ase 3.24 LO 3, 4, 6, 7 Analysis of liquidity and profitability measures of Apple
ID: 2417495 • Letter: A
Question
ase 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 24, 2011, and September 25, 2010, 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:
Page 101
At September 26, 2009, total assets were $47,501 and total shareholders' equity was $31,640.
Required:
Calculate Apple Inc.'s working capital, current ratio, and acid-test ratio at September 24, 2011, and September 25, 2010. Round your ratio answers to one decimal place.
Calculate Apple's ROE for the years ended September 24, 2011, and September 25, 2010. Round your percentage answers to one decimal place.
Calculate Apple's ROI, showing margin and turnover, for the years ended September 24, 2011, and September 25, 2010. Round your turnover calculations to two decimal places. Round your margin and ROI percentages to one decimal place.
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.
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.?
Explanation / Answer
Working Notes :-
Both Current Ratio and Acid Test ratio are higher than 1 i.e. thumb rule of industry. means that quick are are enourgh to pay current liabilities,, the company is liquid enough.
Moreover, Working Capital of the company is very good as it covers the payoff for Current liabilities.
From the trend above, profits of the company is increasing on yearly basis. From the lasy 2 years, retained earnings have increased by large, that means company is in re-construction phase. As more and more profits rea retained for expansion, Market price of share will risen, so its time to make investment in the company.
S.No Particular Formula Detail 2010 2011 1) Working capital C. Asset - C. Liability (a-b) 17018 20956 2) Current Ratio C. Asset /C. Liability (a/b) 1.61 2.01 3) Acid test Ratio Quick Asset/C. Liabilities (c/b) 1.58 1.96 4) ROE Net Income/Shareholder equity (d/e) 0.34 0.29Related Questions
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