Question

AA 3-2 Comparative Analysis LO A1, A2 Key figures for the recent two years of both Apple and Google follow. $ millions Net income Net sales Current assets Current liabilities Apple Current Year Prior Year $ 48,351 $ 45,687 229,234 215,639 128,645 106,869 100,814 79,006 Google Current Year Prior Year $ 12,662 $ 19,478 110,855 90, 272 124,308 105,408 24,183 16,756 Required: 1. Compute profit margins for (a) Apple and (b) Google for the two years of data reported above. 2. In the current year, which company is more successful on the basis of profit margin? 3. Compute current ratios for (a) Apple and (b) Google for the two years reported above. 4. In the current year, which company has the better ability to pay short-term obligations according to the current ratio? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Compute profit margins for (a) Apple and (b) Google for the two years of data reported above. (Round your percentage answers to 1 decimal place.) Profit Margins Current Year Prior Year % % % % (a) Apple (b) Google

Answer 1

Question 1

Formula for Profit Margin = Net Income / Net Sales * 100

For Current Year

For Apple

Profit Margin = 48,351 / 229,234 * 100

Profit Margin = 21.1%

For Google

Profit Margin = 12,662 / 110,855 * 100

Profit Margin = 11.4%

For Prior Year

For Apple

Profit Margin = 45,687 / 215,639 * 100

Profit Margin = 21.2%

For Google

Profit Margin = 19,478 / 90,272

Profit Margin = 21.6%

Question 2

In Current Year Apple is more successful on the basis of Profit Margin.

Question 3

Formula for Current Ratio = Current Assets / Current Liabilities

For Current Year

For Apple

Current Ratio = 128,645 / 100,814

Current Ratio = 1.28 Times

For Google

Current Ratio = 124,308 / 24,183

Current Ratio = 5.14 Times

For Prior Year

For Apple

Current Ratio = 106,869 / 79,006

Current Ratio = 1.35 Times

For Google

Current Ratio = 105,408 / 16,756

Current Ratio = 6.29 Times

Question 4

According to Current Ratios Google has better ability to pay Short Term obligations.