Question

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. 

Answer the following questions. 

Make a 5-year trend analysis, using 2013 as the base year, of (1) net sales and (2) net income. (Round percentages to O decimal places, e.g. 15% and enter amounts in millions.) 

Answer 1

	Trend Analysis (in Millions)
		2017	2016	2015
(1)	Net Sales	229234	215639	233715
	Trend (Sales of current year / Base Year Sales) * 100	98%	92%
(2)	Net Income	48351	45687	53394
	Trend (Net Income of current year / Base Year Net Income) * 100	91%	86%
	Note: As financial statements are provided for 2015 to 2017 only, data of these three years only have been used. Instead of using 2013 as base year, 2015 has been used as base year.

Computation of: Debt Asset Ratio and times Interest earned
	2017	2016
Debt Asset Ratio (DAR) = Total Debt / Total Assets
Commercial Paper	11977	8105
Current portion of long-term debt	6496	3500
Long-term debt	97207	75427
Total Debt (Commercial Paper + Current long-term debt + long-term debt)	115680	87032
Total Assets	375319	321686
Therefore, DAR	31%	27%
Times Interest Earned (TIE) = Operating income before taxes / Interest Expense
Operating income before taxes	64089	61372
Interest Expense (Taken from Statement of Cash flow: Cash paid for Interest)	2092	1316
Therefore, TIE	30.6	46.6
Note: Ideally, Interest expenses should be taken from Statement from operations which contains a separate line item titled 'Interest expense'. However, as in this case the income statement has no details of the same, the interest expense have been taken from the statement of cash flow, which is the only place where there is a mention of interest in the entire financial statements provided.

Computation of other ratios
	2017	2016
Profit Margin % (PM%)= (Operating Income / Net Sales) * 100
Operating Income	61344	60024
Net Sales	229234	215639
Therefore, PM%	26.8%	27.8%
Asset Turnover Ratio (ATR) = (Net Sales / Average Total Assets)
Closing Assets	375319	321686
Opening Assets	321686	Not Available
Average Assets = (Opening Assets + Closing Assets) / 2	348503	Not Available
Net Sales	229234
Therefore, ATR	0.66
Return on Asset (ROA) = (Net Income / Average Total Assets)
Net Income	48351	45687
Average Total Assets (as computed above)	348503	Not Available
Therefore, ROA	13.9%
Return on Common Stockholders Equity (ROE) = (Net Income / Stockholders Equity)
Net Income	48351	45687
Stockholders Equity	134047	128249
Therefore, ROE	36.1%	35.6%