Your parents are considering investing in Apple Inc. common stock. They ask you, as an accounting expert, to make an analysis of the company for them. Financial statements of Apple are presented in Appendix A. The complete annual report, including the notes to its financial statements, is available at the company's website.

Instructions

a. Make a 5-year trend analysis, using 2016 as the base year, of (1) net sales and (2) net income. Comment on the significance of the trend results. (To satisfy this requirement you must access information regarding performance in prior years. This information is provided in the complete annual report available on the company's website.)

b. Compute for 2020 and 2019 the (1) debt to assets ratio and (2) times interest earned. (See Note 3 for interest expense.) How would you evaluate Apple's long-term solvency?

c. Compute for 2020 and 2019 the (1) profit margin, (2) asset turnover, (3) return on assets, and (4) return on common stockholders' equity. How would you evaluate Apple's profitability? Total assets at September 29, 2018, were \(\$ 365,725\) million. Total stockholders' equity at September 29,2018 , was \(\$ 107,147\) million.

d. What information outside the annual report may also be useful to your parents in making a decision about Apple?

Data from Appendix A

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Net sales: Products Services Total net sales Cost of sales: Products Services Apple Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except number of shares which are reflected in thousands and per share amounts) Total cost of sales Gross margin Operating expenses: Research and development Selling, general and administrative Total operating expenses Operating income Other income/(expense), net Income before provision for income taxes Provision for income taxes Net income Years ended September 26, September 28, September 29, 2020 2019 2018 $ 220,747 $ 53,768 274,515 151,286 18,273 169,559 104,956 18,752 19,916 38,668 66,288 803 67,091 9,680 $ 57,411 $ 213,883 46,291 260,174 144,996 16,786 161,782 98,392 16,217 18,245 34,462 63,930 1,807 65,737 10,481 55,256 $ 225,847 39,748 265,595 $ 148,164 15,592 163,756 101,839 14,236 16,705 30,941 70,898 2,005 72,903 13,372 59,531