Apple Inc. is one of the countrys most successful computer technology companies. The company designs, manufactures, and

Question:

Apple Inc. is one of the country€™s most successful computer technology companies. The company designs, manufactures, and sells computers, digital music devices, communication devices, and various software products. The company€™s net income has increased each year since 2002, and in 2007, Apple sold 1.463 million computers and 51.630 million iPods. Information relating to the company€™s business segments can be found in the company€™s annual report, an excerpt of which follows.

1. Where does Apple generate most of its revenues? Its profits?
2. The profitability of each dollar of revenue is measured by the ratio (Operating income/Net sales). Compute this ratio for each of Apple€™s five operating segments in 2007. Which segment has the highest profitability per dollar of revenue?
3. The extent to which a segment uses its assets to efficiently generate revenues is measured by the ratio (Net sales/Assets). Compute this asset turnover ratio for each of Apple€™s five operating segments in 2007. Which segment has the highest number of dollars of revenue generated for each dollar of assets?
4. The return on assets ratio (Operating income/Assets) measures how well a segment combines profitability and efficiency to generate profits with the existing assets. Compute return on assets for each of Apple€™s five operating segments in 2007. Which segment has the highest operating profit generated for each dollar of assets?
5. Based on your answers to parts (1) and (2), how critical is Apple€™s Retail segment to the company€™s overall success? Before you answer this question, think about how the company is able to sell and promote its computers and otherproducts.

Asset Turnover
Asset turnover is sales divided by total assets. Important for comparison over time and to other companies of the same industry. This is a standard business ratio.