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 firm's 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, Apple's ROIC is compared to Blackberry's. The income statement and balance sheet are provided for both firms. While the ROIC calculation forBlackberry 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 Apple's ROIC will be calculated along with some supporting ratios. Use these subcomponents and supporting ratios to compare Apple and Blacberry's performance. Where does Apple's 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 Apple's ROIC and supporting ratios. Once filled in correctly, compare Apple's performance to that of Blackberry. Where does Apple have an advantage? Where does Blackberry have an advantage? Apple, Inc. YE Sept 2012 156,508 Blackberry Income Statement YE Mar 2012 Net sales 18,423 Cost of sales 87,846 11,848 Gross margin Research & development expense Selling, general & admin expense other operating 68,662 6,575 3,381 1,559 10,040 2,600 930 Total operating expenses 13,421 5,089 Operating margin 55,241 1,486 Interest & dividend income Interest expense 0. Other Income / Expense 522 21 Total Other income 522 21 Earnings before taxes 55,763 1,507 Provision for taxes 14,030 354 Net income (loss) 41,733 1,153 Apple Inc Microsoft Corporation Balance sheet YE Sept 2014 YE Mar 30 2012 1,527 Cash & cash equivalents 10,746 247 Short-term marketable securities 18,383 3,062 Accounts receivable 10,930 Components Finished goods 1,027 Inventories 791 1,208 Other Current Assets 16,803 Total current assets 57,653 7,071 Long-term marketable securities Fixed Assets: PP&E (net) 2,733 15,452 3,927 Other assets 102,959 Long term assets 6,660 Total assets 176,064 13,731 744 Accounts payable Accrued expenses 21,175 11,414 Deferred revenue 2,645 other 5,953 Total current liabilties 38,542 3,389 Long-term debt Deferred revenue - non-current Deferred tax liabilities Other non-current liabilities 19,312 242 Other long-term liabilities Total long-term Illabilities Long-term liabilities 242 19,312 Total liabilities 57,854 3,631 14 Common stock 667 7,913 Retained earnings 101,289 2,173 Unrecognized gain on securities Total shareholders' equity 10,100 118,210 Total liabilities + shareholders equity 176,064 O o O N Calculate of Apple's ROIC and supporting ratios. APPLE ROIC % Tax Efficiency % Tax Rate Operating Profit Margin % COGS/Rev % R&D/Rev % S&GA/Rev % Capital Efficiency Working Capital Turn Fixed Asset Turn Inventory Turn Receivable Turn Payables Turn