Your parents are considering investing in Apple Inc. common stock. They ask you, as an accounting expert, to make an analysis of the company for them. Apples financial statements of Apple are presented in Appendix A. The complete annual report, including the notes to the financial statements, is available at the companys website.
Appendix A:
Answer the following questions.
Cost of sales 140,089 112,258 106,606 Operating expenses: Selling, general and administrative 14,329 11,993 10,830 Operating income 71,230 52,503 48,999 Income before provision for income taxes 72,515 53,483 50,155 Net income 53,394 $ 39,510 $ 37,037 Basic $ 9.28 $ 6.49 $ 5.72 Shares used in computing earnings per share: Diluted 5,793,069 6,122,663 6,521,634 Other comprehensive income/(loss): = Change in unrealized gains/losses on derivative instruments: Adjustment for net (gains)/losses realized and included in net income, net of tax expense/(benefit) of $630, $(36) and $255, respectively (3,497) 149 (458) Change in unrealized gains/losses on marketable securities: Adjustment for net (gains)/losses realized and included in net income, net of tax expense/(benefit) of $(32), $71 and $82, respectively 59 (134) (131) Total other comprehensive income/(loss) (1,427) 1,553 (970) Current assets: Short-term marketable securities 20,481 11,233 Inventories 2,349 2,111 Vendor non-trade receivables 13,494 9,759 Total current assets 89,378 68,531 Property, plant and equipment, net 22,471 20,624 Acquired intangible assets, net 3,893 4,142 Total assets $ 290,479 $ 231.839 Current liabilities: Accrued expenses 25,181 18,453 Commercial paper 8,499 6,308 Total current liabilities 80,610 63,448 Long-term debt 53,463 28,987 Total liabilities 171,124 120,292 Shareholders' equity: Retained earnings 92,284 87,152 Total shareholders' equity 119,355 111,547 Net income 0 0 37,037 0 37,037 Dividends and dividend equivalents declared 0 0 (10,676) 0 (10,676) Share-based compensation 0 2.253 0 0 2.253 Tax benefit from equity awards, including transfer pricing adjustments O 1,232 0 0 1,232 Net income 0 0 39,510 0 39,510 Dividends and dividend equivalents declared 0 0 (11,215) 0 (11,215) Share-based compensation 0 2,863 0 0 2,863 Tax benefit from equity awards, including transfer pricing adjustments 0 735 0 0 735 Net income 0 0 53,394 0 53,394 Dividends and dividend equivalents declared 0 0 (11,627) 0 (11,627) Share-based compensation 0 3,586 0 0 3,586 Tax benefit from equity awards, including transfer pricing adjustments 0 748 0 0 748 Operating activities: Adjustments to reconcile net income to cash generated by operating activities: Share-based compensation expense 3,586 2,863 2,253 Changes in operating assets and liabilities: Inventories (238) (76) (973) Other current and non-current assets (179) 167 1,080 Deferred revenue 1,042 1,460 1,459 Cash generated by operating activities 81.266 59,713 53,666 Purchases of marketable securities (166,402) (217,128) (148,489) Proceeds from sales of marketable securities 107,447 189,301 104,130 Payments for acquisition of property, plant and equipment (11,247) (9,571) (8,165) Other (26) 16 (160) Financing activities: Excess tax benefits from equity awards 749 739 701 Dividends and dividend equivalents paid (11,561) (11,126) (10,564) Proceeds from issuance of term debt, net 27,114 11,960 16,896 Cash used in financing activities (17,716) (37,549) (16,379) Cash and cash equivalents, end of the year $ 21,120 $ 13,844 $ 14,259 Cash paid for income taxes, net $ 13,252 $ 10,026 $ 9,128 Make a 3-year trend analysis, using 2013 as the base year, of (1) net sales and (2) net income. (Round percentages to decimal places, e.g. 15% and enter amounts in millions.) APPLE INC. Trend Analysis of Net Sales and Net Income For the Three Years Ended 2015 2014 $ 2015 2013 (1) Net sales $ $ $ Trend (2) Net income $ $ $ $ Trend se % Compute for 2015 and 2014 the (1) profit margin. (2) asset turnover. (3) return on assets, and (4) return on common stockholders' equity. Total assets at September 28, 2013, were $207.000 and total stockholders' equity at September 28, 2013, was $123,549. (Round Percentages to 1 decimal places, e.g. 15.2% and times to 2 decimal places, e.g. 15.25.) 2015 2014 1. Profit Margin se 2. Asset Turnover times times 3. Return on Assets % 4. Return on Common Stockholders' Equity % % Compute for 2015 and 2014 the (1) debt to assets ratio and (2) times interest earned. (Round answers to 1 decimal place, eg, 15.2.) 2015 2014 % 1. Debt to Assets Ratio 2. Times Interest Earned times times Cost of sales 140,089 112,258 106,606 Operating expenses: Selling, general and administrative 14,329 11,993 10,830 Operating income 71,230 52,503 48,999 Income before provision for income taxes 72,515 53,483 50,155 Net income 53,394 $ 39,510 $ 37,037 Basic $ 9.28 $ 6.49 $ 5.72 Shares used in computing earnings per share: Diluted 5,793,069 6,122,663 6,521,634 Other comprehensive income/(loss): = Change in unrealized gains/losses on derivative instruments: Adjustment for net (gains)/losses realized and included in net income, net of tax expense/(benefit) of $630, $(36) and $255, respectively (3,497) 149 (458) Change in unrealized gains/losses on marketable securities: Adjustment for net (gains)/losses realized and included in net income, net of tax expense/(benefit) of $(32), $71 and $82, respectively 59 (134) (131) Total other comprehensive income/(loss) (1,427) 1,553 (970) Current assets: Short-term marketable securities 20,481 11,233 Inventories 2,349 2,111 Vendor non-trade receivables 13,494 9,759 Total current assets 89,378 68,531 Property, plant and equipment, net 22,471 20,624 Acquired intangible assets, net 3,893 4,142 Total assets $ 290,479 $ 231.839 Current liabilities: Accrued expenses 25,181 18,453 Commercial paper 8,499 6,308 Total current liabilities 80,610 63,448 Long-term debt 53,463 28,987 Total liabilities 171,124 120,292 Shareholders' equity: Retained earnings 92,284 87,152 Total shareholders' equity 119,355 111,547 Net income 0 0 37,037 0 37,037 Dividends and dividend equivalents declared 0 0 (10,676) 0 (10,676) Share-based compensation 0 2.253 0 0 2.253 Tax benefit from equity awards, including transfer pricing adjustments O 1,232 0 0 1,232 Net income 0 0 39,510 0 39,510 Dividends and dividend equivalents declared 0 0 (11,215) 0 (11,215) Share-based compensation 0 2,863 0 0 2,863 Tax benefit from equity awards, including transfer pricing adjustments 0 735 0 0 735 Net income 0 0 53,394 0 53,394 Dividends and dividend equivalents declared 0 0 (11,627) 0 (11,627) Share-based compensation 0 3,586 0 0 3,586 Tax benefit from equity awards, including transfer pricing adjustments 0 748 0 0 748 Operating activities: Adjustments to reconcile net income to cash generated by operating activities: Share-based compensation expense 3,586 2,863 2,253 Changes in operating assets and liabilities: Inventories (238) (76) (973) Other current and non-current assets (179) 167 1,080 Deferred revenue 1,042 1,460 1,459 Cash generated by operating activities 81.266 59,713 53,666 Purchases of marketable securities (166,402) (217,128) (148,489) Proceeds from sales of marketable securities 107,447 189,301 104,130 Payments for acquisition of property, plant and equipment (11,247) (9,571) (8,165) Other (26) 16 (160) Financing activities: Excess tax benefits from equity awards 749 739 701 Dividends and dividend equivalents paid (11,561) (11,126) (10,564) Proceeds from issuance of term debt, net 27,114 11,960 16,896 Cash used in financing activities (17,716) (37,549) (16,379) Cash and cash equivalents, end of the year $ 21,120 $ 13,844 $ 14,259 Cash paid for income taxes, net $ 13,252 $ 10,026 $ 9,128 Make a 3-year trend analysis, using 2013 as the base year, of (1) net sales and (2) net income. (Round percentages to decimal places, e.g. 15% and enter amounts in millions.) APPLE INC. Trend Analysis of Net Sales and Net Income For the Three Years Ended 2015 2014 $ 2015 2013 (1) Net sales $ $ $ Trend (2) Net income $ $ $ $ Trend se % Compute for 2015 and 2014 the (1) profit margin. (2) asset turnover. (3) return on assets, and (4) return on common stockholders' equity. Total assets at September 28, 2013, were $207.000 and total stockholders' equity at September 28, 2013, was $123,549. (Round Percentages to 1 decimal places, e.g. 15.2% and times to 2 decimal places, e.g. 15.25.) 2015 2014 1. Profit Margin se 2. Asset Turnover times times 3. Return on Assets % 4. Return on Common Stockholders' Equity % % Compute for 2015 and 2014 the (1) debt to assets ratio and (2) times interest earned. (Round answers to 1 decimal place, eg, 15.2.) 2015 2014 % 1. Debt to Assets Ratio 2. Times Interest Earned times times
