Integrative Exercise

Integrating Accounting for Liabilities and Equity

Obtain Apple's 2016 10-K (filed October 26, 2016) either through the "Investor Relations" portion of its website (do a web search for "Apple Investor Relations") or go towww.sec.govand click "Company Filings Search" under "Filings."

Required:

Using Apple's 10-K, answer the following questions (Hint: It may be easier to use the Word or PDF file and use the search feature within the program):

1.Calculate Apple's current, quick, and cash ratios for 2015 and 2016. The industry averages for these ratios for 2016 were 1.72, 1.41, and 0.77, respectively. Round your answers to two decimal places.

2016 2015

Current Ratio

Quick Ratio

Cash Ratio

Comment on Apple's short-term liquidity.

For 2016, Appleexceeds

the industry average for the cash but is below the industry average for the current and quick ratio. However, because there is little concern about Apple's ability to sell its inventories, the current ratio provides relatively high confidence that Applewill

be able to meet its short-term obligations.

2.Calculate Apple's debt to equity, long-term debt to equity, and times interest earned (accrual basis) for 2015 and 2016. The industry averages for these ratios for 2016 were 52.42%, 36.41%, and 13.83, respectively. You will need to read the "Other Income and Expense" section of the Management, Discussion & Analysis section to find the amount of interest expense.

Round your answers to two decimal places.

20162015Debt to Equity%%Long-Term Debt to Equity%%Times Interest Earned (Accrual Basis)

Comment on Apple's mix of debt and equity and long-term solvency.

Apple iswell above

the industry averages for all three ratios. There islittle risk

of long-term solvency issues.

3.Calculate Apple's return on equity for 2015 and 2016 (stockholders' equity for 2014 was $111,547,000,000). The industry average for 2016 was 15.26%. Round your answers to two decimal places.

2015%2016%

Comment on Apple's profitability.

Apple isabove

the industry average for return on equity. Itis

doing well.

4.Calculate Apple's Dividend Payout, Stock Repurchase Payout and Total Payout for 2015 and 2016.

Round your answers to two decimal places.

20162015Dividend Payout%%Stock Repurchase Payout%%Total Payout%%

What are Apple's objectives with their dividend policy and stock repurchase plan (See the "Capital Return Program" portion of Item 7: Management Discussion and Analysis)?

Apple is attempting to return capital of between$200 and $250

billion to shareholders through a $175 billion share repurchase plan. The remaining$25 to $75

billion will come in the form of dividends.