I need help with this assignment. The questions are at the end of the PDF. I have trouble reading statements and figuring out what I have to do.

ACCOUNTING M110 Case APPLE, INC. Introduction to Financial Statements Company Background The Company designs, manufactures, and markets mobile communication and media devices, personal computers, and portable digital music players, and sells a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications. The Company's products and services include iPhone , iPad , Mac , iPod , Apple TV , a portfolio of consumer and professional software applications, the iOS and OS X operating systems, iCloud , and a variety of accessory, service and support offerings. The Company also sells and delivers digital content and applications through the iTunes Store , App Store, iBooks Store, and Mac App Store. The Company sells its products worldwide through its retail stores, online stores, and direct sales force, as well as through third-party cellular network carriers, wholesalers, retailers, and valueadded resellers. In addition, the Company sells a variety of third-party iPhone, iPad, Mac and iPod compatible products, including application software, and various accessories, through its online and retail stores. The Company sells to consumers; small and mid-sized businesses (\"SMB\"); and education, enterprise and government customers. The Company's fiscal year is the 52 or 53-week period that ends on the last Saturday of September. Unless otherwise stated, all information presented in this Form 10-K is based on the Company's fiscal calendar. The Company is a California corporation established in 1977. Business Strategy The Company is committed to bringing the best user experience to its customers through its innovative hardware, software and services. The Company's business strategy leverages its unique ability to design and develop its own operating systems, hardware, application software, and services to provide its customers new products and solutions with superior ease-of-use, seamless integration, and innovative design. The Company believes continual investment in research and development, marketing and advertising is critical to the development and sale of innovative products and technologies. As part of its strategy, the Page | 1 Company continues to expand its platform for the discovery and delivery of third-party digital content and applications through the iTunes Store. As part of the iTunes Store, the Company's App Store and iBooks Store allow customers to discover and download applications and books through either a Mac or Windows-based computer or through \"iOS devices,\" namely iPhone, iPad and iPod touch . The Company's Mac App Store allows customers to easily discover, download and install Mac applications. The Company also supports a community for the development of third-party software and hardware products and digital content that complement the Company's offerings. The Company believes a high-quality buying experience with knowledgeable salespersons who can convey the value of the Company's products and services greatly enhances its ability to attract and retain customers. Therefore, the Company's strategy also includes enhancing and expanding its own retail and online stores and its third-party distribution network to effectively reach more customers and provide them with a high-quality sales and post-sales support experience. Business Organization The Company manages its business primarily on a geographic basis. Accordingly, the Company determined its reportable operating segments, which are generally based on the nature and location of its customers, to be the Americas, Europe, Japan, Greater China, Rest of Asia Pacific and Retail. The Americas segment includes both North and South America. The Europe segment includes European countries, as well as India, the Middle East and Africa. The Greater China segment includes China, Hong Kong and Taiwan. The Rest of Asia Pacific segment includes Australia and Asian countries, other than those countries included in the Company's other operating segments. The Retail segment operates Apple retail stores in 13 countries, including the U.S. Each operating segment provides similar hardware and software products and similar services. The results of the Company's geographic segments do not include results of the Retail segment. Further information regarding the Company's operating segments may be found in Part II, Item 7 of this Form 10-K under the subheading \"Segment Operating Performance,\" and in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements in Note 11, \"Segment Information and Geographic Data.\" Page | 2 Products iPhone iPhone is the Company's line of smartphones that combines a phone, music player, and internet device in one product, and is based on Apple's iOS Multi-Touch operating system. iPhone has an integrated photo and video camera and photo library app, and on qualifying devices, also includes Siri , a voice activated intelligent assistant. iPhone works with the iTunes Store, the App Store and iBooks Store for purchasing, organizing and playing music, movies, TV shows, podcasts, books, and apps. In addition to apps delivered with iOS, beginning in September 2013, free downloads of iPhoto , iMovie and iWork apps for iOS became available with all new iPhones. iPhone is compatible with both Mac and Windows personal computers and Apple's iCloud services which provide synchronization of mail, contacts, calendars, apps, music, photos, documents, and more across users' devices. The latest versions, introduced in September 2013, are iPhone 5c and iPhone 5s. iPad iPad and iPad mini are the Company's line of multi-purpose tablets based on Apple's iOS Multi-Touch operating system. iPad has an integrated photo and video camera and photo library app, and on qualifying devices, also includes Siri. iPad works with the iTunes Store, the iBooks Store, and the App Store for purchasing and playing music, movies, TV shows, podcasts, books, and apps. In addition to apps delivered with iOS for qualifying devices, beginning in September 2013, iPhoto, iMovie and iWork apps for iOS became available as free downloads with all new iPads. iPad is compatible with both Mac and Windows personal computers and Apple's iCloud services. In October 2013, the Company announced iPad Air, its fifth generation iPad, and iPad mini with Retina display. Mac Mac is the Company's line of desktop and portable personal computers. Macs feature Intel microprocessors, the OS X operating system and include Mail, Safari web browser, Messages, Calendars, Reminders, Contacts and Page | 3 the iLife suite of software apps. The Company's desktop computers include iMac , Mac Pro and Mac mini. The Company's portable computers include MacBook Pro and MacBook Air . Beginning in October 2013, the Company's iWork productivity suite of apps for OS X became available as free downloads with all new Macs. iPod The Company's iPod line of portable digital music and media players includes iPod touch, iPod nano , iPod shuffle and iPod classic . All iPods work with iTunes to purchase and synchronize content. iPod touch, based on the Company's iOS Multi-Touch operating system, is a flash-memory-based iPod with an integrated photo and video camera and photo library app, and also includes Siri. iPod touch works with the iTunes Store, the App Store, and the iBooks Store for purchasing and playing music, movies, TV shows, podcasts, books, and apps. In addition to apps delivered with iOS, beginning in September 2013, iPhoto, iMovie and iWork apps for iOS became available as free downloads for all new iPod touches. iPod touch is compatible with both Mac and Windows personal computers and Apple's iCloud services. iTunes and the iTunes Store Apple's iTunes app, available for both Mac and Windows personal computers, keeps users' music, movies, and TV shows organized in one place. iTunes is integrated with the iTunes Store, the App Store and the iBooks Store. The iTunes Store allows users to purchase and download music and TV shows and to rent or purchase movies. The iTunes Store also includes hundreds of thousands of free Podcasts on a multitude of subjects. The App Store allows customers to discover and download apps and purchase in-app content. The iBooks Store features e-books from major and independent publishers. iTunes U allows users to download free lectures, videos, and more from top universities, museums, and other institutions. iTunes also features Genius mixes to find songs that go together and organize them into genre-based mixes and Home Sharing to allow users to stream content from one computer to another computer as well as to iOS devices and newer versions of the Company's Apple TV. In September 2013, Apple introduced iTunes Radio, a free Internet streaming service that allows users of iOS Page | 4 devices, Mac and Windows personal computers and Apple TV to personalize radio stations featuring music from the iTunes Store. Mac App Store The Mac App Store allows customers to discover, download and install Mac apps. The Mac App Store offers applications in education, games, graphics and design, lifestyle, productivity, utilities and other categories. The Company's OS X operating system software and its iLife, iWork and other application software titles are also available on the Mac App Store. iCloud iCloud is the Company's cloud service, which stores music, photos, applications, contacts, calendars, documents and more, keeping them upto-date and available to multiple iOS devices and Mac and Windows personal computers. iCloud's features include iTunes in the Cloud; Photo Stream; Documents in the Cloud; Contacts; Calendar; Mail; automatic downloads and purchase history for content, applications and books; and iCloud Backup for iOS devices. Users can sign up for free access to iCloud using a device running qualifying versions of iOS or OS X. Operating System Software iOS iOS is the Company's Multi-Touch operating system that serves as the foundation for iOS devices. iOS 7 is the current version and was released in September 2013. Apps delivered with iOS for qualifying devices include Safari web browser, FaceTime video calling, Maps with turn-by-turn directions, Mail, Contacts, Calendar, Clock, Weather, Calculator, Notes, Reminders, Stocks, Compass, and Messages. Devices running iOS are compatible with both Mac and Windows personal computers and Apple's iCloud services. OS X OS X, the Company's Mac operating system, is built on an open-source UNIX-based foundation and provides an intuitive and integrated computer experience. OS X Mavericks, released in October 2013, is the tenth major release of OS X. Support for iCloud is built into OS X so users can access content and information from their other Macs, their iOS devices and other supported devices and access downloaded content and apps from the iTunes Store. In addition to Mail, Safari web browser, Page | 5 Messages, Calendars, Reminders, Contacts and the iLife suite of software apps, Mavericks also includes a new Maps app and a new iBooks app that both work with their iOS counterparts. Application Software iLife iLife for Mac is the Company's consumer-oriented digital lifestyle software application suite included with all Mac computers. iLife features iPhoto, a digital photo application for storing, viewing, editing and sharing photos; iMovie, a digital video editing application; and GarageBand , a music creation application that allows customers to play, record and create music. The Company also has Multi-Touch versions of these iLife applications designed specifically for use on iPhone and iPad, and beginning in September 2013, both iPhoto and iMovie for iOS became available as free downloads with all new iOS devices. iWork iWork for Mac is the Company's integrated productivity suite designed to help users create, present, and publish documents, presentations, and spreadsheets. iWork includes Pages for word processing and page layout, Keynote for presentations, and Numbers for spreadsheets. Beginning in October 2013, the iWork suite of apps for OS X will be available as free downloads with all new Macs. The Company also has iOS Multi-Touch versions of each iWork application designed specifically for use on iOS devices and, beginning in September 2013, they all became available as free downloads with all new iOS devices. Other Application Software The Company also sells various other application software, including its professional line of applications, Final Cut Pro , Logic Pro X, and its FileMaker Pro database software. Displays & Peripheral Products The Company manufactures the Apple LED Cinema Display and Thunderbolt Display. The Company also sells a variety of Applebranded and third-party Mac-compatible and iOS-compatible peripheral products, including printers, storage devices, computer memory, digital video and still cameras, pointing devices, and various other computing products and supplies. Apple TV Page | 6 Apple TV connects to consumers' high definition TVs and enables them to access iTunes content directly for streaming HD video, playing music and viewing photos. Content from Netflix, YouTube, Flickr, MLB, Hulu Plus, iTunes Radio and other media services is also available. Apple TV allows streaming iTunes content from Macs and Windows personal computers through Home Share and through AirPlay from compatible Mac and iOS devices. Compatible Mac and iOS devices can also mirror their device screens as well as stream and play games on Apple TV. iOS and Mac Developer Programs The Company's iOS and Mac Developer Programs support app developers with the development, testing and distribution of iOS and Mac apps through the App Store and the Mac App Store. Development tools included with the Company's Developer Programs include Xcode , the Company's integrated development environment for creating apps for iOS devices, including iPhone and iPad, and Mac. Xcode includes project management tools; analysis tools to collect, display and compare app performance data; simulation tools to locally run, test, and debug apps; tools to simplify the design and development of user interfaces; and the latest software development kits for iOS and OS X. The Company's Developer Programs also provide access to multiple development resources including the Company's Developer Forums, extensive technical documentation, and sample code. The Company's Developer Programs also provide developers with access tools and information for submitting their apps to the App Store and the Mac App Store. Product Support and Services AppleCare offers a range of support options for the Company's customers. These include assistance that is built into software products, printed and electronic product manuals, online support including comprehensive product information as well as technical assistance, the AppleCare Protection Plan (\"APP\") and the AppleCare+ Protection Plan (\"AC+\"). APP is a fee-based service that typically includes two to three years of phone support, hardware repairs and dedicated web-based support resources. AC+ is a fee-based service available in certain countries for iPhone and iPad. AC+ offers additional coverage under some circumstances for instances of accidental damage in addition to the services offered by APP. Page | 7 Markets and Distribution The Company's customers are primarily in the consumer, SMB, education, enterprise and government markets. The Company sells its products and resells third-party products in most of its major markets directly to consumers and SMBs through its retail and online stores and its direct sales force. The Company also employs a variety of indirect distribution channels, such as third-party cellular network carriers, wholesalers, retailers, and value-added resellers. During 2013, the Company's net sales through its direct and indirect distribution channels accounted for 30% and 70%, respectively, of total net sales. The Company believes that sales of its innovative and differentiated products are enhanced by knowledgeable salespersons who can convey the value of the hardware and software integration, and demonstrate the unique solutions that are available on its products. The Company further believes providing direct contact with its targeted customers is an effective way to demonstrate the advantages of its products over those of its competitors and providing a high-quality sales and after-sales support experience is critical to attracting new and retaining existing customers. To ensure a high-quality buying experience for its products in which service and education are emphasized, the Company continues to expand and improve its distribution capabilities by expanding the number of its own retail stores worldwide. The Company's retail stores are typically located at high-traffic locations in quality shopping malls and urban shopping districts. By operating its own stores and locating them in desirable high-traffic locations the Company is better positioned to ensure a high quality customer buying experience and attract new customers. The stores are designed to simplify and enhance the presentation and marketing of the Company's products and related solutions. The retail stores employ experienced and knowledgeable personnel who provide product advice, service and training and offer a wide selection of third-party hardware, software, and other accessories and peripherals that complement the Company's products. The Company has also invested in programs to enhance reseller sales by placing high quality Apple fixtures, merchandising materials and other resources within selected third-party reseller locations. Through the Apple Premium Reseller Program, certain third-party resellers focus on the Apple platform by providing a high level of product expertise, integration and support services. Page | 8 The Company is committed to delivering solutions to help educators teach and students learn. The Company believes effective integration of technology into classroom instruction can result in higher levels of student achievement and has designed a range of products, services and programs to address the needs of education customers. The Company also supports mobile learning and real-time distribution of, and access to, education related materials through iTunes U , a platform that allows students and teachers to share and distribute educational media online. The Company sells its products to the education market through its direct sales force, select third-party resellers and its online and retail stores. Page | 9 CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except number of shares which are reflected in thousands and per share amounts) Net sales Cost of sales September 27, 2014 Years ended September 28, 2013 September 29, 2012 $ $ $ Gross margin 182,795 112,258 170,910 106,606 156,508 87,846 70,537 64,304 68,662 6,041 4,475 3,381 11,993 10,830 10,040 18,034 15,305 13,421 Operating income Other income/(expense), net 52,503 980 48,999 1,156 55,241 522 Income before provision for income taxes Provision for income taxes 53,483 13,973 50,155 13,118 55,763 14,030 Operating expenses: Research and development Selling, general and administrative Total operating expenses Net income $ 39,510 $ 37,037 $ 41,733 Earnings per share: Basic Diluted $ $ 6.49 6.45 $ $ 5.72 5.68 $ $ 6.38 6.31 Shares used in computing earnings per share: Basic Diluted 6,085,572 6,122,663 Cash dividends declared per common share $ 1.82 6,477,320 6,521,634 $ 1.64 6,543,726 6,617,483 $ 0.38 See accompanying Notes to Consolidated Financial Statements. Apple Inc. | 2014 Form 10-K | 45 Page | 10 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) Years ended September 27, September 28, September 29, 2014 2013 2012 Net income $ Other comprehensive income/(loss): Change in foreign currency translation, net of tax effects of $50, $35 and $13, respectively Change in unrecognized gains/losses on derivative instruments: Change in fair value of derivatives, net of tax benefit/(expense) of $(297), $(351) and $73, respectively Adjustment for net losses/(gains) realized and included in net income, net of tax expense/(benefit) of $(36), $255 and $220, respectively 37,037 $ (137) (112) (15) 522 (131) (458) (399) 64 (530) 285 (791) 715 (134) (131) (114) 151 (922) 601 1,553 (970) 56 1,390 149 Total change in unrecognized gains/losses on derivative instruments, net of tax 1,539 Change in unrealized gains/losses on marketable securities: Change in fair value of marketable securities, net of tax benefit/(expense) of $(153), $458 and $(421), respectively Adjustment for net losses/(gains) realized and included in net income, net of tax expense/(benefit) of $71, $82 and $68, respectively Total change in unrealized gains/losses on marketable securities, net of tax Total other comprehensive income/(loss) Total comprehensive income 39,510 $ $ 41,063 $ 36,067 $ 41,733 41,789 See accompanying Notes to Consolidated Financial Statements. Apple Inc. | 2014 Form 10-K | 46 Page | 11 CONSOLIDATED BALANCE SHEETS (In millions, except number of shares which are reflected in thousands and par value) September 27, 2014 September 28, 2013 $ $ ASSETS: Current assets: Cash and cash equivalents Short-term marketable securities Accounts receivable, less allowances of $86 and $99, respectively Inventories Deferred tax assets 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 assets Total assets $ 13,844 11,233 14,259 26,287 17,460 2,111 4,318 9,759 9,806 13,102 1,764 3,453 7,539 6,882 68,531 130,162 20,624 4,616 4,142 3,764 73,286 106,215 16,597 1,577 4,179 5,146 231,839 $ 207,000 LIABILITIES AND SHAREHOLDERS' EQUITY: Current liabilities: Accounts payable $ 30,196 Accrued expenses 18,453 Deferred revenue 8,491 Commercial paper 6,308 $ 22,367 13,856 7,435 0 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; 5,866,161 and 6,294,494 shares issued and outstanding, respectively Retained earnings Accumulated other comprehensive income/(loss) Total shareholders' equity Total liabilities and shareholders' equity $ 63,448 3,031 28,987 24,826 43,658 2,625 16,960 20,208 120,292 83,451 23,313 87,152 1,082 19,764 104,256 (471) 111,547 123,549 231,839 $ 207,000 See accompanying Notes to Consolidated Financial Statements. Apple Inc. | 2014 Form 10-K | 47 Page | 12 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (In millions, except number of shares which are reflected in thousands) Common Stock and Additional Paid-In Capital Shares Amount Balances as of September 24, 2011 Net income Other comprehensive income/(loss) Dividends and dividend equivalents declared 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 29, 2012 Net income Other comprehensive income/(loss) 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 28, 2013 Net income Other comprehensive income/(loss) Dividends and dividend equivalents declared Repurchase of common stock Share-based 6,504,937 $ 13,331 $ Accumulated Other Total Comprehensive Shareholders' Income/(Loss) Equity Retained Earnings 62,841 $ 443 $ 76,615 0 0 41,733 0 41,733 0 0 0 56 56 0 0 0 1,740 69,521 200 0 1,151 0 0 1,151 6,574,458 16,422 101,289 499 118,210 0 0 37,037 0 37,037 0 0 0 0 0 (10,676) 0 (10,676) 0 (22,950) 0 (22,950) 0 2,253 (328,837) 0 48,873 2,253 (143) (2,523) 0 (762) 0 (444) 0 (2,523) 0 1,740 0 (970) 0 (970) (587) 0 1,232 0 6,294,494 19,764 104,256 0 0 39,510 0 39,510 0 0 0 1,553 1,553 0 0 (11,215) 0 (11,215) 0 2,863 (45,000) 0 0 0 (45,000) 2,863 (488,677) 0 0 (562) (471) 1,232 123,549 Page | 13 compensation Common stock issued, net of shares withheld for employee taxes Tax benefit from equity awards, including transfer pricing adjustments Balances as of September 27, 2014 60,344 0 5,866,161 $ (49) (399) 735 23,313 $ 0 87,152 $ 0 (448) 0 735 1,082 $ 111,547 See accompanying Notes to Consolidated Financial Statements. Apple Inc. | 2014 Form 10-K | 48 Page | 14 CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Years ended September 27, September 28, September 29, 2014 2013 2012 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 Other Cash used in investing activities Financing activities: Proceeds from issuance of common stock Excess tax benefits from equity awards Taxes paid related to net share settlement of equity awards Dividends and dividend equivalents paid Repurchase of common stock Proceeds from issuance of long-term debt, net Proceeds from issuance of commercial paper, net 14,259 $ 10,746 $ 39,510 37,037 41,733 7,946 2,863 2,347 6,757 2,253 1,141 3,277 1,740 4,405 (4,232) (76) (2,220) 167 5,938 1,460 6,010 (2,172) (973) 223 1,080 2,340 1,459 4,521 (5,551) (15) (1,414) (3,162) 4,467 2,824 2,552 59,713 53,666 50,856 (217,128) 18,810 189,301 (148,489) 20,317 104,130 (151,232) 13,035 99,770 (3,765) (496) (350) (9,571) (242) 16 (8,165) (911) (160) (8,295) (1,107) (48) (22,579) (33,774) (48,227) 730 739 Cash used in financing activities Increase/(decrease) in cash and cash equivalents 530 701 9,815 665 1,351 (1,158) (11,126) (45,000) 11,960 6,306 (1,082) (10,564) (22,860) 16,896 0 (1,226) (2,488) 0 0 0 (37,549) (16,379) (1,698) (415) 3,513 931 Cash and cash equivalents, end of the year $ 13,844 $ 14,259 $ 10,746 Supplemental cash flow disclosure: Cash paid for income taxes, net Cash paid for interest $ $ 10,026 $ 339 $ 9,128 $ 0 $ 7,682 0 See accompanying Notes to Consolidated Financial Statements. Page | 15 CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except number of shares which are reflected in thousands and per share amounts) Years ended September 28, 2013 September 29, 2012 September 24, 2011 Net sales $ 170,910 $ 156,508 $ 108,249 Cost of sales 106,606 87,846 64,431 Gross margin 64,304 68,662 43,818 4,475 3,381 2,429 10,830 10,040 7,599 15,305 13,421 10,028 Operating income Other income/(expense), net 48,999 1,156 55,241 522 33,790 415 Income before provision for income taxes Provision for income taxes 50,155 13,118 55,763 14,030 34,205 8,283 Operating expenses: Research and development Selling, general and administrative Total operating expenses Net income $ 37,037 $ 41,733 $ 25,922 Earnings per share: Basic Diluted $ $ 40.03 $ 39.75 $ 44.64 44.15 $ $ 28.05 27.68 Shares used in computing earnings per share: Basic Diluted Cash dividends declared per common share 925,331 931,662 $ 11.40 $ 934,818 945,355 2.65 924,258 936,645 $ 0.00 See accompanying Notes to Consolidated Financial Statements. Page | 16 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) Years ended September 28, September 29, September 24, 2013 2012 2011 $ 37,037 $ 41,733 $ 25,922 Net income Other comprehensive income/(loss): Change in foreign currency translation, net of tax effects of $35, $13 and $18, respectively (112) (15) (12) Change in unrecognized gains/losses on derivative instruments: Change in fair value of derivatives, net of tax benefit/(expense) of $(351), $73 and $(50), respectively Adjustment for net losses/(gains) realized and included in net income, net of tax expense/(benefit) of $255, $220 and $(250), respectively 522 (131) 92 (458) (399) 450 Total change in unrecognized gains/losses on derivative instruments, net of tax 64 (530) 542 (791) 715 29 (131) (114) (70) (922) 601 (41) (970) 56 489 36,067 $ 41,789 $ Change in unrealized gains/losses on marketable securities: Change in fair value of marketable securities, net of tax benefit/(expense) of $458, $(421) and $17, respectively Adjustment for net losses/(gains) realized and included in net income, net of tax expense/(benefit) of $82, $68 and $(40), respectively Total change in unrealized gains/losses on marketable securities, net of tax Total other comprehensive income/(loss) Total comprehensive income $ 26,411 See accompanying Notes to Consolidated Financial Statements. Page | 17 CONSOLIDATED BALANCE SHEETS (In millions, except number of shares which are reflected in thousands) September 28, 2013 September 29, 2012 ASSETS: Current assets: Cash and cash equivalents Short-term marketable securities Accounts receivable, less allowances of $99 and $98, respectively Inventories Deferred tax assets 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 assets Total assets $ $ 14,259 $ 26,287 10,746 18,383 13,102 1,764 3,453 7,539 6,882 73,286 10,930 791 2,583 7,762 6,458 57,653 106,215 16,597 1,577 4,179 5,146 207,000 $ 92,122 15,452 1,135 4,224 5,478 176,064 22,367 $ 13,856 7,435 43,658 21,175 11,414 5,953 38,542 2,625 16,960 20,208 83,451 2,648 0 16,664 57,854 LIABILITIES AND SHAREHOLDERS' EQUITY: Current liabilities: Accounts payable Accrued expenses Deferred revenue Total current liabilities $ Deferred revenue - non-current Long-term debt Other non-current liabilities Total liabilities Commitments and contingencies Shareholders' equity: Common stock, no par value; 1,800,000 shares authorized; 899,213 and 939,208 shares issued and outstanding, respectively Retained earnings Accumulated other comprehensive income/(loss) Total shareholders' equity Total liabilities and shareholders' equity $ 19,764 104,256 (471) 123,549 207,000 $ 16,422 101,289 499 118,210 176,064 See accompanying Notes to Consolidated Financial Statements. Page | 18 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (In millions, except number of shares which are reflected in thousands) Common Stock Shares Amount Retained Earnings Accumulated Other Comprehensive Income/ (Loss) Total Shareholders' Equity Balances as of September 25, 2010 Net income Other comprehensive income/(loss) Share-based compensation Common stock issued under stock plans, net of shares withheld for employee taxes Tax benefit from equity awards, including transfer pricing adjustments 915,970 $10,668 $ 37,169 $ (46) $ 47,791 0 0 25,922 0 25,922 0 0 0 489 489 0 1,168 0 0 1,168 Balances as of September 24, 2011 Net income Other comprehensive income/(loss) Dividends and dividend equivalent rights declared Share-based compensation Common stock issued under stock plans, net of shares withheld for employee taxes Tax benefit from equity awards, including transfer pricing adjustments Balances as of September 29, 2012 Net income Other comprehensive income/(loss) Dividends and dividend equivalent rights declared Repurchase of common stock Share-based compensation Common stock issued under stock plans, net of shares withheld for employee taxes Tax benefit from equity awards, including transfer pricing adjustments Balances as of September 28, 2013 13,307 561 0 934 929,277 0 0 0 311 0 0 934 13,331 0 0 62,841 41,733 0 443 0 56 76,615 41,733 56 0 0 0 1,740 (2,523) 0 0 0 (2,523) 1,740 9,931 200 (762) 0 (562) 0 939,208 0 0 1,151 16,422 0 0 0 101,289 37,037 0 0 (46,976) 0 0 0 2,253 (10,676) (22,950) 0 0 0 0 (10,676) (22,950) 2,253 (444) 0 (587) 6,981 (143) (250) 0 1,151 499 118,210 0 37,037 (970) (970) 0 1,232 0 0 1,232 899,213 $19,764 $104,256 $ (471) $123,549 Page | 19 CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) September 28, 2013 Cash and cash equivalents, beginning of the year Operating activities: $ Years ended September 29, 2012 10,746 $ September 24, 2011 9,815 $ 11,261 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: 37,037 41,733 25,922 6,757 2,253 1,141 3,277 1,740 4,405 1,814 1,168 2,868 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: (2,172) (973) 223 1,080 2,340 1,459 4,521 53,666 (5,551) (15) (1,414) (3,162) 4,467 2,824 2,552 50,856 143 275 (1,934) (1,391) 2,515 1,654 4,495 37,529 (148,489) 20,317 104,130 (151,232) 13,035 99,770 (102,317) 20,437 49,416 (496) (350) (244) (8,165) (911) (160) (33,774) (8,295) (1,107) (48) (48,227) (4,260) (3,192) (259) (40,419) 665 1,351 831 1,133 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 Other Cash used in investing activities Financing activities: Proceeds from issuance of common stock Excess tax benefits from equity awards Taxes paid related to net share settlement of equity awards Dividends and dividend equivalent rights paid Repurchase of common stock Proceeds from issuance of long-term debt, net Cash generated by/(used in) financing activities Increase/(decrease) in cash and cash equivalents Cash and cash equivalents, end of the year 530 701 (1,082) (10,564) (22,860) 16,896 (1,226) (2,488) 0 0 (520) 0 0 0 $ (16,379) 3,513 14,259 $ (1,698) 931 10,746 $ 1,444 (1,446) 9,815 $ 9,128 $ 7,682 $ 3,338 Supplemental cash flow disclosure: Cash paid for income taxes, net Page | 20 NAME: ______________________________ Turn in this page only! Use the annual reports to answer the following questions: Question Answer 1. Does Apple, Inc. have a single or a multi-step income statement? How can you tell? 2. Does Apple, Inc. have a classified balance sheet? How can you tell? 3. Calculate the Current Ratio for the two most recent fiscal years. What information does this provide? 4. Calculate the Quick Ratio for the two most recent fiscal years. What information does this provide? 5. Calculate the Return on Sales for the two most recent fiscal years. What information does this provide? 6. Calculate the Return on Equity for the two most recent fiscal years. What information does this provide? 7. Calculate the Gross Profit Margins for the three most recent fiscal years. What information does this provide? 8. Is there any evidence that the information in these financial statements is reliable and verifiable? If so, what is it? 9. Find at least two references to the risks that Apple, Inc. faces. 10.What evidence can you find in the annual report that Apple, Inc. has controls in place to minimize these risks? Page | 21