Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Memo two to three pages to your supervisor explaining your findings and your recommendations for where improvements are needed to increase financial health. Be sure
- Memo two to three pages to your supervisor explaining your findings and your recommendations for where improvements are needed to increase financial health. Be sure to include the following:
- Areas within the company that are both above and below industry standards
- An explanation of the limitations of using ratio analysis
- The qualitative factors that play a role in improving the company's financial health
In the memo, suggest some specific ways in which the company can plan to improve below-industry-average ratio performance over time. Suggest annual targets over the next three years to catch up with or surpass industry averages. Explain why your recommendations should be effective.
Supporting Document: The Financial Ratios can be used to address this question.
Financial Ratios | |||
Company Name: | Apple Computer, Inc. | ||
Financial Ratio | Formula | APPLE Company Result | Industry Average |
Profitability | |||
Profit Margin | Net income/Annual Sales | 20.91% | 25.70% |
Operating Margin | Operating Earnings (Income)/Sales | 24.36% | 24.70% |
Return on Total Assets | Net income/Total assets | 17.73% | 16.30% |
Basic Earning Power (BEP) | EBIT/Total Assets | 20.47% | 16.80% |
Return on Common Equity | Net income/Stockholders' equity | 87.87% | 34.00% |
EBITDA Coverage | EBITDA/Total Interest Payment | 25.76 | 22.7 |
Asset Management | |||
Days Sales Outstanding * | Accounts receivable/(Annual sales/365) | 9.20 | 24 |
Inventory Turnover | COGS/Inventory | 24.51 | 15.6 |
Fixed Assets Turnover | Annual Sales/Fixed assets | 0.85 | 1.5 |
Total Assets Turnover | Annual Sales/Total assets | 0.85 | 1.0 |
Liquidity | |||
Current Ratio | Current Assets/Current Liabilities | 1.4 | 1.1 |
Quick Ratio | (Cash & Equivalents+Markeatable Securities+Accounts Receivables)/Current Liabilities | 0.9 | 1.1 |
Debt Management | |||
Total Debt/Total Assets | (Short-term Debt + Long-term Debt) / Total Assets | 0.46 | 0.52% |
Times Interest Earned | EBIT/Interest charges | 22.08 | 25.45 |
Market Value | |||
Price/Earning (P/E) | P/E | 46.27 | 38.1 |
Market/Book | Market price per share/Book Value per Share | 38.52 | 29.38% |
* Calculation is based on 365-day year. | |||
From 10K SEC Filings | |||
Operating Earnings (Income) | $66,880 | ||
Current Assets | $143,713 | ||
Current Liabilities | $105,392 | ||
Short Term Debt | $49,960 | ||
Long Term Debt | $99,700 | ||
Total Assets | $323,888 | ||
Cash & Equivalents | $38,016 | ||
Markeatable Securities | $52,927 | ||
EBIT | $66,288 | ||
EBITDA | $77,344 | ||
Interest Payments or Charges | $3,002 | ||
Annual Sales | $274,515 | ||
Inventory | $4,061 | ||
Accounts Receivable | $6,917 | ||
Fixed Assets | $323,888 | ||
Net income | $57,411 | ||
Stockholders Equity | $65,339 | ||
Cost of Goods Sold (COGS) | $169,559 | ||
Average Inventory | $2,030 | ||
Current Share Price | $151.76 | ||
Earnings per Share | $3.28 | ||
Book Value | $3.94 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started