Analysis of liquidity and profitability measures of Apple Inc. The following summarized data (amounts in millions) are taken from the September 27, 2008, and September 29, 2007, comparative financial statements of Apple Inc., a manufacturer of personal computers, portable digital music players, and mobile communications devices, along with a variety of related software, services, peripherals, and networking solutions.
(Amounts Expressed in Millions) | 2008 | 2007 |
For the Fiscal Years Ended September 27 |
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and September 29, respectively |
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Net sales | $32,479 | $24,006 |
Costs of sales | 21,334 | 15,852 |
Operating income | 6,275 | 4,409 |
Net income | $ 4,834 | $ 3,496 |
At Year End |
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Assets |
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Cash and cash equivalents | $11,875 | $ 9,352 |
Short-term investments | 12,615 | 6,034 |
Accounts receivable, net | 2,422 | 1,637 |
Inventories | 509 | 346 |
Deferred tax assets | 1,447 | 782 |
Other current assets | 5,822 | 3,805 |
Property, plant, and equipment, net | 2,455 | 1,832 |
Goodwill | 207 | 38 |
Acquired intangible assets, net | 285 | 299 |
Other assets | 1,935 | 1,222 |
Total assets | $39,572 | $25,347 |
Liabilities and Shareholders’ Equity |
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Accounts payable | $ 5,520 | $ 4,970 |
Accrued expenses | 8,572 | 4,310 |
Non-current liabilities | 4,450 | 1,535 |
Common stock, no par value | 7,177 | 5,368 |
Retained earnings | 13,845 | 9,101 |
Accumulated other comprehensive income | 8 | 63 |
Total liabilities and shareholders’ equity | $39,572 | $25,347 |
At September 30, 2006, total assets were $17,205 and total shareholders’ equity was
$9,984.
Required:
a.Calculate Apple Inc.’s working capital, current ratio, and acid-test ratio at September 27, 2008, and September 29, 2007. Round your ratio answers to one decimal place.
b. Calculate Apple’s ROE for the years ended September 27, 2008, and September 29, 2007. Round your percentage answers to one decimal place.
c. Calculate Apple’s ROI, showing margin and turnover, for the years ended September 27, 2008, and September 29, 2007. Round your turnover calculations to two decimal places. Round your margin and ROI percentages to one decimal place.
d. Evaluate the company’s overall liquidity and profitability.
Optional continuation of Case 3.17—trend analysis
The following historical data were derived from Apple Inc.’s consolidated financial
statements (in millions).
Note: Past data are not necessarily indicative of the results of future operations.
| 2008 | 2007 | 2006 | 2005 | 2004 |
Net sales | $32,479 | $24,006 | $19,315 | $13,931 | $8,279 |
Net income | 4,834 | 3,496 | 1,989 | 1,328 | 266 |
Cash, cash equivalents, and |
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short-term investments | 24,490 | 15,386 | 10,110 | 8,261 | 5,464 |
Total assets | 39,572 | 25,347 | 17,205 | 11,516 | 8,039 |
Shareholders’ equity | 21,030 | 14,532 | 9,984 | 7,428 | 5,063 |
Long-term debt | - | - | - | - | - |
e.Calculate Apple Inc.’s total liabilities for each year presented above.
f. Are the trends expressed in these data generally consistent with each other?
g. In your opinion, which of these trends would be most meaningful to a potential investor in common stock of Apple Inc.? Which trend would be least meaningful?
h. What other data (trend or otherwise) would you like to have access to before making an investment in Apple Inc.?
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