You are considering an investment in the common stock of Apple Inc. The following information is from the financial statements included in Form 10-K for fiscal years 2015 and 2014 (in millions of dollars):

Cost of sales for the year ended

September 26, 2015 $140,089 

September 27, 2014 112,258 

inventories 

September 26, 2015 2,349 

September 27, 2014 2,111 

September 29, 2013 1,764 

The following information is from the financial statements included in Form 10-K for fiscal years 2012 and 2011 for Hewlett-Packard Company (in millions of dollars):

Cost of sales for the year ended

September 31, 2015 $59,468 

September 31, 2014 65,167 

inventories 

September 31, 2015 6,317 

September 31, 2014 7,490 

September 31, 2013 6,466 

Required

Part A. The Ratio Analysis Model

An investor must assess how well a company is managing its inventory before buying its stock. The inventory turnover ratio tells us how many times in a year a company sells its inventory. Replicate the five steps in the Ratio Analysis Model on page 238 to analyze the inventory turnover ratios for Apple Inc. and Hewlett-Packard:

1. Formulate the Question

2. Gather the Information from the Financial Statements

3. Calculate the Ratio

4. Compare the Ratio with Other Ratios

5. Interpret the Ratios

Part B. The Business Decision Model

An investor must consider a variety of factors, including financial ratios, before buying stock. Replicate the five steps in the Business Decision Model on page 239 to decide whether to buy stock in Apple Inc..

1. Formulate the Question

2. Gather Information from the Financial Statements and Other Sources

3. Analyze the Information Gathered

4. Make the Decision

5. Monitor Your Decision

Answer rating: 100% (QA)

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