awards Payments for taxes related to not share settlement of equily awards Payments for dividends and dividend equivalents Repurchases of common stock Proceeds from suance of term debt, net Repayments of term debt Change in commercial paper.net Cash used in financing activities Increase Decrease in cash and cash equivalent Cash and cash equivalents, end of the year Supplemental cash flow disclosure Chemia 150.406) 31.775 94564 (329) (12.451) (344) (305) 220 (46.446) (142420) 21.258 90.536 (297 (12.734) (814) (1.388) (110) (45.977) (165,402) 14,538 107,447 (343) (11.247 (241) (26) (56,274) 556 627 543 749 (1.4991 (11,561) (35.253) 27,114 495 407 (1.570) (12.150) (29,722) 24,954 (2.500) (397) (20.400 (630) 20.454 (1.874) (12,709) (32.900) 28.652 3.500 3.852 (17,347 (105) 20,269 2.191 (17.716) 7.276 21,120 5 $ A-5