Chapter 3, Problem 3.24C

Case 3.24

LO 3, 4, 6, 7

Analysis of liquidity' and profitability measures of Apple Inc. The following summarized data (amounts in millions) are taken from the September 27, 2014, and September 28, 2013, comparative financial statements of Apple Inc., a manufacturer of mobile communication and media devices, personal computers, portable digital music players, and seller of a variety of related software, services, accessories, networking solutions, and third-party digital content and applications:

(Amounts Expressed in Millions)
For the Fiscal Years Ended September 27 and September 28, respectively:	2014	2013
Net sales	$182,795	$170,910
Costs of sales	112,258	106,606
Operating income	52,503	48,999
Net income	$ 39,510	$ 37,037
At Year End: Assets
Current assets:
Cash and cash equivalents	$ 13,844	$ 14,259
Short-term marketable securities	11,233	26,287
Accounts receivable, less allowances of $84 and $99, respectively	17,460	13,102
Inventories	2,111	1,764
Deferred tax assets	4,318	3,453
Vendor nontrade receivables	9,759	7,539
Other current assets	0,806	6,882
Total current assets	68,531	73,286
Long-term marketable securities	130,162	106,215
Property, plant, and equipment, net	20,624	16,597
Goodwill	4,616	1,577
Acquired intangible assets, net	4,142	4479
Other assets	3,764	5,146
Total assets	$231,839	$207,000
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$ 30,196	$ 22,367
Accrued expenses	18,453	13,856
Deferred revenue	8,491	7,435
Commercial paper	6,308	0
Total current liabilities	63,448	43,658

Deferred revenue-noncurrent	3,031	2,625
Long-term debt	28,987	16,960
Other noncurrent liabilities	24,826	20,208
Total liabilities	120,202	83,451
Shareholders’ equity:
Common stock and additional paid-in capital, $0.00001 par value, 12,600,000 shares authorized; 5,866,161 and 6,294,494 shares issued and outstanding, respectively	23,313	19,764
Retained earnings	37,152	104,256
Accumulated other comprehensive income (loss)	1,082	(471)
Total shareholders’ equity7	111,547	123,549
Total liabilities and shareholders’ equity.	$231,839	$207,000

At September 29, 2012, total assets were $176,064 and total shareholders' equity was $118,210.

Required:

1. Calculate Apple Inc.’s working capital, current ratio, and acid-test ratio at September 27, 2014, and September 28, 2013. Round your ratio answers to one decimal place.
2. Calculate Apple’s ROE for the years ended September 27, 2014, and September 28, 2013. Round your percentage answers to one decimal place.
3. Calculate Apple’s ROI, showing margin and turnover, for the years ended September 27, 2014, and September 28, 2013. Round your turnover calculations to two decimal places. Round your margin and ROI percentages to one decimal place.
4. Evaluate the company’s overall liquidity and profitability.

Optional continuation of Case 3.24-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.

	2014	2013	2012	2011	2010
Net sales	$182,795	$170,910	$156,508	$108,249	$65,225
Net income	35,910	37,037	4 L73 3	25,922	14,013
Cash, cash equivalents, and marketable securities	155,239	146,761	121,251	81,570	51,011
Total assets	23i,S39	207,000	176,064	116,371	75AS3
Long-term debt	28,987	16,960	0	0	0
Other long-term obligations*	24.826	20,208	16,664	10,100	5,531
Total shareholders' equity	m,547	123,549	118,210	76,615	47,791
*Other long-term obligations exclude noncurrent deferred revenue.

Calculate Apple Inc.’s total liabilities for each year presented above.

Are the trends expressed in these data generally consistent with each other?

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?

What other data (trend or otherwise) would you like to have access to before making an investment in Apple Inc.?