Question

APPLE COMPUTER INC.

CONSOLIDATED BALANCE SHEETS

FOR THE YEARS ENDED SEPTEMBER 30, 2015 AND SEPTEMBER 30, 2014

(Dollars in thousands)

Assets	2015	2014
Current Assets
Cash and Cash Equivalents	$1,203,488	$676,413
Short-Term Investment	54,368	215,890
Accounts Receivable, Net of Allowance for Doubtful Accounts of 90,992($83,776 in 2014)	1,581,347	1,381,946
Inventories	1,088,434	1,506,638
Prepaid Income Taxes	293,048	268,085
Other Current Assets	255,767	289,383
Property, Plant, and Equipment Land and Buildings	$484,592	$404,688
Machinery and Equipment	572,728	578,272
Office Furniture and Equipment	158,160	167,905
Leasehold Improvements	236,708	261,792
Total Property, Plant, and Equipment	$1,452,188	$1,412,657
Accumulated Depreciation and Amortization	(785,088)	(753,111)
Net Property, Plant, and Equipment	$667,100	$659,546
Other assets	$159,194	$173,511
Total Assets	$5,302,746	$5,171,412
Liabilities and Shareholders’ Equity
Current Liabilities
Short – Term Borrowings	$292,200	$823,182
Accounts Payable	881,717	742,622
Accrued Compensation and Employee Benefits	136,895	144,779
Accrued Marketing and Distribution	178,294	174,547
Accrued Restructuring Costs	58,238	307,932
Other current Liabilities	396,961	315,023
Long Term Debt	304,472	7,117
Deferred Liabilities	670,668	629,832
Total Liabilities	$2,919,445	$3,145,034
Shareholders’ Equity
Common Stock, no par value; 320,000,000 shares authorised; 119,542,527 shares issued and outstanding in 2015 (116,147,035 shares in 2014)	$297,929	$203,613
Retain Earnings	2,085,372	1,822,765
Total Shareholders’ Equity	$2,383,301	$2,026,378
Total Liabilities and Stockholders’ Equity	$5,302,746	$5,171,412

APPLE COMPUTER INC.

CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED SEPTEMBER 30, 2015 AND SEPTEMBER 30, 2014

(In thousands, except per share amounts)

	2015	2014
Net Sales	$9,188,748	$7,976,954
Cost and Expenses
Cost of Sales	$6,844,915	$5,248,834
Research and Development	564,303	664,564
Selling, General and Administrative	1,384,111	1,632,362
Restructuring Cost	(126,855)	320,856
Total costs and Expenses	$8,666,474	$7,866,616
Operating Income	$522,274	$110,338
Interest and other income(expense),Net	(21,988)	29,321
Income Before Income Taxes	$500,286	$139,659
Provision for Income Taxes	190,108	53,070
Net Income	310,178	86,589
Earnings per Common and Common Equivalent Share	$ 2.61	$ 0.73
Common and Common Equivalent shares used in the Calculations of Earnings per Share	118,735	119,125

Required:

Calculate the following ratios for both years.

1. Current Ratio

2. Quick Ratio

3. Receivable Turnover Ratio

4. Average days’ sales uncollected

5. Inventory Turnover

6. Average days’ Inventory on Hand

7. Profit margin

8. Asset Turnover

9. Return on Assets.

10. Return on Equity

Answer 1

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First step is to organize data in a suitable format for analysis as follows: 2015 2014 $1,203,488 $54,368 5676,413 $215,890 Current assets Cash and Cash Equivalents Short-Term Investment Net Accounts Receivable Inventories Prepaid Income Taxes Other Current Assets Current Assets $1,581,347 51,381,946 $1,088,434 $1,506,638 $293,048 5268,085 $255,767 $289,383 $4,478,467 $4,340,369 Current Liabilities Short-Term Borrowings Accounts Payable Accrued Compensation and Employee Benefits Accrued Marketing and Distribution Accrued Restructuring Costs Other current Liabilities Current Liabilities $292,200 $681,717 $136,895 $178,294 $58,238 $396,961 $1,944,305 SB23,182 5742,622 $144,779 $174,547 $307,932 $315,023 $2,508,085 Assets Equity $5,302,746 $5,171,412 $2,383,301 $2,026,378 Sales Cost of sales Gross income Operating income Net income $9,188,748 $6,844,915 $2,343,833 $522,274 $310,178 $7,976,954 $5,248,834 $2,728,120 $110,338 $86,589 Second step is to calculate the ratios in line with the formulae as follows. For the clarity, we have calculated gross income margin operating income margin as well as net income margin Ratio 2014 1.7x 2015 2.3x 1.6x 5.8x 63 6.3x 63 Current ratio Quick ratio Receivables turnover ratio Average days of sales uncollected Inventory turnover Average days of inventory on hand Gross income margin Operating income margin Net income margin Assets turnover Return on Assets Return on Equity Formula Current assets/ current liabilities Quick assets/ current liabilities Sales / Receivables 365 / Receivables turnover ratio Cost of Sales / Inventory 365 / Inventory turnover Gross income / Sales Operating income / Sales Net income / Sales Sales / Assets Net income / Assets Net income / Equity 58 25.5% 5.7% 3.496 1.7% 5.8% 13.0% 3.5x 105 34.2% 1.4% 1.1% 1.5x 1.796 4396