Notes to the Financial Statements: (for these questions, refer to pgs. 755-762) 6. What method of depreciation does Apple use? 7. What is the range of estimated useful lives used by Apple for each category of assets? Machinery & equipment: Buildings: 8. In which line item does Apple recognize Interest Expense and what was the total in 2016? 9. Locate Apple's Goodwill & Intangible note. What would cause Apple's Goodwill account to increase from 2015 to 2016? Debt Debt 10. What is the largest current liability for Apple? 11. How much of Apple's long-term debt will mature in 2017? 12. Calculate the company's debt ratio for 2016. Does the company finance its assets predominately with debt or equity? 13. Provide one benefit and one concern that issuing debt provides compared to issuing equity (stock). Benefit: Concern: Ratio Analysis 14. On what financial statement can Apple's Basic Earnings Per Share (EPS) ratio be found? 15. Has Apple's EPS improved from 2015 to 2016? Explain. 750 Appendix A Warranty The Company offers a limited parts and labor warranty on most of its hardware products. The basic warranty percet is typically one year from the date of purchase by the original end-user . The Company also offers a 90 day basic warranty for its service parts used to repair the Company's hardware products. In certain jurisdictions, local law requires that manufacturers guarantee their products for a period prescribed by statute, typically at least two years. In addition, where available, consumers may purchase APP or AC+, which extends service coverage on many of the Company's hardware products Employees As of September 24, 2016, the Company had approximately 116,000 full-time equivalent employees. CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except number of shares which are reflected in thousands and per sbure amounts) Years ended September 24, September 26, September 27, 2016 2015 2014 Net sales $ 215,639 $ 233,715 $ 182.795 Cost of sales 131,376 140.089 112.258 84.263 93,626 70,537 Gruss margin Operating expenses Research and development Selling, general and administrative Total operating expenses 10.045 14,194 24,239 8,067 14.329 22.396 6,041 11.993 18,034 Operating income Other income/expense), net Income before provision for income taxes Provision for income taxes Net income 60,024 1,348 61.372 15,685 45,687 71,230 1,285 72,515 19.121 59.394 52,503 980 53,483 13,973 39,510 $ $ S Earnings per share: Basic Diluted $ S 8.35 8.31 S $ 9.28 9.22 S S 6.49 6.45 Sharested in computing earnings per dare! Basic Druid 5.470.820 $500.281 5,753.421 5.793.069 6,085,572 6,122,663 $ Cash dividenck decletice 2.18 1.98 donated Financial Statements, 1.82 751 Appendix A CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME in millions) Net income Other comprehensive income/(loss): Years ended September 24, September 26, September 27, 2016 2015 2014 $ 45,687 53,394 39,5TO Change in foreign currency translation, net of tax effects of $8, $201 and $50, respectively 75 (411) (137) Change in unrealized gains/losses on derivative instruments: Change in fair value of derivatives, net of tax bencfiv(expense) of S(7), $(441) and $(297), respectively 2.905 1.390 Adjustment for net (gains)/losses realized and included in net income, (3.497) (741) 149 net of tax expense/(benefit of $131, $630 and S(36), respectively Total change unrecognized gains/losses on derivative (734) (592) 1.539 instruments, net of tax 7 285 (483) 1.582 59 (134) 56 Change in unrealized gains/losses on marketable securities: Change in fair value of marketable securities, nei of tax benefiw (expense) of $(863). $264 and S(153), respectively Adjustment for net (gains)/losses realized and included in net income, net of tax expense/(benefit) of $(31), $(32) and $71, respectively Total change in unrealized gains/losses on marketable securities net of tax 151 (424) 1.638 (1.427) 51.967 1.553 41,063 S I 16000 Total other comprehensive income/doss) 979 Total comprehensive income $ 46,666 See accompanying Notes to Consolidated Financial Statements. Notes to the Financial Statements: (for these questions, refer to pgs. 755-762) 6. What method of depreciation does Apple use? 7. What is the range of estimated useful lives used by Apple for each category of assets? Machinery & equipment: Buildings: 8. In which line item does Apple recognize Interest Expense and what was the total in 2016? 9. Locate Apple's Goodwill & Intangible note. What would cause Apple's Goodwill account to increase from 2015 to 2016? Debt Debt 10. What is the largest current liability for Apple? 11. How much of Apple's long-term debt will mature in 2017? 12. Calculate the company's debt ratio for 2016. Does the company finance its assets predominately with debt or equity? 13. Provide one benefit and one concern that issuing debt provides compared to issuing equity (stock). Benefit: Concern: Ratio Analysis 14. On what financial statement can Apple's Basic Earnings Per Share (EPS) ratio be found? 15. Has Apple's EPS improved from 2015 to 2016? Explain. 750 Appendix A Warranty The Company offers a limited parts and labor warranty on most of its hardware products. The basic warranty percet is typically one year from the date of purchase by the original end-user . The Company also offers a 90 day basic warranty for its service parts used to repair the Company's hardware products. In certain jurisdictions, local law requires that manufacturers guarantee their products for a period prescribed by statute, typically at least two years. In addition, where available, consumers may purchase APP or AC+, which extends service coverage on many of the Company's hardware products Employees As of September 24, 2016, the Company had approximately 116,000 full-time equivalent employees. CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except number of shares which are reflected in thousands and per sbure amounts) Years ended September 24, September 26, September 27, 2016 2015 2014 Net sales $ 215,639 $ 233,715 $ 182.795 Cost of sales 131,376 140.089 112.258 84.263 93,626 70,537 Gruss margin Operating expenses Research and development Selling, general and administrative Total operating expenses 10.045 14,194 24,239 8,067 14.329 22.396 6,041 11.993 18,034 Operating income Other income/expense), net Income before provision for income taxes Provision for income taxes Net income 60,024 1,348 61.372 15,685 45,687 71,230 1,285 72,515 19.121 59.394 52,503 980 53,483 13,973 39,510 $ $ S Earnings per share: Basic Diluted $ S 8.35 8.31 S $ 9.28 9.22 S S 6.49 6.45 Sharested in computing earnings per dare! Basic Druid 5.470.820 $500.281 5,753.421 5.793.069 6,085,572 6,122,663 $ Cash dividenck decletice 2.18 1.98 donated Financial Statements, 1.82 751 Appendix A CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME in millions) Net income Other comprehensive income/(loss): Years ended September 24, September 26, September 27, 2016 2015 2014 $ 45,687 53,394 39,5TO Change in foreign currency translation, net of tax effects of $8, $201 and $50, respectively 75 (411) (137) Change in unrealized gains/losses on derivative instruments: Change in fair value of derivatives, net of tax bencfiv(expense) of S(7), $(441) and $(297), respectively 2.905 1.390 Adjustment for net (gains)/losses realized and included in net income, (3.497) (741) 149 net of tax expense/(benefit of $131, $630 and S(36), respectively Total change unrecognized gains/losses on derivative (734) (592) 1.539 instruments, net of tax 7 285 (483) 1.582 59 (134) 56 Change in unrealized gains/losses on marketable securities: Change in fair value of marketable securities, nei of tax benefiw (expense) of $(863). $264 and S(153), respectively Adjustment for net (gains)/losses realized and included in net income, net of tax expense/(benefit) of $(31), $(32) and $71, respectively Total change in unrealized gains/losses on marketable securities net of tax 151 (424) 1.638 (1.427) 51.967 1.553 41,063 S I 16000 Total other comprehensive income/doss) 979 Total comprehensive income $ 46,666 See accompanying Notes to Consolidated Financial Statements