Please can you comment on the ratios analysis that I did on excel please between apple and google. Also note that apple shares drops 2 days ago. The professor is very complicated Pick 8 to 10 ratios and analyse them.

Bellow is the sample of how he wants it.

Hi Class,

Class is Thursday night. Please bring questions about week 3. There is an automatic extension until Friday night if you care to use it.

In week 3, please pick 10 ratios. Please explain why you picked the ratios or why not. I would not pick the current ratio for Southwest Airlines. Usually a high ratio is good for a manufacturing company. However for an airline, it is good to get paid in advance of flights. So a high current liability for air traffic liability is good. Lots of tickets were purchased in advance. Also with the volatile price of fuel low inventory is good to avoid speculation. Therefore a good airline has a low Current ratio, not a ratio above 2.

So explain your choices in ratios in words after thinking about the company and industry. I just did that for one ratio above.

No, it is not required that you average the balance sheet ratios. The math gets confusing to many. I would prefer that you understand.

One can NOT copy from Yahoo Finance into Excel and be able to calculate. One can copy from SEC interactive data and have Excel calculate.

You are not required to do the DuPont Formula. I personally like the DuPont formula. It doesn't work well for companies that have come out of bankruptcy or a spin off because the book equity is so low. However, for most companies Return on Equity (ROE) is a good measure of how profitable the company is. DuPont realized that a low price (Net Income / Sales or profit margin) had to be offset by a high volume (Total Asset Turnover) and some borrowing helps the owners (The Equity Multiplier). I usually stop here with 4 of my 10 ratios a- Net Income / Total Common Equity; b- Net Income / Sales or Revenue; c Sales or Revenue / Total Assets and d- Total Assets / Equity.

Next, explain in words how you calculate the ratios. Then explain what the answers mean for management.

Finally evaluate the two companies. It is better to tell why some ratios are more important. One company may have slightly better ratios for 8 of the 10 ratios and you might conclude that the other company is better. Explain why. answer the "So what?" question.

Avoid the typical mistake. ROE is net Income / TOTAL common equity. NOT COMMON STOCK. Southwest Airlines has $808 million in "Common Stock" and $7.358 Billion in Total Stockholder equity. Use the $7.358 billion for Equity in ROE.

If you get stuck, reach out for help

Mike Riley

Apple Inc Years Comparison Goggle Inc Years 2015 Short-term Liquidity Current Ratio Days Receivable Winner 2014 2015 Calculations 2014 Result Current Ratio= Current Assets/Current Liabilities 2015 1.11 56.05 1.08 62.97 4.67 67.70 4.69 Google 60.00 Apple 2014 Apple 1.11 1.08 Google 4.67 4.69 No winner Days Receivable= Apple Google Accounts Receivable / Sales X 365 d 2015 2014 56.05 62.97 67.70 60.00 Gross profit % = Gross Profit/ Sales (Revenue) Current Ratio is a liquidity ratio that measures both Apple and Googles abilities to pay up their short term obligation. It Profitabilty Gross Profit % EBIT % Winner 2015 40.06% 31.03% No winner 2014 38.59% 29.26% 2015 62.44% 26.21% 2014 61.07% Google 26.15% Apple 2015 2014 Apple 40.06% 38.59% Google 62.44% 61.07% EBIT% = EBIT/ Sales (Revenue) Gross Profit Ratio (GP ratio) It is a profitability ratio that shows the relationship between gross profit and total sal 2015 20.45% 46.25% 2014 18.01% 33.61% 2015 11.82% 14.12% 2014 11.34% Apple 14.79% Apple 2014 Apple Return on Investment Net Income:Total Assets Net Income: Common Equity 2015 31.03% 29.26% Google 26.21% 26.15% Net Income:Total Assets= Apple Winner Net Income/ Average Total Assets Average Total Assets 2015 2014 Apple Long-Term Solvency LT Debt to Common Equity Winner 2015 126.21% 2014 86.66% 2015 23.40% 2014 25.60% Google Google Market Ratios Price Earnings Ratio Winner 261159000 219419500 Google 138324000 120053500 2015 2014 20.45% 11.82% 18.01% 11.34% Apple Google 2015 32.18 2014 32.18 2015 11.28 2014 11.28 Apple Apple Net Income:Common Equity= Apple Cash Flow Cash from Operations/Net Income Cash from Operations/Investing Overall Winner 2015 152.20% -144.41% 2014 151.13% -264.46% 2015 159.19% -109.75% 2014 158.29% Google -106.27% Net Income/ Average Common Equit Average Common Equity 2015 2014 115451000 117548000 Google 112095500 2015 2014 46.25% 14.12% Apple Google 95584500 33.61% 14.79% Winner of every ratio category Long Term Liabilities:Common Equity= Average Long term debt/ Average Co Average Long Term Liabilities Google Apple 2015 Prev Close: 107.13 Open: 755.38 Open: 106.9 Bid: 713.40x 200 Bid: 714.30x 100 Ask: 105.25x 300 Google 105.20x 100 Ask: Apple Apple 1y Target Est: 930.08 1y Target Est: 133.64 Beta: 1.032 Beta: 26228500 24469000 2014 126.21% 86.66% 23.40% 25.60% 2014 1.44362 Next Earnings Date: N/A Next Earnings Date: Google 101871500 2015 752.67 145708000 2015 Prev Close: 2014 4/25/2016 Day's Range: 749.55 - 760.45 Day's Range: 105.52 - 106.93 52wk Range: 515.18 - 789.87 52wk Range: Cash From Operations/ Net Income= 92.00 - 134.54 Volume: 3,060,490 Volume: 31,552,525 Apple 152.20% 151.13% Avg Vol (3m): 2,257,720 Avg Vol (3m): 39,557,600 Google 159.19% 158.29% 2015 2014 Apple -144.41% -264.46% Google -109.75% -106.27% Market Cap: 522.53B Market Cap: 587.56B P/E (ttm): 32.18 P/E (ttm): 11.28 EPS (ttm): 23.59 EPS (ttm): 9.4 Div & Yield: N/A (N/A) Div & Yield: Cash From Operations/ Investing Activities = 2.08 (1.95%) days ty ommon Equity Period Ending 9/26/2015 9/27/2014 9/28/2013 53,394,000 39,510,000 37,037,000 11,257,000 7,946,000 6,757,000 4,968,000 5,210,000 3,394,000 Changes In Accounts Receivables -3,124,000 -6,452,000 -1,949,000 Changes In Liabilities 15,188,000 13,408,000 8,320,000 Changes In Inventories -238,000 -76,000 -973,000 Changes In Other Operating Activities -179,000 167,000 1,080,000 81,266,000 59,713,000 53,666,000 Capital Expenditures -11,247,000 -9,571,000 -8,165,000 Investments -44,417,000 -9,017,000 -24,042,000 -610,000 -3,991,000 -1,567,000 -56,274,000 -22,579,000 -33,774,000 Dividends Paid -11,561,000 -11,126,000 -10,564,000 Sale Purchase of Stock Net Borrowings Other Cash Flows from Financing Activities -34,710,000 29,305,000 -1,499,000 -44,270,000 18,266,000 -1,158,000 -22,330,000 16,896,000 -1,082,000 Total Cash Flows From Financing Activities Effect Of Exchange Rate Changes -17,716,000 - -37,549,000 - -16,379,000 - 7,276,000 -415,000 3,513,000 Net Income Operating Activities, Cash Flows Provided By or Used In Depreciation Adjustments To Net Income Total Cash Flow From Operating Activities Investing Activities, Cash Flows Provided By or Used In Other Cash flows from Investing Activities Total Cash Flows From Investing Activities Financing Activities, Cash Flows Provided By or Used In Change In Cash and Cash Equivalents Period Ending 12/31/2015 12/31/2014 12/31/2013 Net Income 16,348,000 14,136,000 12,733,000 Depreciation 5,063,000 4,979,000 3,939,000 Adjustments To Net Income 5,022,000 2,589,000 1,831,000 -2,094,000 -1,641,000 -1,307,000 2,003,000 1,854,000 2,393,000 - - - -318,000 459,000 -930,000 26,024,000 22,376,000 18,659,000 -9,915,000 -10,959,000 -7,358,000 -13,560,000 -5,594,000 -7,398,000 -236,000 -4,502,000 1,077,000 -23,711,000 -21,055,000 -13,679,000 -47,000 - - Sale Purchase of Stock Net Borrowings Other Cash Flows from Financing Activities -4,155,000 -23,000 - -2,069,000 -18,000 - -781,000 -557,000 - Total Cash Flows From Financing Activities Effect Of Exchange Rate Changes -3,677,000 -434,000 -1,439,000 -433,000 -857,000 -3,000 Change In Cash and Cash Equivalents -1,798,000 -551,000 4,120,000 Operating Activities, Cash Flows Provided By or Used In Changes In Accounts Receivables Changes In Liabilities Changes In Inventories Changes In Other Operating Activities Total Cash Flow From Operating Activities Investing Activities, Cash Flows Provided By or Used In Capital Expenditures Investments Other Cash flows from Investing Activities Total Cash Flows From Investing Activities Financing Activities, Cash Flows Provided By or Used In Dividends Paid Period Ending 9/26/2015 9/27/2014 9/28/2013 Cash And Cash Eq 21,120,000 13,844,000 14,259,000 Short Term Invest 20,481,000 11,233,000 26,287,000 Net Receivables 35,889,000 31,537,000 24,094,000 Inventory 2,349,000 2,111,000 1,764,000 Other Current Ass 9,539,000 9,806,000 6,882,000 89,378,000 68,531,000 73,286,000 164,065,000 130,162,000 106,215,000 22,471,000 20,624,000 16,597,000 Goodwill 5,116,000 4,616,000 1,577,000 Intangible Assets 3,893,000 4,142,000 4,179,000 - - - 5,556,000 3,764,000 5,146,000 - - - 290,479,000 231,839,000 207,000,000 60,671,000 10,999,000 8,940,000 48,649,000 6,308,000 8,491,000 36,223,000 7,435,000 80,610,000 53,463,000 33,427,000 3,624,000 - 63,448,000 28,987,000 24,826,000 3,031,000 - 43,658,000 16,960,000 20,208,000 2,625,000 - 171,124,000 120,292,000 83,451,000 27,416,000 92,284,000 -345,000 23,313,000 87,152,000 1,082,000 19,764,000 104,256,000 -471,000 Total Stockholder Equity 119,355,000 111,547,000 123,549,000 Net Tangible Assets 110,346,000 102,789,000 117,793,000 Assets Current Assets Total Current Assets Long Term Investments Property Plant and Equipment Accumulated Amortization Other Assets Deferred Long Term Asset Charges Total Assets Liabilities Current Liabilities Accounts Payable Short/Current Lon Other Current Liabi Total Current Liabilities Long Term Debt Other Liabilities Deferred Long Term Liability Charge Minority Interest Negative Goodwill Total Liabilities Stockholders' Equity Misc Stocks Options Warrants Redeemable Preferred Stock Preferred Stock Common Stock Retained Earnings Treasury Stock Capital Surplus Other Stockholder Equity Period Ending 12/31/2015 12/31/2014 12/31/2013 Cash And Cash Eq 16,549,000 18,347,000 18,898,000 Short Term Invest 56,517,000 46,048,000 39,819,000 Net Receivables 13,909,000 10,849,000 10,916,000 - - - 3,139,000 3,412,000 3,253,000 90,114,000 78,656,000 72,886,000 5,183,000 3,079,000 1,976,000 Property Plant and Equipment 29,016,000 23,883,000 16,524,000 Goodwill 15,869,000 15,599,000 11,492,000 3,847,000 4,607,000 6,066,000 - - - 3,181,000 3,187,000 1,976,000 251,000 176,000 - 147,461,000 129,187,000 110,920,000 15,297,000 3,225,000 788,000 14,018,000 2,009,000 752,000 11,837,000 3,009,000 1,062,000 Total Current Liabilities Long Term Debt Other Liabilities Deferred Long Term Liability Charge Minority Interest Negative Goodwill 19,310,000 1,995,000 5,485,000 340,000 - 16,779,000 3,228,000 4,458,000 862,000 - 15,908,000 2,236,000 3,381,000 2,086,000 - Total Liabilities 27,130,000 25,327,000 23,611,000 Stockholders' Equity Misc Stocks Options Warrants Redeemable Preferred Stock Preferred Stock Common Stock Retained Earnings Treasury Stock Capital Surplus Other Stockholder Equity 32,982,000 89,223,000 -1,874,000 28,767,000 75,066,000 27,000 25,922,000 61,262,000 125,000 Total Stockholder Equity 120,331,000 103,860,000 87,309,000 Net Tangible Assets 100,615,000 83,654,000 69,751,000 Assets Current Assets Inventory Other Current Ass Total Current Assets Long Term Investments Intangible Assets Accumulated Amortization Other Assets Deferred Long Term Asset Charges Total Assets Liabilities Current Liabilities Accounts Payable Short/Current Lon Other Current Liabi Period Ending 9/26/2015 9/27/2014 Total Revenue 233,715,000 182,795,000 Cost of Revenue 140,089,000 112,258,000 93,626,000 70,537,000 8,067,000 6,041,000 14,329,000 11,993,000 Non Recurring - - Others - - Total Operating Expenses - - 71,230,000 52,503,000 1,285,000 980,000 72,515,000 53,483,000 - - Income Before Tax 72,515,000 53,483,000 Income Tax Expense Minority Interest 19,121,000 - 13,973,000 - Net Income From Continuing Ops 53,394,000 39,510,000 - - Net Income Preferred Stock And Other Adjustments 53,394,000 - 39,510,000 - Net Income Applicable To Common Shares 53,394,000 39,510,000 Gross Profit Operating Expenses Research Development Selling General and Administrative Operating Income or Loss Income from Continuing Operations Total Other Income/Expenses Net Earnings Before Interest And Taxes Interest Expense Non-recurring Events Discontinued Operations Extraordinary Items Effect Of Accounting Changes Other Items Period Ending 12/31/2015 12/31/2014 Total Revenue 74,989,000 66,001,000 Cost of Revenue 28,164,000 25,691,000 Gross Profit 46,825,000 40,310,000 Research Development 12,282,000 9,832,000 Selling General and Administrative 15,183,000 13,982,000 Non Recurring - - Others - - Total Operating Expenses - - 19,360,000 16,496,000 291,000 763,000 19,651,000 17,259,000 - - 19,651,000 17,259,000 3,303,000 - 3,639,000 - 16,348,000 13,620,000 - 516,000 - Net Income Preferred Stock And Other Adjustments 16,348,000 -522,000 14,136,000 - Net Income Applicable To Common Shares 15,826,000 14,136,000 Operating Expenses Operating Income or Loss Income from Continuing Operations Total Other Income/Expenses Net Earnings Before Interest And Taxes Interest Expense Income Before Tax Income Tax Expense Minority Interest Net Income From Continuing Ops Non-recurring Events Discontinued Operations Extraordinary Items Effect Of Accounting Changes Other Items