ACC 101-Financial Accounting Case 2 - Financial Statement Analysis Part 2-120 Po
ID: 2522650 • Letter: A
Question
ACC 101-Financial Accounting Case 2 - Financial Statement Analysis Part 2-120 Points Date Name Use the information contained In these financial statements and notes to complete this case. All answers should be for the most current year (September 30, 2017 unless asked otherwise. Many companies show amounts in the thousands or millions-please state amounts as shown on the financial statements. Do not add zeros. You do not need to include dollar signs. Selected financial statements of Apple, Inc. follow. Apple Inc. CONSOLIDATED STATEMENTS OF OPERATIONS In millions, except number of shares which are refected in thousands and per share amounts) Years ended 2017 2016 2015 Net sales Cost of sales $ 229234S 215.639 233,715 140,089 131,376 141,048 88,18664263 9 Gross margin 93,626 Operating expenses: Research and development Selling, general and administrative 11.581 15.261 26,842 10.045 14.194 24.239 8.067 14,329 Total operating expenses 1230 1.285 72.515 19.121 53.394 61,344 60.024 Operating income Other income/(expense), net Income before provision for income taxes Provision for income taxes Net income 2.745 64,089 15.738 48.35t 1.348 61-372 15.685 45.687 Eamings per share Basic Diluted 927 $ 835$ 921 $ 831 S 922 9.28 Gash dnedends declared per share 240 s 2.18 1.98Explanation / Answer
Note: I have answered first four parts of the question as per Chegg's policy.
1. (a) Calulation of Current Ratio
Current ratio shows the liquidity position of company. It shows the availability of short term assets of organisation to pay off its short term liabilities. the higher the ratio is better.
Here, Current ratio for year 2017 has decreased in comparison to year 2016. Hence it is shows unfavourable liquidity position for the company.
(b) Calculate the Profit Margin ratio
Profit Margin Ratio=( Net Income / Net Sales ) x100
Profit margin ratio is a profitability ratio which shows the amount of net income for every dollar of sales made by the company during the year.
Higher the ratio is always better, because it indicates that company is incurring very less expenses.
In this case this ratio has decreased during the year very little, which is unfavourable for the company. decrease is very little so it is not the case of concern in this particular case.
2. (a) Calculate the Accounts Receivable Turnover ratio
Accounts Receivable Turnover ratio= Net Credit Sales / Average Accounts Receivable
Average Accounts Receivable = (Beginning Receivable + Ending Receivable)/2
Average Receivable = (17,874+15,754)/2 = 16,814
Accounts Receivable Turn over ratio= 229234 / 16814 = 13.633 times
It is an efficiency ratio which measures, how many times a business converts its receivable into cash during the period.
In this case 13.633 times means company coverts its receivable into cash in 26 days (365 days/13.633 ). The figure is favourable for the company as company is able to collect money from its credit sales in 26 days which shows effective management of recovery of credit sales.
(b) Calculate the Days’ Sales Uncollected ratio
= ( Average Receivable/ Credit Sales ) x 365 Days
= (16814 / 229234) x 365 days
= 26.772 ( 27 days)
It indicates how many days a business takes to collect its credit sales. It is favourable for company because collection is made within 30 days of sales.
3. (a) Calculate the Total Asset Turnover ratio
= ( Net Sales / Average Assets )
Average Assets = (375319 + 321686) / 2 = 348502.5
Total Asset Turnover ratio= (229234 / 348502.50) = 0.657 times
It is an efficiency ratio which shows company’s ability to generate sales from its assets.
As ratio is lower hence unfavourable for the company.
4. (a) Calculate the Debt ratio
= Total Liabilities / Total Assets
= 241272 / 375319
= 0.642 times
The debt ratio of a business is used in order to determine how much risk that company has acquired.
A low level of risk is preferable, and is linked to a more independent business that does not need to rely heavily on borrowed funds, and is therefore more financially stable.
The Apple Inc has a high debt ratio (above 0.50 or 50%). It means it is highly leveraged and most of its assets are financed through debt, not equity.
Particulars Sept 17 Sept 16 CURRENT ASSETS 128645 106869 CURRENT LIABILITIES 100814 79006 CURRENT RATIO 127.606% 135.266%Related Questions
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