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. Financial statements of Apple are presented in Appendix A. The complete annual report, including the notes to its financial statements, is available at the company's website. Click here to view Appendix A. Answer the following questions. (a 1) - Your answer is partially correct. Make a 5-year trend analysis, using 2014 as the base year, of (1) net sales and (2) net income. (To satisfy this requirement you must access information regarding performance in prior years. This information is provided in the complete annual report available on the company's website.) (Round percentages to 0 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 2018 2018 2017 2016 (1) Net sales 265595 $ 229234 216,639 Trend % % (2) Net income $ 59531 $ 48351 $ 45687 Trend Screenshot Appendix A Specimen Financial Statements: Apple Inc. Once each year, a corporation communicates to its stockholders and other interested parties by issuing a complete set of audited financial statements. The annual report, as this com- munication is called, summarizes the financial results of the company's operations for the year and its plans for the future. Many annual reports are attractive, multicolored, glossy pub lic relations pieces, containing pictures of corporate officers and directors as well photos and descriptions of new products and new buildings. Yet the basic function of every annual report is to report financial information, almost all of which is a product of the corporation's accounting system. The content and organization of corporale annual reports have become fairly standardized. Excluding the public relations part of the report (pictures, products, etc.), the following are the traditional financial portions of the annual report: Financial Highlights Management's Responsibility for Letter to the Stockholders Financial Reporting Management's Discussion Management's Report on Internal and Analysis Control over Financial Reporting . Financial Statements Report of Independent Registered Public Accounting Firm Notes to the Financial Statements Selected Financial Data The official SEC filing of the annual report is called a Form 10-K, which often omits the public relations picces found in most standard annual reports. On the following pages. we present Apple Inc.'s financial statements taken from the company's 2018 Form 10-K, The complete Form 10-K, including notes to the financial statements, is available at the company's website. A-1 A-2 APPENDIX A Specimen Financial Statements: Apple Inc. Apple Inc. Consolidated Statements of Operations (in millions, except number of shares which are reflected in thousands and per share amounts) Years onded September 29, September 30, September 24, 2018 2017 2016 S 265,595 S 229,234 S 215,639 163.756 141,048 131,376 101,839 88,186 84,263 Not xules Cost of sales Gross margin 14,236 11,581 10,043 Operating expenses: Research and development Selling general and administrative Total operating expenses 16.703 15.261 14.194 30,941 26,842 24.239 70.898 61,344 60,024 2,105 2,745 Operating income Other income/expense), net Income before provision for income taxes Provision for income taxes Not income 1,348 61,372 64,089 72,903 13,372 15,738 15,685 45,687 59,531 S 48,351 S Earnings per share: Basic Diluted S 12.01 S 9.27 $ 8.33 S 11.91 S 9.21 $ 8.31 Shares used in computing earnings per share: Basic Diluted 5.217,242 5,470,820 4.955,377 5.000,109 5.251,692 5,500,281 See accompanying Votes in Consolidated Financial Statements. APPENDIX A Specimen Financial Statements: Apple Inc. A-3 Apple Inc. Consolidated Statements of Comprehensive Income (in millions) September 29, 2018 Years ended September 30, 2017 September 24, 2016 $45,687 $59,531 $46,351 Net income Other comprehensive income/(loss): Change in forcign currency translation, net of tax effects of S(I), 5(77) and S8, respectively (525) 224 75 523 1,315 7 Change in unrealized gains/losses on derivative instruments: Change in fair value of derivatives, net of tax benefit/lexpense) of $(149), 478) and S(7), respectively Adjustment for ner (gains) losses realized and included in net income. net of tax expense/(hencfit) of S(104), $475 and $131, respectively Total change in unrcalized gains/losses on derivative instruments, net of tax 382 (1,477) (741) 905 (162) (734) (3,407) (782) 1,5R2 Change in unrealized gains/losses on marketable securities: Change in fair value of marketable securities.net of tax benefit: (expense) of S1,156, 5425 and S(863), respectively Adjustment for net (gains) losses realized and included in net income, net of tax experise/(benefit) or S21, S35 and $31), respectively Total change in un realized yainslosses on marketable securities, net of tax ! (64) S6 (3.406) (846) 1,638 (3.026) (784) y7y Total other comprehensive income/loss) Total comprehensive income $56,505 $47,567 546.666 See acompanying Notes to Consolidated Financial Statements. A-4 APPENDIX A Specimen Financial Statements: Apple Inc. September 30, 2017 Apple Ine. Consolidated Balance Sheets (in millions, except number of shares which are reflected in thousands and par value) September 29, 2018 ASSETS: Current assets: Cash and cash equivalents S 25.913 Markelablc securities 40,388 Accounts receivable.net 23.186 Inventories 3.956 Vendor non-trade receivables 25,809 Other current assets 12.087 Total current assets 131,339 $ 20,289 53,892 17,874 4,853 17,799 13,936 128,645 170,799 194,714 41,304 33,783 Non-current assets: Marketahle securities Property, plant and equipment, net Other non-current assets Total non-current assets - Total assets 22,283 18,177 231.386 246,674 $365,725 $375,319 LIABILITIES AND SHAREHOLDERS' EQUITY: S 55.888 32.687 $ 44,242 30,351 Current liabilities: Accounts payable Other current liabilities Deferred revenue Commercial paper Term debt Total current liabilities 7.543 7,548 11.964 11,977 6,496 8.784 116,866 100.814 2,797 43,735 2,836 97.2017 Non-current liabilities: Deferred revenue Term debt Other non-current liabilities Total non-current liabilitics Total liahilities 45.180 40,415 141.712 140,458 241,272 258,578 Commitments and contingencies 40,201 Shareholders' equity: Common stock and additional paid in capital. $0.00001 par value: 12,600.000 shares authorized; 4,754,986 and 5,126,201 shares issued and outstanding, respectively Retained earnings Accumulated other comprehensive income/(loss) Total shareholders' equity Total liabilitics and sharcholders' equity 35,867 98,330 70,400 (150) (3,454) 107,147 134,042 S365,725 $375,319 Sce accompanying Soles to Consolidated Financial Statements, APPENDIX A Specimen Financial Statements: Apple Inc. A-5 Apple Inc. Consolidated Statements of Shareholders' Equity (in millions, except number of shares which are reflected in thousands and per share amounts) Accumulated Common Stock and Other Additional Paid In Capital Retained Comprehensive Total Shareholders Shares Amount Earnings Income/(Loss) Equity Balances as of September 26. 2015 5,578,753 $27,416 $92.284 $ (445) $119.355 Net income 45.687 45,687 Other comprehensive incume/(loss) 979 979 Dividends and dividend equivalente declared at $2.18 per share or RSU (12,188) (12,188) Repurchase of common stock (279,609) ( (29,000) (29,000 Share-based compensation 4.262 4,262 Common stuck issued, net of shares withheld for employee taxes 37,022 {H06) (419) (1,225) Tax benefit from equity awards. including transfer pricing adjustments 379 379 Balances as of September 24, 2016 5,336,166 31,251 96,364 634 128,249 Nel income 18,351 18,351 Other comprehensive income (loss) (784) (784) Dividends and dividend equivalents declared at $2.40 per share or RSU (12,803) (12.803) Repurchase of common stock (246,496) (33,001) (33,001) Share based oompensation 4,909 4.909 Common stock issued, net of shares withheld for employee taxes 36,531 (913) (581) (1.494) Tax benefit from equity awards, including transfer pricing adjustments 620 620 Balances as of September 30, 2017 5.126,201 35,867 98.330 (150) 134,047 Cumulative effect of change in accounting principle 278 (278) Nel income 59,531 59,531 Other comprehensive income/(loss) (3,026) (3,026) Dividends and dividend equivalents declared at $2.72 per share or RSU (13.735) (13.735 Repurchase of common stock (405,549) (73,056) (73.056) Share-based compensation 5,443 5,443 Common stock issued, nct of shares withheld for employee taxes 34,334 (1.109) (948) (2,057) Balances as of September 29, 2018 4.754,986 $40,201 $70.400 S(3,454) $107.147 Sce accompanying Noles lo Consolidated Financial Statements A-6 APPENDIX A Specimen Financial Statements: Apple Inc. Apple Inc. Consolidated Statements of Cash Flows (in millions) September 29, 2018 Year's ended September 30, 2017 September 24, 2016 $20.289 $20,484 $21,120 59.531 18,331 45.687 10,505 4,210 10,903 5,340 (32.590) (444) 10,157 4,840 5,966 (166) 4,938 486 527 (5,322) 828 217 Cash and cash equivalents, beginning of the year Operating activities: Net income Adjustments to reconcile net income to cash generated lynperating activities: Depreciation and amortization Share based compensation expense Deferred income tax expense/(benefit) Other Changes in operating assets and liabilities: Accounts receivable, net , Inventories Vendor non-trade receivables - Other current and non current assets Accounls payable Deferred revenue Other current and non-current liabilities Cash generated by operating activities Investing activities: Purchases of marketable securities Proceeds from maturities of marketable securities Proceeds from sales of marketable securities Payments for acquisition of property, plant and equipment Payments made in connection with business acquisitions, net Purchases of non-marketable securilius Proceeds from non-marketable securities (8,010) (423) 9,175 (44) (2,093) (2.723) (4.254) (5,318) ) 8,966 (626) 1,125 (51) 1,055 2.117 (1,554 (1,906) 66,231 38,490 77.434 64,225 (71,356) 55,881 47,838 (159,486) 31,775 (142,428) 21,258 90.536 (13,313) (721) (1.871) 3.53 94,561 (12,451) (329) (521) 126 (124) (12,734) (297) (1.388) Other (745) (924) 16.066 (-16,446) (45,977) 669 555 495 (2.527) (13.712) (72,738) 6.969 (1.874) (12,769) (32,900) Cash generated by/(used in) investing activities Financing activities: Proceeds from issuance of common stock Payments for taxes related to reshare settlement of equily awards Payments for dividends and dividend equivalents Repurchases of common stock Proceeds from issuance of terin debt, net Repayments of term debt Change in commercial paper, net Cash used in financing activities Increase/(Decrease) in cash and cash equivalents Cash and cash equivalents, end of the year Supplemental cash flow disclosure: Cash paid for income taxes, net Cash paid for interest (1.570) (12,150) (29,722) 24,954 (2.500) (397) (6.500) (37) 28,662 (3,500) 3,852 (17,974) (87,876) 5.624 (195) (20,890) (636) $20,484 $25.913 $20,289 $11,591 $10,444 $10.417 $ 3.022 $ 2,092 $ 1,316 See accompanying Notes to Consolidated Financial Statements