Problem 5-5 Making Business Decisions: Analyzing Apple's Inventory Turnover Ratio You are considering an investment in the common stock of Apple Inc. The following informa- tion is from the financial statements included in Form 10-K for fiscal years 2015 and 2014 (in millions of dollars): Cost of sales for the year ended: September 26, 2015 $140,089 September 27, 2014 112,258 Inventories: September 26, 2015 2,349 September 27, 2014 2,111 September 28, 2013 1,764 The following information is from the financial statements included in Form 10-K for fiscal years 2015 and 2014 for Hewlett-Packard Company in millions of dollars): $53,081 56,469 Cost of products for the year ended: October 31, 2015 October 31, 2014 Inventory: October 31, 2015 October 31, 2014 October 31, 2013 6,485 6,415 6,046 Required Part A. The Ratio Analysis Model An investor must assess how well a company is managing its inventory before buying its stock. The inventory turnover ratio tells us how many times in a year a company sells its inventory. Rep- licate the five steps in the Ratio Analysis Model on pages 238 239 to analyze the inventory turn- over ratios for Apple Inc. and Hewlett-Packard: 1. Formulate the Question 2. Gather the Information from the Financial Statements 3. Calculate the Ratio 4. Compare the Ratio with Other Ratios 5. Interpret the Ratios Part B. The Business Decision Model An investor must consider a variety of factors, including financial ratios, before buying stock. Replicate the five steps in the Business Decision Model on page 239 to decide whether to buy stock in Apple Inc. 1. Formulate the Question 2. Gather Information from the Financial Statements and Other Sources 3. Analyze the Information Gathered 4. Make the Decision 5. Monitor Your Decision Problem 5-5 Making Business Decisions: Analyzing Apple's Inventory Turnover Ratio You are considering an investment in the common stock of Apple Inc. The following informa- tion is from the financial statements included in Form 10-K for fiscal years 2015 and 2014 (in millions of dollars): Cost of sales for the year ended: September 26, 2015 $140,089 September 27, 2014 112,258 Inventories: September 26, 2015 2,349 September 27, 2014 2,111 September 28, 2013 1,764 The following information is from the financial statements included in Form 10-K for fiscal years 2015 and 2014 for Hewlett-Packard Company in millions of dollars): $53,081 56,469 Cost of products for the year ended: October 31, 2015 October 31, 2014 Inventory: October 31, 2015 October 31, 2014 October 31, 2013 6,485 6,415 6,046 Required Part A. The Ratio Analysis Model An investor must assess how well a company is managing its inventory before buying its stock. The inventory turnover ratio tells us how many times in a year a company sells its inventory. Rep- licate the five steps in the Ratio Analysis Model on pages 238 239 to analyze the inventory turn- over ratios for Apple Inc. and Hewlett-Packard: 1. Formulate the Question 2. Gather the Information from the Financial Statements 3. Calculate the Ratio 4. Compare the Ratio with Other Ratios 5. Interpret the Ratios Part B. The Business Decision Model An investor must consider a variety of factors, including financial ratios, before buying stock. Replicate the five steps in the Business Decision Model on page 239 to decide whether to buy stock in Apple Inc. 1. Formulate the Question 2. Gather Information from the Financial Statements and Other Sources 3. Analyze the Information Gathered 4. Make the Decision 5. Monitor Your Decision