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Return on Invested Capital ( ROIC ) is a profitability ratio that measures how effective the firm is at generating a return for investors who

Return on Invested Capital (ROIC) is a profitability ratio that measures how effective the firm is at generating a return for investors who have provided capital (bondholders and stockholders). The ROIC calculation answers three questions: How tax efficient is the firm? How effective are the firms operations? How intensively does the firm use capital? Comparing the answers to these questions between firms can help you understand why one firm is more profitable than another and where that profitability is coming from.
In the following, Apples ROIC is compared to Blackberrys. The income statement and balance sheet are provided for both firms. While the ROIC calculation for Blackberry is completed below, you have to complete the calculation for Apple by supplying the correct income statement and balance sheet information. As you fill in this information, the components of Apples ROIC will be calculated along with some supporting ratios. Use these subcomponents and supporting ratios to compare Apple and Blacberrys performance. Where does Apples advantage come from?
This activity demonstrates the calculation of ROIC and the comparison of firm performance, supporting Learning Objective 5-1 and 5-2.
Instructions
Use the income statement and balance sheet information for Apple to fill in the missing items in the calculation of Apples ROIC and supporting ratios. Once filled in correctly, compare Apples performance to that of Blackberry. Where does Apple have an advantage? Where does Blackberry have an advantage?
Apple, Inc. Blackberry
Income Statement YE Sept 2012 YE Mar 2012
Net sales 156,50818,423
Cost of sales 87,84611,848
Gross margin 68,6626,575
Research & development expense 3,3811,559
Selling, general & admin expense 10,0402,600
other operating 0930
Total operating expenses 13,4215,089
Operating margin 55,2411,486
Interest & dividend income 00
Interest expense 00
Other Income / Expense 52221
Total Other income 52221
Earnings before taxes 55,7631,507
Provision for taxes 14,030354
Net income (loss)41,7331,153
Apple Inc Microsoft Corporation
Balance sheet YE Sept 2014 YE Mar 302012
1,527
Cash & cash equivalents 10,746247
Short-term marketable securities 18,3833,062
Accounts receivable 10,9300
Components 00
Finished goods 01,027
Inventories 7911,208
Other Current Assets 16,803
Total current assets 57,6537,071
0
Long-term marketable securities 02,733
Fixed Assets: PP&E (net)15,4523,927
Other assets 102,959
Long term assets 6,660
Total assets 176,06413,731
744
Accounts payable 21,1750
Accrued expenses 11,4140
Deferred revenue 02,645
other 5,953
Total current liabilities 38,5423,389
0
Long-term debt 00
Deferred revenue - non-current 00
Deferred tax liabilities 0
Other non-current liabilities 19,312242
Other long-term liabilities
Total long-term liabilities 242
Long-term liabilities 19,312
Total liabilities 57,8543,631
14
Common stock 6677,913
Retained earnings 101,2892,173
Unrecognized gain on securities 010,100
Total shareholders' equity 118,210
Total liabilities + shareholders equity 176,064
Execise 8a - Calculating Apple's ROIC
Calculate of Apples ROIC and supporting ratios. (Enter your responses rounded to two decimal places.)

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