pls i need help with the samsung wiley Annual Report Project

only the other 4 Attachment is a guideline telling you what need to be done.pls see the attached Apple company wiley Annual Report

ANNUAL REPORT PROJECT Assignment 2 1. Name of company chosen: Apple Inc. 2. Information about the company: What is the industry classification for the company (according to Fortune or the Internet site you are using)? -According to Fortune, Apple is classified under the Technology sector, and in the Computers and Office Equipment industry. Their current chief executive officer is Tim Cook. Apple was founded on April 1, 1976 by Steve Wozniak and Steve Jobs; it was then incorporated on January 3, 1977. She changed her name on January 9, 2007, to match their new mission of producing consumer electronics. Apple has joined Dow Jones industrial average since March 3, 2015. Describe the nature of the company's business. -Per the company's annual report, Apple \"designs, manufactures, and markets mobile communication and media devices, personal computers, and portable digital music players, and sells a variety of related software, services, accessories, networking solutions, and third-party digital content and applications\" (Apple, 2014). List the company's primary products or services (use brand names where available). -Apple's primary products and services include iPhone, iPad Air, iPad Mini, MacBook Air, MacBook Pro, MacBook, iMac, Mac Pro, Mac Mini, iPod, Apple TV, Apple accessories, Apple networking devices, Apple Watch, Applecare, iOS and OS X operating systems, iCloud, consumer and professional software applications, iTunes Store, App Store, iBookstore, Mac App Store, and Apple Pay. What is the address of the company's corporate headquarters? One Infinite Loop Cupertino, CA 95014 What is the address of the company's Web site? www.apple.com List other countries in which the company operates: -United States, Canada, -Europe (Albania, Austria, Belarus, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Lithuania, Luxembourg, Macedonia, Malta, Moldova, Netherlands, Norway, Poland, Portugal, Romania, Russia, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey, Ukraine, United Kingdom) -Africa, the Middle East, and India (Algeria, Angola, Armenia, Azerbaijan, Bahrain, Benin, Botswana, Burkina Faso, Cape Verde, Chad, Republic of the Congo, Egypt, Gambia, Ghana, Guinea-Bissau, India, Israel, Jordan, Kenya, Kuwait, Lebanon, Liberia, Madagascar, Malawi, Mali, Mauritania, Mauritius, Mozambique, Namibia, Niger, Nigeria, Oman, Qatar, So Tom and Prncipe, Saudi Arabia, Senegal, Seychelles, Sierra Leone, South Africa, Swaziland, Tanzania, Tunisia, UAE, Uganda, Yemen, Zimbabwe) -Asia Pacific (Australia, Bhutan, Brunei Darussalam, Cambodia, China, Fiji, Hong Kong, Indonesia, Japan, Kazakhstan, Kyrgyzstan, Lao People's Democratic Republic, Macao, Malaysia, Federated States of Micronesia, Mongolia, Nepal, New Zealand, Pakistan, Palau, Papua New Guinea, Philippines, Singapore, Solomon Islands, South Korea, Sri Lanka, Taiwan, Tajikistan, Thailand, Turkmenistan, Uzbekistan, Vietnam) -Latin America and the Caribbean (Anguilla, Antigua and Barbuda, Argentina, Bahamas, Barbados, Belize, Bermuda, Bolivia, Brazil, British Virgin Islands, Cayman Islands, Chile, Colombia, Costa Rica, Dominica, Dominican Republic, Ecuador, El Salvador, Grenada, Guatemala, Guyana, Honduras, Jamaica, Mxico, Montserrat, Nicaragua, Panam, Paraguay, Per, St. Kitts and Nevis, St. Lucia, St. Vincent and The Grenadines, Suriname, Trinidad and Tobago, Turks and Caicos, Uruguay, Venezuela) What were the company's revenues for the most recent fiscal year? -Net Sales totaled $182,795,000,000 FY2014. Who is the chairman of the company's board of directors? -Arthur D. Levinson was named non-executive chairman of board on November 15, 2011 Who is the company's CEO? -The company's CEO is Timothy D. Cook 3. Provide the following market data: On what stock exchange is the company's stock traded? -Apple is traded on the NASDAQ stock exchange (Global Select Market). What is the ticker symbol for the company? -AAPL What was the price of the company's stock at the end of one day during this past week? Price: $122.57 Date: July 8, 2015 What were the lowest and highest stock prices during the past year? 52-week low: $92.57 52-week high: $134.54 4. Obtain a copy of an article about the company. Attach a copy of the article. Name of article: \"Why Apple still solid on 2 fronts: Wealth managers\" Source of article (name of magazine or newspaper, date, page numbers): http://www.cnbc.com/id/102821468 Summarize the article. Use complete sentences and well-organized paragraphs. Your summary should be no fewer than 100 words in length. Back in March, Apple's stock (AAPL) was added to the Dow Jones industrial average. According to the article, even though the company's stock has been \"under heavy pressure\" since then, two prominent wealth managers believe that it \"remains a solid investment technically and fundamentally\" (Belvedere, 2015). Interestingly, hedge fund manager David Gerstenhaber believes that \"unless you think the index is going down hard, and unless there's any negative news on Apple, there's no way the stock should underperform\" (Belvedere, 2015). Although the AAPL was down 4.5% since March, only losing 3% during this time, the S&P 500's heavy reliance on the company's performance has only decreased by 2.5%, meaning that subpar conditions aren't all that bad in Apple's case. The article's other expert opinion came from Elizabeth Corley, a chief executive for Allianz Global Investors. In short, she strongly believes in Apple as a company, stating that, \"we think it's one of the strongest consumer brands in the world... it's well run... it's coming out with a great product lineup\" (Belvedere, 2015). But possibly the most significant part of what she shared involves Apple's impressive loyalty from consumers, calling it a \"consumer trust element.\" As for the company's outlook, Apple intends to increase production of the next iPhone in anticipation of its launch this fall, with more units expected than ever before. Given these insights and current conditions, both Apple and its investors should be both pleased with the company's performance over the last decade and optimistic for the future. Name of article: \"Why Apple's Stock Has Been Weak\" Source of article (name of magazine or newspaper, date, page numbers): http://www.forbes.com/sites/chuckjones/2015/07/09/why-apples-stock-has-been-weak/ Summarize the article. Use complete sentences and well-organized paragraphs. Your summary should be no fewer than 100 words in length. As big as Apple is, it is hard to believe that their stock is actually down about 2%. The article written by Chuck Jones, a contributor for Forbes Magazine, outlines the reasons why this is happening. The article is aptly named \"Why Apple's Stock Has Been Weak.\" Some of the reasons Jones says are contributing to this are the drop in the Chinese stock market, the projected stagnation in iPhone 6 sales later this year or early next year as the anticipation of the new iPhone grows. He also states that the demand for the newly launched Apple Watch has begun to slow already and does not show any real promise of growing again among a few other reasons. To be concerned that the stock will stay low is not really a valid one as Jones summarizes that this ep and flow of their stock happens from time to time. ANNUAL REPORT PROJECT Assignment 3 *Another useful website is finance.yahoo.com Name of company chosen: Apple Inc., is our choice Balance sheet date: 27 September 2014 1. REVIEW THE ANNUAL REPORT THAT YOU HAVE RECEIVED. IT WILL CONTAIN SEVERAL SECTIONS: a. FINANCIAL HIGHLIGHTS. This section provides a summary of selected financial results over a number of years. You may find two schedules providing highlights: one brief summary near the front of the annual report and a more detailed summary in the financial section. This second schedule may be called Five-Year Summary of Selected Financial Data. Note its page number here. Page(s) 24. Here is an excerpt of their selected financial data for 2104: Selected Financial Data The information set forth below for the five years ended September 27, 2014, is not necessarily indicative of results of future operations, and should be read in conjunction with Part II, Item 7, \"Management's Discussion and Analysis of Financial Condition and Results of Operations\" and the consolidated financial statements and related notes thereto included in Part II, Item 8 of this Form 10-K to fully understand factors that may affect the comparability of the information presented below (in millions, except number of shares, which are reflected in thousands, and per share amounts). 2014 2013 2012 2011 2010 Net sales $ 182,795 $ 170,910 $ 156,508 $ 108,249 $ 65,225 Net income $ 39,510 $ 37,037 $ 41,733 $ 25,922 $ 14,013 Basic $ 6.49 $ 5.72 $ 6.38 $ 4.01 $ 2.20 Diluted $ 6.45 $ 5.68 $ 6.31 $ 3.95 $ 2.16 Cash dividend s declared per share $ 1.82 $ 1.64 $ 0.38 $ 0 $ 0 Earnings per share: Shares used in computi ng earnings per share: Basic 6,085,5 72 6,477,3 20 6,543,7 26 6,469,8 06 6,366,2 24 Diluted 6,122,6 63 6,521,6 34 6,617,4 83 6,556,5 14 6,472,9 83 Total cash, cash equivale nts and marketab le securitie s $ 155,239 $ 146,761 $ 121,251 $ 81,570 $ 51,011 $ 231,839 $ 207,000 $ 176,064 $ 116,371 $ 75,183 Commercia l paper $ 6,308 $ 0 $ 0 $ 0 $ 0 Long-term debt $ 28,987 $ 16,960 $ 0 $ 0 $ 0 Total assets Other longterm obligatio ns (1) $ 24,826 $ 20,208 $ 16,664 $ 10,100 $ 5,531 Total liabilities $ 120,292 $ 83,451 $ 57,854 $ 39,756 $ 27,392 Total sharehol ders' equity $ 111,547 $ 123,549 $ 118,210 $ 76,615 $ 47,791 b. THE CHAIRMAN'S LETTER. This letter provides the chairman's overview of the past year and developments which will affect the next year. Page(s) There is no Chairman letter contained in the annual report. c. THE COMPANY, ITS PRODUCTS, ITS EMPLOYEES. This section may contain a number of color photographs and will highlight the products and accomplishments of the company. Pages 19 contains graphs and some photos. d. MANAGEMENT DISCUSSION AND ANALYSIS. This section discusses operating results, industries in which the company operates, financing and investing activities, significant events, trends and developments. Page 25 (in 2014 financial statements). e. THE FINANCIAL STATEMENTS AND NOTES TO THE FINANCIAL STATEMENTS. This section contains the balance sheet(also called statement of financial position), income statement, statement of cash flows and statement of stockholders' equity. The accompanying notes, as indicated at the bottom of each of the above statements, are an integral part of the financial statements. The financial statements cannot be understood without reference to the notes. The financial statements and accompanying notes will be the focus of your Annual Report Project. Balance Sheet Page 56 - 57 Income Statement Page 55 Statement of Cash Flows Page 60-61 Statement of Stockholders' Equity Page 58 - 59 Notes to the financial statements: (Include ALL notes. Attach an additional page if necessary.) Summary of significant accounting policies Inventories Plant assets Long-term debt Income taxes Employee benefit plans Commitments and contingencies Note # 1 is located starting on Page 62 Note # 3 is located starting on Page 77 Note # 3 is located starting on Page 77 Note # 6 is located starting on Page 86 Note # 5 is located starting on Page 81 Note # 9 is located starting on Page 94 Note # 10 is located starting on Page 98 Other notes: Title of note Financial Instruments Goodwill and Other Intangible Assets Shareholders' Equity Comprehensive Income Segment Information and Geographic Data Note #2 is located starting on Page 69 Note #4 is located starting on Page 79 Note #7 is located starting on Page 89 Note #8 is located starting on Page 92 Note #11 is located starting on Page 103 Selected Quarterly Financial Information (Unaudited) Note #12 is located starting on Page 108 f. MANAGEMENT REPORT ON INTERNAL CONTROL Page 112 g. THE INDEPENDENT AUDITOR'S REPORT: REPORT ON INTERNAL CONTROL Page 111 REPORT ON THE FINANCIAL STATEMENTS Page 110 h. Other: Page Page Page 2. REVIEW THE CHAIRMAN'S LETTER TO THE SHAREHOLDERS. Summarize the major points made in the letter. Page(s) on which letter appears: There is no Chairman's letter to the shareholders contained in the annual report. Locate the management report(s) and the independent auditor's report(s). Answer the following questions. Page(s) First, I want to disclose that my annual reports were obtained through securities and exchange control. www.sec.gov Therefore, my page numbering might be a little different even though I don`t expect that to be the case. a) Who is responsible for the preparation and integrity of the financial statements? This can be located on page 85 of 2014 filings The CEO and Chief financial and officers are both responsible for the integrity of the financial statements. However, the report was signed by Tim Cook, Luca Maestri, Millard Drexler, Al Gore, Robert Iger, Andrea Jung, Arthur Levinson, Ronald Sugar, and Susan Wagner, b) Does the company maintain a system of internal controls? Why? Yes, it maintains a system of financial controls to protect company assets. This is to maintain reasonable assurance over the reliability of their financial reports and statements. It can be located on page 82 c) Does the company have an audit committee? What is its purpose? Yes, they do have an audit committee. Similar to internal controls, audit committee is tasked with mainly protecting company assets. d) What is the name of the independent public accountant (auditor)? Ernst & Young LLP was the auditing firm. (Note: There are two independent auditor's reports: (1) a report on internal control, and (2) a report on the financial statements. The following questions relate to the financial statement audit.) e) According to the auditor's report on the financial statements, what is the auditor's responsibility? The auditor's responsibility is to express an opinion on these financial statements based on our audits. (Page 110) f) According to the audit report, what is an audit? An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. (Page 110) g) Summarize the auditor's opinion. The auditor's opinion states Apple's financial statements at 28 September 2013 and 27 September 2014 are presented fairly and properly. They also state Apple's Inc. consolidated results of its operations and its cash flows for each of the 3 years in the period ending on 27 September 2014 were in conformity with U.S. generally accepted accounting principles. (Page 110) ANNUAL REPORT PROJECT ASSIGNMENT 4 THE BALANCE SHEET Name of company chosen: _Apple Inc._______ THE BASICS Locate the company's balance sheet. Balance sheet date: 27 Sept 2014 Page on which balance sheet appears: _Page 56-57__ 1. The accounting equation is Assets = Liabilities + Stockholders' Equity. Replacing the words in the accounting equation with dollar amounts, give the company's accounting equation at the end of the current and prior years. Assets = Liabilities + Equity This year _$231,839,000__ __$120,292,000_ __$111,547,000_ Last year __$207,000,000__ __$83,451,000__ __$123,549,000_ 2. Calculate the company's current ratio for both this year and the prior year. Show your computations. This year: 2014 First of all current ratio is derived as follows; current assets /current liabilities Current assets = 68,531,000,000 Current liabilities =63,448,000,000 = 68,531,000,000/63,448,000,000 = 1.08 Last year: = 73,286,000,000/43,658,000,000 = 1.68 Explain what information this ratio provides. (Hint: See the Financial Statement Analysis chapter of your textbook.) Use complete sentences. Current ratios measures a company's ability to meet its short-term obligations by converting their current assets to cash. A current ratio of 1 means Apple can meet their short-term obligations easily. But, 1.68 means that they can almost twice meet their short term obligations. Has the current ratio improved or worsened? Explain. Use complete sentences. Apple's current ratio worsened from 2013 to 2014. This is because the value decreased by 0.60, going from 1.68 to 1.08. Calculate the company's debt to total assets ratio (also called total debt to equity) for both this year and the prior year. Show your computations. This year: Total liabilities = 120,292,000 = 0.52 Total assets 231,839,000 Last year: = 83,451,000 = 0.40 207,000,000 Explain what information this ratio provides. Use complete sentences. The debt to total asset ratio provides information which measures the percentage of the total assets provided by creditors. The higher the ratio results in a higher degree of leverage and financial risk of a business. A ratio which is greater than 1 signifies that a large amount of assets are being funded with debt, while a low ratio means the majority of asset funding is coming from equity. Has the ratio improved or worsened? Explain. Use complete sentences. The ratio in 2014 has worsened since 2013 as it has increased, therefore soon the company may not be able to meet its maturing obligations. 3. Compare these ratios to industry averages. Use the ratios you printed in Assignment 3. Your company Industry Current ratio Debt to equity ratio _1.08______ _0.52____ _1.78______ __0.59_____ How do the results for your company compare to industry averages? Apple's current ratio is much lower than the industry's average as the debt to equity ratio is also below the industry's average. FURTHER ANALYSIS 4. Prepare common-size balance sheets for the two years presented, expressing each balance sheet item as a percentage of total assets (Total assets = 100%). (Refer to the discussion of vertical analysis in the financial statement analysis chapter of your text.) Use a spreadsheet program such as Excel to do this part of the assignment. Label the spreadsheet \"Common Size Analysis - Balance Sheet.\" Insert the accounts and classifications in column A and the amounts for each of the two years in columns B and C. In columns D and E, use a formula to convert the amounts in columns B and C to percentages. Apple Inc. Comparative Balance Sheet (in millions, USD) Sept. 27, 2014 and Sept. 28, 2013 Assets 2014 2013 2014 2013 $13,844 $14,259 5.97% 6.89% Short-term marketable securities 11,233 26,287 4.85% 12.70% Accounts receivable 17,460 13,102 7.53% 6.33% Current assets: Cash and cash equivalents Inventories 2,111 1,764 0.91% 0.85% Deferred tax assets 4,318 3,453 1.86% 1.67% Vendor non-trade receivables 9,759 7,539 4.21% 3.64% Other current assets 9,806 6,882 4.23% 3.32% Total current assets 68,531 73,286 29.56% 35.40% 130,162 106,215 56.14% 51.31% 20,624 16,597 8.90% 8.02% Goodwill 4,616 1,577 1.99% 0.76% Acquired intangible assets, net 4,142 4,179 1.79% 2.02% Other assets 3,764 5,146 1.62% 2.49% Long-term marketable securities Property, plant and equipment, net Total assets Liabilities and Shareholders' Equity $231,839 $207,000 100.00% 100.00% 2014 2013 2014 2013 Accounts payable $30,196 $22,367 13.02% 10.81% Accrued expenses 18,453 13,856 7.96% 6.69% Deferred revenue 8,491 7,435 3.66% 3.59% Commercial paper 6,308 0 2.72% 0.00% 63,448 43,658 27.37% 21.09% 3,031 2,625 1.31% 1.27% Long-term debt 28,987 16,960 12.50% 8.19% Other non-current liabilities 24,826 20,208 10.71% 9.76% 120,292 83,451 51.89% 40.31% Common stock and additional paid-in capital 23,313 19,764 10.06% 9.55% Retained earnings 87,152 104,256 37.59% 50.37% 1,082 (471) 111,547 123,549 Current liabilities: Total current liabilities Deferred revenue - non-current Total liabilities Shareholders' equity: Accumulated other comprehensive income/(loss) Total shareholders' equity Total liabilities and shareholders' equity 0.47% (0.23%) 48.11% 59.69% $231,839 $207,000 100.00% 100.00% INFORMATION FOR DECISION MAKING 5. Answer the following questions: Use complete sentences. a. In which assets does the company have the most significant investment? After analyzing Apple's financial information, it appears that they have the most significant investment in long-term marketable securities, with 56.14% ($130,162 million) of total assets in 2014 and 51.31% ($106,215 million) in 2013. The justification behind this is that they can be easily bought and sold in a public market. The next most significant portion appears to be the entire group of current assets, with 29.56% ($68,531 million) in 2014 and 35.40% ($73,286 million) in 2013. b. Is the company financed primarily with debt or equity? Explain using the information obtained in questions 1-4. Since Apple's debt to equity ratio was 0.52 for 2014, the company's assets are almost evenly financed between debt and equity. Technically speaking, Apple was financed with slightly more debt than they are with equity in 2014. Considering that the industry average is 0.59, Apple are ahead of the pack in terms of not requiring as much debt to acquire assets. c. Is the debt primarily short-term or long-term? Explain. In 2014, Apple's long-term debt was 12.50% ($28,987 million) of total assets, while current liabilities during this time was 27.37% ($63,448 million). Additionally, the difference between these two classifications was approximately the same in 2013 as well. Therefore, it's safe to say that Apple's debt is primarily short-term. d. Comment on any significant changes in individual assets or liabilities. Use the information obtained in question 4. The most significant change from 2013 to 2014 ocurred in total liabilities, where it increased by $36,841, which equals an increase of 11.57% in its portion of total assets. The most significant change in individual liabilities was commercial paper, where it went from $0 in 2013 to $6,308 in 2014. As far as individual assets go, short-term marketable securities decreased by $15,054 from 2013 to 2014. Even so, total assets increased by $24,839 during this time. e. Comment on any significant changes in the composition of current assets or current liabilities. Use the information obtained in question 4. In 2014, Apple's current assets decreased by $4,755, going from $73,286 to $68,531. As far as current liabilities are concerned, Apple saw an increase of $19,790 to $63,448 in 2014. f. Evaluate the company's debt-paying ability. Refer to the information obtained in the previous questions. Even though Apple's current ratio decreased from 1.68 in 2013 to 1.08 in 2014, the company is still in a good position to cover their debts. This is because their current ratio is still above 1.00. A company of Apple's stature and financial history shouldn't feel too concerned about this category. ANNUAL REPORT PROJECT ASSIGNMENT 5 THE INCOME STATEMENT Name of company chosen: __Apple Inc._____ Locate the company's income statement. What is the period covered by the income statement? _Years ending 29 September 2012, 28 September 2013 and 27 September 2014_______ What is the page on which the income statement appears? __Page 55_____ THE BASICS 1. Does the format of the statement more closely follow a single-step or a multiple-step format? Apple's income statement resembles a single-step format vice a multiple-step format. How can you tell? Apple's income statement states it is a consolidated form as it shows the total of revenues and gains minus the expenses and losses. It also does not show the gross profit as the multiple-step format does. 2. Calculate the following ratios for each of the three years presented. Show your computations. Current year Last year Two years ago Gross profit rate (%) 70,537,000 = 64,304,000 = 68,662,000 = 182,795,000 .39 x 100 = 38.59 % Ratio of operating 52,503,000 = expenses to sales 182,795,000 (or operating revenue) 0.29 x 100 = 28.72% (%) 170,910,000 .38 x 100 = 37.62 % 156,508,000 .44 x 100 = 43.87 % 48,999,000 = 170,910,000 0.29 x 100 = 28.67% 55,241,000 = 156,508,000 0.35 x 100 = 35.30% Profit margin (%) 39,510,000 = 37,037,000 = 0.22 x 100 41,733,000 = 0.27 x 100 Net income/sales 182,795,000 170,910,000 156,508,000 or operating revenues 0.22 x 100 = 21.61% = 21.67% = 26.67% Return on assets 39,510,000 = 37,037,000 = Net income/average (231,839,000 + 207,000,000)/2 (207,000,000 + 176,064,000)/2 41,733,000 = (176,064,000 + 116,371,000)/2 total assets 0.18 x 100 = 18.01% 0.19 x 100 = 19.34% 0.29 x 100 = 28.54% You will find prior years' assets in the Five-Year Summary of Selected Financial Data. 3. Compare these ratios to industry averages. (Note: The gross profit rate may also be called the gross margin. The ratio of operating expenses to sales may also be called the operating margin. The profit margin percentage may also be called the net profit margin.) Your company Industry Gross profit rate __38.59 %_______ ___26.57%_______ Operating margin __35.30%________ ___10.60%_______ Profit margin __21.61%________ ___7.57%________ Return on assets __18.01%________ ___8.37%________ How do the results for your company compare to industry averages? Apple's gross profit rate, operating margin, profit margin, and return on assets are all well above the industry averages. Overall, they are operating in an effective, profitable manner. FURTHER ANALYSIS 4. Prepare common-size income statements for the three years presented, expressing each income statement item as a percentage of total revenue. (Total revenue = 100%). (Refer to the discussion of vertical analysis in your textbook.) Use a spreadsheet program to do this part of the assignment. Label the spreadsheet \"Common Size Analysis - Income Statement.\" List the revenue and expense classifications in column A, the amounts for the three years in columns B, C, and D. In columns E, F, and G, use a formula to convert the amounts to percentages. Apple Inc. Comparative Income Statement (in millions, USD) Vertical Analysis 2014 Net sales 2013 2012 2014 2013 2012 $182,795 $170,910 $156,508 100.00% 100.00% 100.00% Cost of sales 112,258 106,606 87,846 61.41% 62.38% 56.13% Gross margin 70,537 64,304 68,662 38.59% 37.62% 43.87% 6,041 4,475 3,381 3.30% 2.62% 2.16% Selling, general, and administrative 11,993 10,830 10,040 6.56% 6.34% 6.42% Total operating expenses 18,034 15,305 13,421 9.87% 8.96% 8.58% Operating income 52,503 48,999 55,241 28.72% 28.67% 35.30% 980 1,156 522 0.54% 0.68% 0.33% Income before provision for income taxes 53,483 50,155 55,763 29.26% 29.35% 35.63% Provision for income taxes 13,973 13,118 14,030 7.64% 7.68% 8.96% $39,510 $37,037 $41,733 21.61% 21.67% 26.67% Basic $6.49 $5.72 $6.38 Diluted $6.45 $5.68 $6.31 Operating expenses: Research and development Other income/(expense), net Net income Earnings per share: Shares (in thousands): Basic 6,085,572 6,477,320 6,543,726 Diluted 6,122,663 6,521,634 6,617,483 Cash dividends declared per common share $1.82 $1.64 $0.38 INFORMATION FOR DECISION MAKING 5. Answer the following questions. Use complete sentences, and explain your answers by reference to the information you obtained in the preceding questions. a. Comment on the trend in total revenue. Is it increasing or decreasing during the three- year period? Net sales steadily increased from 2012 to 2014, going from $156,508 (2012) to $170,910 (2013) to $182,795 (2014), with all of these amounts in millions. So from 2012 to 2013, total revenue increased by 9.20%, followed by a 6.95% increase from 2013 to 2014. Consistently increasing revenues in an incredibly competitive industry is certainly a positive sign. b. How has the gross profit percentage changed over the three-year period? Refer to the information obtained in question 2. It appears though the gross profit percentage decreased from 2012 to 2014. However, this was not a steadily declining trend, with a decrease from 43.87% (2012) to 37.62% (2013), followed by a slight increase to 38.59% (2014). Given the ever changing technology industry, it's understandable to see fluctuations in these percentages, so long as they don't follow a declining trend over an extended period of time. c. Comment on the ratio of total operating expenses to operating revenues over the three- year period. Refer to the information obtained in question 2. From 2012 to 2013, the ratio of total operating expenses to operating revenues decreased by 6.63% from 35.30% to 28.67%. The following year saw a 0.05% increase to 28.72% in 2014. Exhibiting a lower portion of operating expenses while increasing total revenues indicates a company growing in a healthy manner. d. Comment on individual revenue and expense items that had significant percentage changes (changes as a percentage of total revenue or total expenses) over the three-year period. Indicate the percentages. After going through the common-size income statement that we created for Apple, it appeared as if the percentages from 2012 to 2014 remained somewhat similar. Interestingly, the selling, general, and administrative expenses only increased by $1,953,000,000 (19.45% increase) while research and development expenses increased by $2,660,000,000 (78.67% increase) during this time. Analytically speaking, since total revenue (net sales) increased by $26,287,000,000 and operating expenses only increased by $4,613,000,000, Apple are succeeding while operating efficiently. e. Comment on the overall trend in operating income and net income as a percent of sales over a three-year period. Refer to the information obtained in questions 2 and 4. As a percentage of net sales, both operating income and net income saw a decrease from 2012 to 2013. However, operating income increased from 2013 to 2014 while net income decreased during this time. Operating income went from 35.30% in 2012 to 28.67% in 2013, before slightly increasing to 28.72% in 2014. Net income, on the other hand, started at 26.27% in 2012 and decreased to 21.67% in 2013 before slightly decreasing to 21.61% in 2014. f. Comment on the significance of these changes. Do they indicate a positive or negative trend for the company? Explain. Overall, these changes indicate a relatively positive trend for Apple. Even though there were some negative factors over the last three years, the company appears to be increasing their revenues while minimizing their expenses. The slight decrease in the percentage of net income from 2013 to 2014 shouldn't be too worrisome, as the company has historically performed above industry standards. g. Include any other comments that you consider relevant. Having become quite familiar with Apple products, I find it interesting that the company's trend in regard to earnings per share seems to follow their releasing of new iPhone models. In 2013, since there wasn't much of an upgrade from the iPhone 5 to iPhone 5S, the basic and diluted EPS decreased by 10.34% ($6.38 to $5.72) and 9.99% ($6.31 to $5.68) respectively. However, in 2014, when the entirely new iPhone 6 model was released, the basic EPS increased by 13.46% ($5.72 to $6.49) and the diluted EPS increased by 13.56% ($5.68 to $6.45). Of course, this couldn't have been the only reason as to why such a trend would occur, especially considering the countless contributing factors in the booming tech space. But even so, with the iPhone 6 launch being the largest and most significant in Apple's storied history, it certainly played a role in boosting the company's EPS. ANNUAL REPORT PROJECT Assignment 6 CURRENT ASSETS Name of company chosen: __Apple, Inc._____ Refer to the notes to the financial statements. The first note, \"Summary of Significant Accounting Policies,\" provides information about the company's inventory costing and other accounting methods. You will also need to refer to the other notes to the financial statements and to the financial statements themselves in order to answer the following questions. IMPORTANT: For each answer given, indicate the page number on which the information was found. THE BASICS 1. Accounts Receivable (a) What is the amount of the company's accounts receivable? Page _56______ Before subtracting the allowance for doubtful accounts (gross accounts receivable): This year __$103,460,000________ Last year __$112,102,000________ After subtracting the allowance for doubtful accounts (net accounts receivable): This year ___$17,460,000________ Last year ___$13,102,000_________ (b) What is the amount of the allowance for doubtful accounts? This year __$86,000,000_________ Page _56______ Last year __$99,000,000__________ What percentage of the gross accounts receivables are considered bad debts? The credit risk ratio: Allowance for doubtful accounts Gross accounts receivable This year _$86,000,000 / $103,460,000 = 0.83 x 100 = 83.12%___________________ Last year _$99,000,000,/ $112,102,000 = 0.88 x 100 = 88.31%___________________ 2. Inventories and Cost of Goods Sold (a) What is the amount of inventory? This year __$2,111,000_____________ Page __56_________ Last year ___$1,764,000______________ (b) What is the amount of cost of goods sold? Page __53__________ This year __$112,258,000__________________ Last year __$106,606,000________ 2 years ago ___$87,846,000___________ (c) What inventory costing method has the company chosen? Page _____54_________ Apple's inventories are stated at the lower of cost, computed using first-in, first-out method (FIFO), or market. (d) What other information does the company provide in the note about its inventory? If the cost of their inventories exceeds their market value, provisions are made currently for the difference between the cost and the market value. Page _67____________ FURTHER ANALYSIS Analysis of Current Assets 3. Calculate the following ratios: Show your computations. (a) Receivables turnover = _____Sales__________ = _$182,795,000_ = 11.96 Average net receivables ($17,460,000 + $13,102,000) / 2 (b) Average collection period = ___ 365_______ (c) Inventory turnover = Turnover Cost of goods sold Average inventory $112,258,000 = 57.94 ($2,111,000 + $1,764,000) / 2 = __365__ 11.96 = = 30.52 days (d) Average days inventories held = __ 365_______ = __365____ = 6.30 days Turnover 57.94 4. Explain what information each of these ratios provides. 1. The receivables turnover ratio measures the amount of times, on average, how effectively an organization is able to collect receivables during a given period. This also displays how well a company extends credit to other institutions and collects funds from them. b. The average collection period ratio is the average amount of days between a given date where a credit sale occurs and the date when the money is received from the customer. This collections period is also sometimes referred to as the days' sales in accounts receivable. c. The inventory turnover ratio measures the average number of times a particular company sells its inventory during a specific period, or the liquidity of the inventory. A higher number shows there is a large amount of inventory being sold during the period. d. The average days inventories held ratio shows the average amount of days how long the inventory remains on the shelf until it is sold to its customers. 5. Compare these ratios to industry averages. Your company Industry Receivables turnover __11.96________ __10.02__________ Inventory turnover __57.94________ __21.67__________ How do the results for your company compare to industry averages? Apple's receivable turnover ratio compared to the industry average is slightly higher which shows that it is either operating on a cash basis, collecting the credit sales from their customers or that its extension of credit and collection of accounts receivable is efficient. Apple's inventory turnover ratio is significantly higher than the industry average which shows that there is a large amount of sales that are being generated/sold during a given a amount of time. INFORMATION FOR DECISION MAKING 6. Evaluate the company's receivables collection. In your answer, consider the type of product(s) the company sells, the industry in which the company operates and the type of customer it serves. Refer to the information obtained in the preceding questions. Apple's receivables collection process is slightly above the industry's average which signifies they are doing a good job on collecting the accounts receivable from other organizations. The electronic manufacturing sector is competitive as there are many firms who operate and mass produce similar products which Apple sells. With the economy constantly fluctuating, causing risk to many businesses, being able to collect on their accounts and remain profitable on its investments shows the company is headed in the right direction. Due to having a large amount of outstanding trade receivables to many cellular network carriers, wholesalers and retailers Apple will sometimes require credit insurance on some of their third-party companies in order to help reduce the credit risk. 7. Evaluate the company's inventory management. In your answer, consider the type of product(s) the company sells, the industry in which the company operates and the type of customer it serves. Refer to the information obtained in the preceding questions. Apple's inventory management process is doing exceptionally well as it turns its entire inventory over in under 7 days. Its inventory ratio is over twice as the industry's average which shows Apple is selling a large amount of inventory in a very competitive market. There are many organizations which sell similar products that Apple does at a cheaper price, but it's reliability, brand name and reputation for standing behind the products it makes and sells helps to keep it as a leader in the market. This shows that Apple's purchasing and sales departments are working together to ensure sales are being met as it's products are in great demand. ANNUAL REPORT PROJECT Assignment 7 Refer to the notes to the financial statements. The first note, \"Summary of Significant Accounting Policies,\" provides information about the company's depreciation and amortization methods. You will also need to refer to the other notes to the financial statements and to the financial statements themselves in order to answer the following questions. IMPORTANT: Indicate the page number in which the information was found. The summary of significant accounting policies can be found on page 49 THE BASICS Property, Plant and Equipment 1. What depreciation method does the company use? Page _67_____ The depreciation method Apple uses is the straight-line method over the estimated useful lives of the assets, which for buildings is the lesser of 30 years or the remaining life of the underlying building; between two to five years for machinery and equipment, including product tooling and manufacturing process equipment; and the shorter of lease terms or ten years for leasehold improvements. 2. What is the amount of depreciation expense for the current year? Page _60___ (Hint: Look at the operating activities section of the cash flow statement if the indirect method was used.) Current year $7,946,000,000 Last year __$6,757,000,000_________ Intangible assets 3. Does the company have any intangible assets? If so, what are they? Page _56___ Yes Apple reported having acquired intangible assets for 2014 totaling the amount of $4,142,000,000 4. Does the company report any goodwill? Yes Page _56____ What is the amount? _For 2014 Apple reported $4,616,000,000 in Goodwill___ FURTHER ANALYSIS 5. Calculate the following: Show your computations. You will find prior years' total assets in the Five-Year Summary of Selected Financial Data. (a) Average useful life of plant assets = Average cost of plant assets = ($20,624 + $16,597) / 2 Depreciation Expense = 2.34 $7,946 (b) Average age of plant assets = Accumulated Depreciation Depreciation Expense = 18,391,000/7,946,000 = 2.31 (c) Asset turnover = ____Sales__________ = Average total assets ________$182,795,000__________ = 0.83 ($231,839,000 + $207,000,000) / 2 ________$182,795,000__________ = 0.95 ($207,000,000 + $176,064,000) / 2 ________$182,795,000__________ = 1.25 ($176,064,000 + $116,371,000) / 2 ___0.83_______ current year ____0.95______ last year (d) Return on assets = 18.01% ____1.25________ two years ago ____Net income____ = _______$39,510,000__________ = 0.18 x 100 = Average total assets ($231,839,000 + $207,000,000) /2 ________$39,510__________ = 0.21 x 100 = 20.63% ($207,000 + $176,064) / 2 ________$39,510__________ = 0.27 x 100 = 27.02% ($176,064 + $116,371) / 2 ___18.01%_____ current year ___20.63%____ last year ___27.02%______ two years ago 6. What information is provided by: (a) The asset turnover ratio: The asset turnover ratio measures a company's ability in using assets to generate revenue. (b) Return on assets: Return on assets indicates a company's overall profitability (Spiceland intermediate accounting 6th ed). 7. Compare the asset turnover ratio and the return on assets computed above to the industry averages. Your company Industry Asset turnover Return on assets ___0.83____ __18.01____ ___1.55____ __8.37____ How does your company compare to others in the industry? While Apple is much below the industry in terms of efficient use of their enormous assets, it is, however, much better than their rivals in returning profits for investors. INFORMATION FOR DECISION MAKING Answer the following questions. Use complete sentences. 8. How does depreciation expense affect cash flow? Depreciation expense is neither added nor subtracted from cash flow because in reality no cash has changed hands. Therefore, it does not affect cash flow. 9. Comment on the average age of the company's assets relative to their average useful life. Refer to the information obtained in question 5, above. The average age of plant assets is 2.31. This indicates that Apple updates or acquires new plant assets every 2 years and a few months. 10. Refer to the investing activities section of the company's cash flow statement. Cash flow statement can be found on page 48 What was the amount spent to purchase long-lived assets (capital expenditures) during each year presented? The amount spent to purchase long-lived assets during each year are as follows; current year: $20,624 last year:$16,597 two years ago:$15,452 11. Evaluate your company's capital spending. Compute the capital expenditure ratio Cash provided by operating activities __59,713,000,000 Capital expenditures = 20,624,000,000 =59713/20624 The ratio of operating activities to capital expenditure = 2.89 Comment on your company's ability to finance its capital spending through operations. (A ratio of 2 would indicate that the company could have purchased twice as much property, plant and equipment as it did without any additional external financing.) This means that Apple can finance their capital spending with free money provided by operating activities almost three times. ANNUAL REPORT PROJECT Assignment 8 LIABILITIES Name of company chosen: Apple Inc. Refer to the financial statements and notes to the financial statements. The first note, \"Summary of Significant Accounting Policies,\" provides information about the company's accounting methods. You will also need to refer to the other notes to the financial statements and to the financial statements themselves in order to answer the following questions. IMPORTANT: Indicate the page number on which the information was found. THE BASICS 1. What is the amount of the company's current liabilities? Page 47 This year $63,448 million 2. Last year $43,658 million What is the amount of the company's long-term liabilities? This year $28,987 million Page 47 Last year $16,960 million 3. Refer to the notes to the financial statements. Does the company report any other commitments or contingent liabilities? If yes, provide a description of any contingencies discussed. Page 74-76 According to Apple's 10-K for 2014, \"The Company is subject to various legal proceedings and claims that have arisen in the ordinary course of business and that have not been fully adjudicated\" (Apple, 2014). The most notable of these cases is Apple Inc. v. Samsung Electronics Co., Ltd., et al., where on August 24, 2014, a jury awarded Apple $1.05 billion in its lawsuit against the South Korean company. Even though this is not a contingent liability, it is discussed in the company's financial notes. The second case is VirnetX, Inc. v. Apple Inc., et al., where on August 11, 2010, VirnetX, Inc. filed a lawsuit against Apple, citing alleged infringement on four patents related to network communications technology. On November 6, 2012, a jury awarded $368 million in damages to VirnetX, but \"on September 16, 2014, the Court of Appeals for the Federal Circuit affirmed the District Court's decision in part, reversed in part, and vacated the damages award\" (Apple, 2014). Since then, the case has been remanded and additional proceedings are expected, meaning that this is by far Apple's most significant contingent liability. As far as other commitments go, Apple \"utilizes several outsourcing partners to manufacture subassemblies\" and \"to perform final assembly and testing of finished products\" (Apple, 2014). Since these partners get their supplies and produce goods based on demand information generated by Apple, they had outstanding off-balance sheet third-party commitments and purchase commitments of $24.5 billion. The company also has another $3.4 billion in off-balance sheet commitments due to the acquisition of capital assets, advertising, research and development, Internet and telecommunications services, and other obligations. 4. Refer to the notes to the financial statements. Does the company disclose any off-balancesheet financing arrangements? Page 75 If yes, describe. According to the report, Apple does not currently utilize any other off-balance sheet financing arrangements besides operating leases. These include various pieces of equipment and facilities, and are all under noncancelable operating lease agreements. 5. (a) Examine the financial statements and the notes. Does the company report any capital leases? Page N/A **Apple does not report any capital leases.** (b) Refer to the notes to the financial statements. Does the company report any operating leases? Page 75 If yes, are these leases noncancellable? Yes, these leases are noncancelable. What is the amount of total cash flow commitment under these operating leases? Page 75 As of September 27, 2014, Apple's total future minimum lease payments under noncancelable operating leases were $5.0 billion, with $3.6 billion of this related to retail space leases. What is the definition of a liability? Use complete sentences. A liability is any obligation that a company must pay or fulfill at some point in the future due to previous events or transactions. These can be both current (accounts payable, accrued expenses, deferred revenue, etc.) and long-term (due at some point beyond the current fiscal year; bonds payable, notes payable, etc.). Even though they are not recorded as liabilities, do these operating leases seem to meet the definition of a liability? Explain. Use complete sentences. Since Apple are technically obligated to pay the amount listed for operating leases and they could see economic benefit at a later date, then it seems as though they meet the definition of a liability. However, operating leases are considered to be a part of off-balance sheet financing arrangements, so they are not recorded as liabilities. FURTHER ANALYSIS 6. Calculate the following ratios for both years presented in the balance sheet: Show your computations. (a) Current ratio = $68,531 million = 1.08 $63,448 million (current year) = $73,286 million = 1.68 $43,658 million (prior year) = Current assets Current liabilities (b) Quick or Acid-Test ratio = Quick assets Current liabilities = $68,531 mil - $2,111 mil = 1.05 $63,448 mil (current year) *Current Assets - Inventories Current Liabilities = $73,286 mil - $1,764 mil = 1.64 $43,658 mil (prior year) (c) Debt to total assets ratio = $120,292 million = 0.52 $231,839 million (current year) = $83,451 million = 0.40 $207,000 million (prior year) = Total liabilities Total assets 7. Explain what information each of these ratios provides. Use complete sentences. (a) Current ratio is a measure of a company's ability to meet short term obligations that come due. A current ratio of 1.0 is usually seen as ideal or being able to pay their current liabilities. But, a company might have a current ratio of 1.0 and still be unable to pay their short term debts. This can happen if a significant portion of current assets consisted of inventories. With a 1.08 in current ratio, it means that Apple is moderately able to fulfil their short term obligations. (b) Quick or acid test ratio measures a company's ability to pay its current liabilities by excluding inventories. Therefore, acid test ratio offers a better assurance of ability to pay current liabilities than current ratio does. In the current year, with a 1.05 in acid test ratio, Apple is only moderately able to pay their current liabilities. In the prior year, however, it was 1.68 which is a sharp difference. (c) As a coverage ratio, debt to total assets provides the percentage of assets that are funded by creditors. If this portion is too high, then the company would be considered highly risky and increasingly unlikely to meet their financial obligations. Even though Apple's increased from 0.40 to 0.52, they are still sitting below the industry average of 0.59, meaning that they are in a good position to cover their debts in this sense. 8. Compare the current, quick, and debt to total assets ratios computed above to industry averages. (Remember that the debt to total assets ratio may also be called total debt to equity.) Your company Current ratio Quick ratio Debt to total assets 1.08 1.05 0.52 Industry 1.78 1.44 0.59 How do the results for your company compare to industry averages? Overall, Apple appears to be doing worse than the industry average in regard to the current and quick ratios. However, they are outperforming the industry when it comes to debt to total assets. 9. Refer to the financing activities section of the company's cash flow statement. Page 49 (a) What was the amount of new borrowings during each of the years presented? Proceeds from the issuance of common stock in addition to the issuance of long-term debt, and the issuance of commercial paper: 2014 = $18,996 million 2013 = $17,426 million 2012 = $665 million **Including \"excess tax benefits from equity awards\"** 2014 = $19,735 million 2013 = $18,127 million 2012 = $2,016 million (b) What was the amount of debt repaid during each of the years presented? Dividends and dividends equivalent paid in addition to repurchase of common stock: 2014 = ($56,126 million) 2013 = ($33,424 million) 2012 = ($2,488 million) **Including \"taxes paid related to net share settlement of equity awards\"** 2014 = ($57,284 million) 2013 = ($34,506 million) 2012 = ($3,714 million) (c) Did these activities result in a net increase or decrease in the Company's cash balance? Cash used in financing activities: 2014 = ($37,549 million) 2013 = ($16,379 million) DECREASE DECREASE Total increase/(decrease) in cash and cash equivalents: 2014 = ($415 million) 2013 = $3,513 million 2012 = ($1,698 million) DECREASE 2012 = $931 million INFORMATION FOR DECISION MAKING 10. Evaluate the company's debt-paying ability. Use complete sentences. Refer to the ratios and other information obtained above. Your analysis should include a consideration of unused lines of credit and of any existing off-balance-sheet financing arrangements. Since Apple's quick ratio and current ratio decreased a fair amount from 2013 to 2014, one would have to say that the company's financial health took a hit. The current ratio is a measure of liquidity that judges a company's ability to meet its maturing obligations with its available assets. Even though Apple's current ratio dropped, it is still above 1.0, meaning that they should still be able to meet their obligations. The quick ratio (acid-test ratio) is another liquidity ratio that measures about the same aspects as the current ratio. However, the primary difference is that the quick ratio removes certain current assets (inventories and prepaid expenses) before calculating the value, therefore providing more useful information for short-term creditors. In this regard, Apple are still sitting above 1.0, so they should still be able to meet their obligations. As far as Apple's coverage ability goes, they are sitting in a great position, especially when compared to the industry average. The debt to assets ratio tells what portion of the company's total assets is provided by their creditors. If the debt to assets ratio is too high, the company is viewed as being a greater risk when it comes to being able to cover their upcoming obligations. It is also important to note the amount of existing off-balance sheet financing arrangements. Apple currently have $5.0 billion in noncancelable operating leases. Now, this amount may seem high, but considering that the company has facilities all over the world, it's definitely understandable. These financing agreements wouldn't be in place unless there was complete belief in the company's debt-paying abilities. So after pondering this and their three ratio values, I would have to say that Apple aren't in an incredible financial position, but it is certainly a good one. ANNUAL REPORT PROJECT Assignment 9 STOCKHOLDERS' EQUITY Name of company chosen: Apple Inc. Refer to the financial statements and notes to the financial statements. The first note, \"Summary of Significant Accounting Policies,\" provides information about the company's accounting methods. You will also need to refer to the other notes to the financial statements and to the financial statements themselves in order to answer the following questions. IMPORTANT: Indicate the page number on which the information was found: The information regarding Apple's accounting policies can be found on Page 49. THE BASICS 1. How many shares of common stock have been issued? There are 6,122,663 shares of common stock. How many shares are outstanding? 6,085,572 shares outstanding Page 53 If these numbers differ, explain why. The numbers differ because of the effect of dilutive securities. 2. Does the company have any preferred stock outstanding? No mention was made of any number of preferred stocks except that the board of directors in the second quarter of 2014, eliminated issuing preferred stock. Page 68 3. Does the company report any stockholders' equity accounts other than contributed capital (capital stock), paid-in capital in excess of par (additional paid-in capital) and retained earnings? List these accounts and their amounts (for example, treasury stock, accumulated other comprehensive income) These accounts are as follows; Common stock: $23,313 (millions) Share based compensation: $2863 (millions) Treasury stock: $0 Other accumulated or comprehensive income: $0 Page 48 reports consolidated statement of shareholders' equity FURTHER ANALYSIS 4. Calculate the following ratios for each of the three years presented in the stockholders' equity statement: (You may be able to find the year-end stock price in the financial review or financial highlights section of the annual report. If the year-end price is not available, compute the average of the high and low prices for the fourth quarter. Show your computations. Indicate the page(s) which contain the information used in the computations. a. Dividend payout ratio = Total cash dividends paid on common stock Net income Page 48 2014 = 11,215 = 0.284 2013 = 10,676 = 0.288 2012 = 2,523 = 0.060 39,510 37,037 41,733 b. Dividend yield = Dividends paid per share /Market value per share Dividends per share: 2014 = $1.82 2013 = $1.64 2012 = $0.38 Stock price at year-end: 2014 = $100.75 2013 = $68.96 2012 = $95.30 Dividend yield: 2014 = 0.0181 2013 = 0.0238 2012 = 0.0040 *Historical market data retrieved from Nasdaq.com* **Apple elected for a seven-for-one stock split to shareholders on June 2, 2014.** c. Earnings per share (provided in income statement) Page 45 Basic: 2014 = $6.49 2013 = $5.72 2012 = $6.38 Diluted: 2014 = $6.45 2013 = $5.68 2012 = $6.31 d. Price-earnings ratio = Market price per share of stock Earnings per share 2014 = 100.75/6.49 = 15.524 2013 = 68.96/5.72 = 12.056 2012 = 95.30/6.38 = 14.937 e. Return on common stockholders' equity = Net income - preferred stock dividends Average common stockholders' equity You will find prior years' stockholders' equity in the Five-Year Summary of Selected Financial Data. **Apple has not issued preferred stock or preferred stock dividends for 2014** Average common stockholders' equity: 2014 = (111,547+123,549)/2 = 117,548 2013 = (123,549+118,210)/2 = 120,879.5 2012 = (118,210+76,615)/2 = 97,412.5 Return on common stockholders' equity: 2014 = 39,510/117,548 = 0.336 2013 = 37,037/120,879.5 = 0.306 2012 = 41,733/97,412.5 = 0.428 5. Explain what information each of these ratios provides. Use complete sentences. (a) As a measure of profitability, the dividend payout ratio indicates the percentage of earnings that a company distributes to common stockholders as cash dividends. Apple's payout ratio jumped from 6.0% in 2012 to 28.8% in 2013, followed by a slight decrease to 28.4% in 2014. This three-year trend lets investors know that Apple's dividends paid have somewhat steadied after a sharp increase. Stability is always an attractive feature in a highly unpredictable stock market. (b) Dividend yield is an indication of what portion of a stock's price has been paid out in cash dividends. Of course, the higher the value the better if you're an investor, as it's likely to mean that the company are exceeding performance expectations. In 2012, Apple saw a 0.40% dividend yield. This rose to 2.38% in 2013, before dropping to 1.81% in 2014. While the company's yield increased and decreased over these years, the stock price was much higher in 2014 ($100.75) when compared to 2013 ($68.96). This explains why the total amount of dividends paid increased but the dividend yield decreased. (c) Earnings per share (EPS) is a measure of net income per share. This information is vital, as it lets investors know how well the company are performing. In short, EPS measures the income or loss as a result of one share outstanding. In 2012, Apple's EPS was at $6.38 before falling to $5.72 in 2013. Then in 2014, the company's EPS increased $0.77 to $6.49. This three-year trend indicates a down year in 2013, while 2012 and 2014 were more indicative of the company's normal performance. (d) The price earnings ratio indicates the how much investors pay for a dollar of a company's stock. This, in turn, makes the P/E ratio a measure of how attractive a company's stock is, with higher values indicating higher expected returns and a lower value indicating the opposite. In fact, if a company is operating at a loss, then they will not have a P/E ratio value until they turn profitable. Apple's P/E ratio appears to follow the trend of their EPS over this three year period. In 2012, the P/E ratio was 14.937. This decreased to 12.056 in 2013, before increasing to 15.524 in 2014. (e) Return on common stockholders' equity (more commonly referred to as return on equity or ROE) is a profitability ratio that measures the amount of net income that was earned for each dollar invested by the common stockholders. Normally, the amount of preferred stock would be subtracted from the net income value for the period, but since Apple doesn't issue preferred stock anymore, this step wasn't necessary. In 2012, Apple's ROE was at 42.8%, before falling to 30.6% in 2013. Then in 2014, the company's ROE increased to 33.6%. Overall, this indicates a very good return for Apple and their investors. 6. Compare the dividend payout, dividend yield, price-earnings ratio and return on equity (current year) to industry averages. Your company Industry Dividend payout 0.284 or 28.4% 0.3137 or 31.37% Dividend yield 0.0181 or 1.81% 0.0248 or 2.48% Price-earnings ratio 15.524 22.61 Return on equity 0.336 or 33.6% 0.1969 or 19.69% **Industry data retrieved from Reuters** How does your company compare to others in the industry? Apple's dividend payout is slightly lower than the industry average of 31.37%, sitting at 28.24% in 2014. The company's dividend yield (1.81%) is also slightly worse than the rest of the industry, coming in at 2.48% in 2014. While Apple's P/E ratio is respectable, it is much worse than the industry average of 22.61 for 2014. Considering Apple's ROE, 33.6% is well above the industry average of 19.69%, meaning that the company is certainly succeeding in this regard. 7. Refer to the financing activities section of the company's cash flow statement. Page 49 (a) What amount, if any, was received from common stock issued in each of the years presented? 2014 = $730 million 2013 = $530 million 2012 = $665 million (b) What amount, if any, was paid to purchase treasury stock in each of the years presented? **Apple did purchase treasury stock during 2012, 2013, or 2014** (c) What was the amount paid in dividends in each of the years presented? 2014 = $11,126 million 2013 = $10,564 million 2012 = $2,488 million (d) Did these activities result in a net increase or decrease in the company's cash balance? Issuance of common stock and dividends paid, net: 2014 = ($10,396 million) 2013 = ($10,034 million) 2012 = ($1,823 million) DECREASE DECREASE DECREASE Total increase/(decrease) in cash and cash equivalents: 2014 = ($415 million) 2013 = $3,513 million 2012 = $931 million DECREASE INCREASE INCREASE INFORMATION FOR DECISION MAKING 8. Based on the ratios computed in question 4 and your understanding of their meaning as indicated in question 5, evaluate the company's stock as an investment. Refer to each of the ratios in your discussion. After analyzing the aforementioned ratios, Apple (AAPL) presents an interesting situation for their stock. For starters, the company's dividend payout ratio is quite close to the industry average (31.37%), coming in at 28.4% for 2014. This means that 28.4% of the company's earnings are distributed to their shareholders, which is an overall attractive prospect. What's most encouraging about this is that two years ago during 2012, Apple was only at 6.0%, before significantly improving to 28.8% in 2013 and holding steady in 2014 with only a slight decrease. As far as the company's dividend yield goes, they are currently sitting below the industry average of 2.48% at 1.81%. Following a similar trend as the company's payout ratio, the sharp increase from 2012 to 2013 and relative consistency into 2014 should also be appealing to current and prospective investors. Even though their price-earnings ratio was well below the industry average, 15.524 compared to 22.61, Apple's earnings per share was quite strong in 2014 at $6.49. The disparity between the P/E ratios could be attributed to the significant increase in AAPL's market price from $68.96 in 2013 to $100.75 in 2014. Combined with the increase in EPS of $0.77 from 2013 to 2014, these factors would undoubtedly bring about a sense of confidence amongst shareholders. But possibly the most impressive of these ratios for Apple was their return on common stockholders' equity. In 2012, the company had an ROE of 42.8%. Even though this value dropped to 30.6% in 2013, it increased to 33.6% in 2014, putting Apple significantly higher than the industry average of 19.69%. Out of all of these factors, ROE could be the most important when it comes to deciding whether or not to buy or sell a company's stock, as it lets investors know how effective/profitable they were with their equity. Overall, Apple's stock remains a very attractive prospect for investors. According to Nasdaq's website, AAPL is currently viewed as a \"strong buy\" by 18 leading financial analytics firms, with another 3 saying \"buy\" and 13 \"hold.\" None of these firms placed the company's stock in the \"underperform\" or \"sell\" categories. Considering all of these expert opinions, Nasdaq gave Apple's stock an overall rating of \"strong buy.\" Thus, given all of the supporting evidence, Apple remains a very strong investment for shareholders and a smart buy for those looking to get involved. (Source: http://www.nasdaq.com/symbol/aapl/recommendations) ANNUAL REPORT PROJECT Assignment 10 THE STATEMENT OF CASH FLOWS Name of company chosen: _Apple Inc.___ THE BASICS Locate the company's statement of cash flows. What is the period covered by the statement? _The periods covered by the Cash Flow Statement are years ended ended September 27, 2014, September 28, 2013 and September 29, 2012._________ On what page of the annual report does the statement appear? _The Cash Flow Statement appears on Page 52.__ 1. What was the ending balance of cas