Question

The following summarized data (amounts in millions) are taken from the September 30, 2017, and September 24, 2016, comparative financial statements of Apple Inc., a company that designs, manufactures, and markets mobile communication and media devices and personal computers; sells a variety of related software, services, accessories, networking solutions, and offers third-party digital content and applications:

  

(Amounts Expressed in Millions)
For the Fiscal Years Ended September 30 and September 24, respectively:	2017		2016
Net sales	$	229,234	$	215,639
Costs of sales		114,048		131,376
Operating income		61,344		60,024
Net income	$	48,351	$	45,687
At Year End: Assets
Current assets:
Cash and cash equivalents	$	20,289	$	20,484
Short-term marketable securities		53,892		46,671
Accounts receivable, less allowance of $58 and $53, respectively		17,874		15,754
Inventories		4,855		2,132
Vendor nontrade receivables		17,799		13,545
Other current assets		13,936		8,283
Total current assets		128,645		106,869
Long-term marketable securities		194,714		170,430
Property, plant, and equipment, net		33,783		27,010
Goodwill		5,717		5,414
Acquired intangible assets, net		2,298		3,206
Other assets		10,162		8,757
Total assets	$	375,319	$	321,686
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	49,049	$	37,294
Accrued expenses		25,744		22,027
Deferred revenue		7,548		8,080
Commercial paper		11,977		8,105
Current portion of long-term debt		6,496		3,500
Total current liabilities		100,814		79,006
Deferred revenue—noncurrent		2,836		2,930
Long-term debt		97,207		75,427
Other noncurrent liabilities		40,415		36,074
Total liabilities		241,272		193,437
Shareholders’ Equity:
Common stock and additional paid-in capital, $0.00001 par value, 12,600,000 shares authorized; 5,126,201 and 5,336,166 shares issued and outstanding, respectively		35,867		31,251
Retained earnings		98,330		96,364
Accumulated other comprehensive income (loss)		(150	)	634
Total shareholders’ equity		134,047		128,249
Total liabilities and shareholders’ equity	$	375,319	$	321,686

At September 26, 2015, total assets were $290,345 and total shareholders’ equity was $119,355.

A) Find Acid Test Ratio for

	2017 2016 Working capital $27,831 $27,863 Current ratio 1.3 1.4 Acid-test ratio

B) Calculate Apple’s ROI, showing margin and turnover, for the years ended September 30, 2017, and September 24, 2016.

2017 2016 ROI % % Margin % % Turnover

Answer 1

Ans. A 1	Working capital =     Total current assets - Total current liabilities
	2017	$128,645 - $100,814	$27,831	million
	2016	$106,869 - $79,006	$27,863	million
Ans. A 2	Current ratio   =   Total current assets / Total current liabilities
	2017	$128,645 / $100,814	1.3 : 1
	2016	$106,869 / $79,006	1.4 : 1
Ans. A 3	We assumed that inventories, other current assets and vendor non trade receivables are non liquid assets.
	Quick ratio   =   (Cash & cash equivalents + Short term Marketable securities + Accounts receivables) / Total current liabilities
	2017	($20,289 + $53,892 + $17,874) / $100,814	0.9 : 1
	2016	($20,284 + $46,671 + $15,754) / $79,006	1.0 : 1
Ans. B 1	Return on investment (ROI) =   Net income / Average assets * 100
	2017	$48,351 / $348,502.50 * 100	13.9%
	2016	$45,687 / $306,015.50 * 100	14.9%
	*Average assets = (Beginning assets + Ending assets) / 2
	2017	($321,686 + $375,319) / 2	$348,502.50
	2016	($290,345 + $321,686) / 2	$306,015.50
Ans. B 2	Margin = Net income / Net sales * 100
	2017	$48,351 / $229,234 * 100	21.10%
	2016	$45,687 / $215,639 * 100	21.20%
Ans. B 3	Turnover = Sales / Average assets
	2017	$229,234 / $348,502.50	0.66	times
	2016	$215,639 / $306,015.50	0.7	times
Ans.	Return on equity (ROE) =   Net income / Average Common stockholder's equity * 100
	2017	$48,351 / $131,148 * 100	36.9%
	2016	$45,687 / $123,802 * 100	36.9%
	* Average Stockholder's equity =   (Beginning equity + Ending equity) / 2
	2017	($128,249 + $134,047) / 2	$131,148
	2016	($119,355 + $128,249) / 2	$123,802