Question

Compute common-size percents for each of the companies using the data provided.

Key figures for Apple and Google follow. points $ millions Cash and equivalents. . . . . . . Accounts receivable, net..... Inventories....... Retained earnings. ...... Cost of sales........ Revenues.............. Total assets........ Apple $ 20,289 17,874 4,855 98,330 141,048 229,234 375,319 Google $ 10,715 18,336 749 113,247 45,583 110,855 197,295 eBook Print Required: 1. Compute common-size percents for each of the companies using the data provided. 2. If Google decided to pay a dividend, would retained earnings as a percent of total assets increase or decrease? 3. Which company has a higher gross margin ratio on sales? References Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute common-size percents for each of the companies using the data provided. (Input all the values as positive numbers. Enter your answers in millions. Round your percentage answers to 1 decimal place.) Apple Google Key Figures ($ millions) Cash and equivalents Accounts receivable, net Inventories Retained earnings Cost of sales Revenues Total assets Required 1 Required 2 >

Answer 1

Ans :

1.

Balance sheet account balances should be expressed in total assets, while income statement balances in terms of Total sales.

Key Figures	Apple		Google
Cash and cash equivalents	5.4%	20289/375319	5.4%	10715/197295
account receivables, net	4.8%	17874/375319	9.3%	18336/197295
Inventories	1.3%	4855/375319	0.4%	749/197295
retained earnings	26.2%	98330/375319	57.4%	113247/197295
Cost of sales	61.5%	141048/229234	41.1%	45583/110855
Revenues	100%	229234/229234	100.0%	110855/110855
Total assets	100%	375319/375319	100.0%	197295/197295

2. Retained earning/ total assets ratio will decrease as payment of dividend will decrease retained earnings.

3 From the below calculation, Gross margin to sales is higher for Google.

Gross margin = Sales - cost of goods sold.

Key Figures	Apple		Google
Gross margin	88186	229234-141048	65272	110855-45583
Gross margin/sales	38.5%	88186/229234	58.9%	65272/110855