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 2014 as the base year, of (1) net sales and (2) net income. Comment on the significance of the trend results.

b. Compute for 2018 and 2017 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 2018 and 2017 the

(1) Profit margin

(2) Asset turnover

(3) Return on assets

(4) Return on common stockholders’ equity.

How would you evaluate Apple’s profitability? Total assets at September 24, 2016, were $321,686 million and total stockholders’ equity at September 24, 2016, was $128,249 million.

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