You are considering an investment in the common stock of Apple Inc. The following information is from

Question:

You are considering an investment in the common stock of Apple Inc. The following information 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):

Cost of products for the year ended: .....................

October 31, 2015 ................................... $53,081

October 31, 2014 ..................................... 56,469

Inventory: ..................................................

October 31, 2015 ................................... 6,485

October 31, 2014 ................................... 6,415

October 31, 2013 ................................... 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. Replicate the five steps in the Ratio Analysis Model on pages 238-239 to analyze the inventory turnover 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

Inventory Turnover Ratio
Inventory Turnover RatioThe inventory turnover ratio is a ratio of cost of goods sold to its average inventory. It is measured in times with respect to the cost of goods sold in a year normally. Inventory Turnover Ratio FormulaWhere,... Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...