Financial Accounting (ACTG4A) Spring 2019 Due: Tuesday May 7th, 2019 Apple Inc.-Analysis of Fiscal 2015 Annual Report (20 points) Inc. is an American multinational technology company that designs, develops, Apple and sells consumer electronics, computer software, and online services. The company's hardware products include the iPhone smartphone, the iPad tablet computer, the Mac personal computer, the iPod portable media player, and the Apple Watch smartwatch. Apple's consumer software includes the macOS and ios operating systems, the iTunes media player, and the Safari web browser. Its online services include the iTunes Store, Apple Music, and iCloud. Established on April 1, 1976 in Cupertino, California, the company was previously named Apple Computer, Inc., for its first 30 years, but removed the word "Computer" in 2007, to reflect the company's ongoing expansion into the consumer electronics market in addition to its traditional focus on personal computers. Apple is the world's largest information technology company by revenue and the world's second-largest mobile phone manufacturer after Samsung. In August 2018, Apple became the first Us. company to be valued at over US$1 trillion. The company employs 132,000 full-time employees (2018). Apple's worldwide annual revenue totaled $265 billion for the 2018 fiscal year. The company enjoys a high level of brand loyalty and has been repeatedly ranked as the world's most valuable brand. Answer the following questions from Apple's 2015 Financial Report (found in the Appendix of Wild, Larson & Chiappetta, pages A-2 to A-5, starting on page 703). The purpose of this assignment is to familiarize you with a company's annual report and basic financial statement analysis. What were Apple's basic earnings per common share for the fiscal year ended September 26, 2015? 1. What was the value of net sales for Apple for the fiscal year ended September 26, 2015? Be precise when giving your answer. 2. Calculate the profit margin ratio for the fiscal years ended September 26.2015 and September 27, 2014 (show calculations). Formula: Net Income/Net Sales % 3. 2015 2014 4. What was Apple's return on total assets for 2015? Formula: Return on total assets =-% Net Income Avg. Total Assets [Avg. Total Assets = (Beg. Total Assets + End. Total Assets)/2] Calculate days sales in inventory for 2015 (show calculation). Formula: Endinginventories x 365 5. days Cost of Goods Sold *Note: Cost of Goods Sold is sometimes called "Cost of Sales" 6. Calculate the total asset turnover ratio for 2015 (show calculation). Formula: Net Sales Avg. Total Assets - times 7. Calculate the current ratio for 2015 and 2014 (show calculation). Formula. Current Assets/Current Liabilities times 2014 2015 Calculate the acid test ratio for 2015 and 2014 (show calculation). Formula: "Quick" Assets/Current Liabilities 8. times 2014 2015 Calculate the debt-to-equity ratio for Apple for 2015 and 2014 (show calculation) Formula: Total Liabilities 9. Total Stockholders' Equity Note: The higher the ratio, the more debt the company has relative to investments by owners (i.e. riskier) 2014 2015 10. What was Apple's return on common stockholders' equity for 2015? Netincome-PreferredDividends (if any) Avg. Stockholders' Equity -% Formula: Apple Inc. CONSOLIDATED BALANCE SHEETS In millions, except number of shares which are reflected in thousands and par value) September 27, 2014 ASSETS Current assets 13,844 11,233 17.460 2,111 4,318 9,759 Cash and cash equivalents Short-term marketable securities Accounts receivable, less allowances of $82 and $86, respectively Inventories Deferred tax assets Vendor non-trade receivables Other current assets 21,120 20,481 16,849 2,349 5,546 9,539 89,378 164,065 22,471 5,116 3,893 68,531 130,162 20,624 4,616 4,142 3.764 231,839 Total current assets Long-term marketable securities Property, plant and equipment,net Goodwill red intangible assets, net Other assets Total assets 290,479 LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities Accounts payable Accrued expenses Deferred rovenue Commercial paper Current portion of long-term debt 35,490 25,181 8,940 8,499 2,500 80,610 3,624 53,463 33,427 171,124 30,196 18,453 8,491 6,308 Total current liabilities 63,448 3,031 28,987 24.826 120,292 Deferred revenue- non-current Long-term debt Other non-current liabilities Total liabilities Commitments and contingencies Sharcholders' equity Common stock and additional paid-in capital, $0.00001 par value: 12,600,000 shares authorized; 5.578,753 and 5,866,161 shares issued and outstanding, respectively Retained earnings Accumulated other comprehensive income 27.416 92,284 23,313 87,152 1,082 111,547 231,839 Total sharcholders' equity Total Habilities and shareholders' equity 119,355 290,479 See accompanying Notes to Consolidated Financial Statements. Apple Inc. CONSOLIDATED STATEMENTS OF OPERATIONS In millions, except number of shares which are reflected in thousands and per which are reflected in thousands and per share amounts) September 27, 2014 182,795 112,258 70,537 September 28, 2013 September 26, 2015 233,715 140,089 93,626 Years ended Net sales Cost of sales Gross margirn Operating expenses 4,475 10,830 15,305 48,999 1,156 6,041 11,993 18,034 8,067 14.329 22,396 71,230 1,285 72,515 Research and development g, general and administrative Total operating expenses Operating income Other income, net 980 53,483 13,973 39,510 Income before provision for income taxes Provision for income taxes Net income 37,037 53.394 Earnings per share: 6.49 6.45 Basic 5.68 9.22 Shares used in computing eurnings per share: 6,085,572 6,122,663 1.82 6.477,320 6,521,634 5,753,421 ,793,069 1.98 Diluted Cash dividends declared per common share See accompanying Notes to Consolidated Financial Statements Apple Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME In millions) Years ended Net income Other comprehensive income (loss): September 26, 2015 September 27, 2014 September 28, 2013 37,037 53,394 S 39,510 $ Change in foreign currency translation, net of tax effects of $201, S50 and $35, respectively (411) (137) Change in unrealized gains/losses on derivative instruments: Change in fair value of derivatives, net of tax benefit (expense) of S(441), S(297) and $(351), respectively 2,905 1,390 149 ,539 522 Adjustment for net losses (gains) realized and included in net income net of tax expense (benefit of $630, s(36) and $255, respectively Total change in unrecognized gains/losses on derivative instruments, net of tax (592) 64 Change in unrealized gains/losses on marketable securities: Change in fair value of marketable securities, net of tax benefit (expense) of $264, S(153) and $458, respectively (483) 285 (791) Adjustment for net (gains) losses realized and included in net income, net of tax expense (benefit) of $(32), 571 and $82, respectively Total change in unrealized gainslosses on marketable securities, net of tax (424) (1,427) 51,967 $ 151 Total other comprehensive income (loss) Total comprehensive income 41,063S 36,067 See accompanying Notes to Consolidated Financial Statements, Financial Accounting (ACTG4A) Spring 2019 Due: Tuesday May 7th, 2019 Apple Inc.-Analysis of Fiscal 2015 Annual Report (20 points) Inc. is an American multinational technology company that designs, develops, Apple and sells consumer electronics, computer software, and online services. The company's hardware products include the iPhone smartphone, the iPad tablet computer, the Mac personal computer, the iPod portable media player, and the Apple Watch smartwatch. Apple's consumer software includes the macOS and ios operating systems, the iTunes media player, and the Safari web browser. Its online services include the iTunes Store, Apple Music, and iCloud. Established on April 1, 1976 in Cupertino, California, the company was previously named Apple Computer, Inc., for its first 30 years, but removed the word "Computer" in 2007, to reflect the company's ongoing expansion into the consumer electronics market in addition to its traditional focus on personal computers. Apple is the world's largest information technology company by revenue and the world's second-largest mobile phone manufacturer after Samsung. In August 2018, Apple became the first Us. company to be valued at over US$1 trillion. The company employs 132,000 full-time employees (2018). Apple's worldwide annual revenue totaled $265 billion for the 2018 fiscal year. The company enjoys a high level of brand loyalty and has been repeatedly ranked as the world's most valuable brand. Answer the following questions from Apple's 2015 Financial Report (found in the Appendix of Wild, Larson & Chiappetta, pages A-2 to A-5, starting on page 703). The purpose of this assignment is to familiarize you with a company's annual report and basic financial statement analysis. What were Apple's basic earnings per common share for the fiscal year ended September 26, 2015? 1. What was the value of net sales for Apple for the fiscal year ended September 26, 2015? Be precise when giving your answer. 2. Calculate the profit margin ratio for the fiscal years ended September 26.2015 and September 27, 2014 (show calculations). Formula: Net Income/Net Sales % 3. 2015 2014 4. What was Apple's return on total assets for 2015? Formula: Return on total assets =-% Net Income Avg. Total Assets [Avg. Total Assets = (Beg. Total Assets + End. Total Assets)/2] Calculate days sales in inventory for 2015 (show calculation). Formula: Endinginventories x 365 5. days Cost of Goods Sold *Note: Cost of Goods Sold is sometimes called "Cost of Sales" 6. Calculate the total asset turnover ratio for 2015 (show calculation). Formula: Net Sales Avg. Total Assets - times 7. Calculate the current ratio for 2015 and 2014 (show calculation). Formula. Current Assets/Current Liabilities times 2014 2015 Calculate the acid test ratio for 2015 and 2014 (show calculation). Formula: "Quick" Assets/Current Liabilities 8. times 2014 2015 Calculate the debt-to-equity ratio for Apple for 2015 and 2014 (show calculation) Formula: Total Liabilities 9. Total Stockholders' Equity Note: The higher the ratio, the more debt the company has relative to investments by owners (i.e. riskier) 2014 2015 10. What was Apple's return on common stockholders' equity for 2015? Netincome-PreferredDividends (if any) Avg. Stockholders' Equity -% Formula: Apple Inc. CONSOLIDATED BALANCE SHEETS In millions, except number of shares which are reflected in thousands and par value) September 27, 2014 ASSETS Current assets 13,844 11,233 17.460 2,111 4,318 9,759 Cash and cash equivalents Short-term marketable securities Accounts receivable, less allowances of $82 and $86, respectively Inventories Deferred tax assets Vendor non-trade receivables Other current assets 21,120 20,481 16,849 2,349 5,546 9,539 89,378 164,065 22,471 5,116 3,893 68,531 130,162 20,624 4,616 4,142 3.764 231,839 Total current assets Long-term marketable securities Property, plant and equipment,net Goodwill red intangible assets, net Other assets Total assets 290,479 LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities Accounts payable Accrued expenses Deferred rovenue Commercial paper Current portion of long-term debt 35,490 25,181 8,940 8,499 2,500 80,610 3,624 53,463 33,427 171,124 30,196 18,453 8,491 6,308 Total current liabilities 63,448 3,031 28,987 24.826 120,292 Deferred revenue- non-current Long-term debt Other non-current liabilities Total liabilities Commitments and contingencies Sharcholders' equity Common stock and additional paid-in capital, $0.00001 par value: 12,600,000 shares authorized; 5.578,753 and 5,866,161 shares issued and outstanding, respectively Retained earnings Accumulated other comprehensive income 27.416 92,284 23,313 87,152 1,082 111,547 231,839 Total sharcholders' equity Total Habilities and shareholders' equity 119,355 290,479 See accompanying Notes to Consolidated Financial Statements. Apple Inc. CONSOLIDATED STATEMENTS OF OPERATIONS In millions, except number of shares which are reflected in thousands and per which are reflected in thousands and per share amounts) September 27, 2014 182,795 112,258 70,537 September 28, 2013 September 26, 2015 233,715 140,089 93,626 Years ended Net sales Cost of sales Gross margirn Operating expenses 4,475 10,830 15,305 48,999 1,156 6,041 11,993 18,034 8,067 14.329 22,396 71,230 1,285 72,515 Research and development g, general and administrative Total operating expenses Operating income Other income, net 980 53,483 13,973 39,510 Income before provision for income taxes Provision for income taxes Net income 37,037 53.394 Earnings per share: 6.49 6.45 Basic 5.68 9.22 Shares used in computing eurnings per share: 6,085,572 6,122,663 1.82 6.477,320 6,521,634 5,753,421 ,793,069 1.98 Diluted Cash dividends declared per common share See accompanying Notes to Consolidated Financial Statements Apple Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME In millions) Years ended Net income Other comprehensive income (loss): September 26, 2015 September 27, 2014 September 28, 2013 37,037 53,394 S 39,510 $ Change in foreign currency translation, net of tax effects of $201, S50 and $35, respectively (411) (137) Change in unrealized gains/losses on derivative instruments: Change in fair value of derivatives, net of tax benefit (expense) of S(441), S(297) and $(351), respectively 2,905 1,390 149 ,539 522 Adjustment for net losses (gains) realized and included in net income net of tax expense (benefit of $630, s(36) and $255, respectively Total change in unrecognized gains/losses on derivative instruments, net of tax (592) 64 Change in unrealized gains/losses on marketable securities: Change in fair value of marketable securities, net of tax benefit (expense) of $264, S(153) and $458, respectively (483) 285 (791) Adjustment for net (gains) losses realized and included in net income, net of tax expense (benefit) of $(32), 571 and $82, respectively Total change in unrealized gainslosses on marketable securities, net of tax (424) (1,427) 51,967 $ 151 Total other comprehensive income (loss) Total comprehensive income 41,063S 36,067 See accompanying Notes to Consolidated Financial Statements