Module 4: Corporate Ratio Calculations Worksheet

Directions: Select a company and locate the company perspectives and all available financial
information, such as the statement of cash flows, income statement, balance sheet, etc. Provide
the required ratio calculations and write responses to the given prompts.

Submit the completed worksheet in the “Assignment and grades” tab in your course menu. After
submission, please return to Module 4 for a module wrap-up.

Company
● What is the company you have selected?

The company Description

“Apple, Inc. engages in designing, manufacturing, and marketing of mobile communication,
media devices, personal computers, and portable digital music players. It operates through
the following geographical segments: Americas, Europe, Greater China, Japan, and Rest of
Asia Pacific. The Americas segment includes North and South America. The Europe segment
consists of European countries, as well as India, the Middle East, and Africa. The Greater
China segment comprises of China, Hong Kong, and Taiwan. The Rest of Asia Pacific
segment includes Australia and Asian countries. Its products and services include iPhone,
iPad, Mac, iPod, Apple Watch, Apple TV, a portfolio of consumer and professional software
applications, iPhone OS (IOS), OS X and watch OS operating systems, Apple Pay and a
range of accessory, service and support offerings. Apple was founded by Steven Paul Jobs,
Ronald Gerald Wayne, and Stephen G. Wozniak on April 1, 1976 and is headquartered in
Cupertino, CA.” as cited (Company description Nov.2019)
• The financial documents:
Is balance sheet, income statement and Cash flow

Liquidity Ratios
● Calculate the following liquidity ratios. Provide the formulas and show your work.
○ Current Ratio
○ Quick Ratio

Current Ratio:
 Current ratio = Current assets ÷ Current liabilities (for fiscal year 2018)
131339 / 116866 = 1.2

 Quick ratio = Total quick assets ÷ Current liabilities (for fiscal year 2018)
115296 / 116866 = 0.99

Asset Turnover Ratio

● Calculate the asset turnover ratio. Provide the formula and show your work.

 Total asset turnover = Net sales ÷ Total assets

265595 / 365725 = 0.73
Debt to Equity Ratio
● Calculate the debt to equity ratio. Provide the formula and show your work.

 Debt to equity = Total debt ÷ Shareholders’ equity

114483 / 107147 = 1.07

Profitability Ratios
● Calculate the following profitability ratios. Provide the formulas and show your work.
○ Gross Margin Ratio
○ Operating Margin Ratio
○ Net Margin Ratio
○ Return on Assets (ROA) Ratio
○ Return on Equity (ROE) Ratio

 Gross profit margin = 100 × Gross margin ÷ Net sales

100 × 101839 / 265595 =38.34%
 Operating profit margin = 100 × Operating income ÷ Net sales
100 × 70898 / 265595 = 26.69%
 Net profit margin = 100 × Net income ÷ Net sales
100 × 59531 / 265595 = 22.41%
 ROA = 100 × Net income ÷ Total assets
100 × 59531 / 365725 = 16.28%
 ROE = 100 × Net income ÷ Shareholders’ equity
100 × 59531 / 107147 = 55.56%

Dividend Policy Ratios

● Calculate the following dividend policy ratios. Provide the formulas and show your
work.
○ Dividend Yield Ratio
○ Dividend Payout Ratio

 Dividend Yield Ratio = Full Year Dividend /Current Share Price

= 3.04 / 264.16 = 1.15 %

 Dividend Payout Ratio=Dividends per Share /EPS without NRI

3 / 11.89 = 0.25

Written Responses
● Answer the following prompts.
● Include 3-5 outside resources to complete your analysis, cited in APA format.

Prompt 1. Discuss and list where industry averages for comparison are found when you are
calculating ratios.

Answer: As citied (www.stock-analysis)

1. Apple's current ratio is 20% less than the sector median
Current ratio: Apple 1.2% versus industry 1.5%
2. Apple's quick ratio is 15% less than the sector median
Quick ratio: Apple 0.99% versus industry 1.4%
3. Gross Margin Ratio: Apple 38.34% versus industry 39.9%
4. Operating Margin Ratio: Apple 26.69% versus industry 26.62%
5. Net Margin Ratio: Apple 22.41% versus industry 20.21%
 6. Return on Assets (ROA) Ratio: Apple 16.28% versus 11.43%
7. Return on Equity (ROE) Ratio: Apple 55.56% versus industry 26.41%
8. Debt to equity: Apple 1.07 versus industry 0.58

Prompt 2. What limitations do you face when using industry averages?

Answer: as citied (Ratio Analysis 2012)

1. Firms can use different accounting policies
The choices of accounting policies may distort inter-company comparisons.
Accounting law allows firms to use some discretion when preparing accounts.
2. Use of creative accounting
The businesses apply creative accounting in trying to show the better financial
performance or position which can be misleading to the users of financial accounting
3. Interpretation of the ratios is not a science.
It is difficult to generalize about whether a particular ratio is ‘good’ or ‘bad’. For
example a high Acid Test Ratio may indicate a strong liquidity position, which is good
or alternatively excessive cash which is bad.
4. Inflation
Comparison of performance over time can be distorted by inflation which leads to price
increases.
5. Different market, and financial risk profiles
No two companies are the same, and they can be very different. One major cause of
the difference is the type of market the firm operates in. Is it a monopoly, is there a
great deal of competition, does the government limit competition or interfere with
price? All of these will influence profit margins and prices

Prompt 3. Explain your company’s Return on Investment (ROI) and describe what it means to
the organization.

Answer:
To calculate the ROI:
Total investments / Net Income *100
248,859 / 59,531 *100 = 23.92%

Apple Inc. achieved return on average invested assets of 23.9 % in 2018, below company
average return on investment.

ROI improved compare to previous year, due to net income growth.

Within Technology sector 16 other companies have achieved higher return on investment.
While Return on investment total ranking has improved so far to 133.
As citied (csimarket.com)

References

1. Company description Nov.2019

2. Apple Inc. Form 10-KFor the Fiscal Year Ended September 29, 2018
3. www.stock-analysis
4. Ratio Analysis—Limitations Issue 2 Sept. 2012
5. csimarket.com › stocks › AAPL-Return-on-Investment-ROI