CT5.
1 The financial statements of Apple Inc = ($70,537 million / $182,795 million) x 100%
Instructions
Answer the following questions using Apple’s
Consolidated Statement of Income.
a. What was the percentage change in (1) net sales
and in (2) net income from 2013 to 2014 and from
2014 to 2015?
b. What was the company’s gross profit rate in
2013, 2014, and 2015?
c. What was the company’s percentage of net
income to net sales in 2013, 2014, and 2015?
Comment on any trend in this percentage.
a. The percentage change in net sales from 2013 to
2014 was:
[(Net Sales in 2014 - Net Sales in 2013) / Net Sales
in 2013] x 100%
= [($182,795 million - $170,910 million) / $170,910
million] x 100%
= 6.96%
The percentage change in net income from 2013 to
2014 was:
[(Net Income in 2014 - Net Income in 2013) / Net
Income in 2013] x 100%
= [($37,037 million - $39,510 million) / $39,510
million] x 100%
= -5.91%
The percentage change in net sales from 2014 to
2015 was:
[(Net Sales in 2015 - Net Sales in 2014) / Net Sales
in 2014] x 100%
= [($233,715 million - $182,795 million) / $182,795
million] x 100%
= 27.85%
The percentage change in net income from 2014 to
2015 was:
[(Net Income in 2015 - Net Income in 2014) / Net
Income in 2014] x 100%
= [($53,394 million - $39,510 million) / $39,510
million] x 100%
= 35.06%
b. The gross profit rate for Apple in 2013 was:
(Gross Profit / Net Sales) x 100%
= ($64,304 million / $170,910 million) x 100%
= 37.60%
The gross profit rate for Apple in 2014 was:
(Gross Profit / Net Sales) x 100%
= 38.60%
The gross profit rate for Apple in 2015 was:
(Gross Profit / Net Sales) x 100%
= ($93,626 million / $233,715 million) x 100%
= 40.05%
c. The percentage of net income to net sales for
Apple in 2013 was:
(Net Income / Net Sales) x 100%
= ($37,037 million / $170,910 million) x 100%
= 21.65%
The percentage of net income to net sales for Apple
in 2014 was:
(Net Income / Net Sales) x 100%
= ($39,510 million / $182,795 million) x 100%
= 21.63%
The percentage of net income to net sales for Apple
in 2015 was:
(Net Income / Net Sales) x 100%
= ($53,394 million / $233,715 million) x 100%
= 22.85%
There is a slight increase in the percentage of net
income to net sales from 2013 to 2014, but there is
no significant trend observed in the percentage over
the three-year period. The gross profit rate has been
increasing over the years, which indicates that the
company has been able to maintain or increase its
profitability even as its revenue has grown.
Balance sheet analysis
Thank you for providing the Consolidated Balance
Sheet of Apple Inc. for the years ended September
27, 2014, and September 26, 2015. Below are some
observations and analyses based on the information
provided.
1. Current Assets: In 2015, Apple's current
assets increased to $89,378 million, from
$68,531 million in 2014, representing a
30.4% increase. The increase was primarily
driven by an increase in long-term
marketable securities.
2. Non-Current Assets: Apple's non-current
assets also increased from $163,550 million
in 2014 to $201,101 million in 2015,
primarily due to an increase in long-term
 marketable securities and property, plant, c. How does Apple value its inventories? Which
and equipment. inventory cost flow method does Apple use? (See Notes
to the Financial Statements.)
3. Current Liabilities: Apple's current liabilities d. What is the cost of sales (cost of goods sold) reported
increased from $63,448 million in 2014 to by Apple for 2015, 2014, and 2013? Compute the
$80,610 million in 2015, representing a percentage of cost of sales to net sales in 2015.
27.0% increase. The increase was due to an
increase in accounts payable, accrued a. According to the Consolidated Balance Sheet of Apple
expenses, and commercial paper. Inc. in its 2015 annual report, the amount of inventories
reported at September 27, 2014, was $2,111 million, and
4. Non-Current Liabilities: Apple's non-current at September 26, 2015, it was $2,349 million.
liabilities also increased from $56,844
million in 2014 to $90,514 million in 2015, b. The dollar amount of change in inventories between
primarily due to an increase in long-term 2014 and 2015 was:
debt and other non-current liabilities.
5. Shareholders' Equity: Apple's shareholders' $2,349 million - $2,111 million = $238 million
equity increased from $111,547 million in
2014 to $119,355 million in 2015, primarily The percentage change in inventories between 2014 and
due to an increase in retained earnings. 2015 was:
6. Overall, Apple's total assets increased from
($238 million / $2,111 million) x 100% = 11.27%
$231,839 million in 2014 to $290,479
million in 2015, representing a 25.3% The inventory as a percentage of current assets at
increase. The increase was primarily due to September 26, 2015 was:
an increase in long-term marketable
securities, property, plant, and equipment, ($2,349 million / $89,378 million) x 100% = 2.63%
and goodwill.
7. Apple's total liabilities also increased from c. According to Note 1 of the Notes to the Financial
$120,292 million in 2014 to $171,124 Statements in Apple's annual report, inventories are
valued at the lower of cost or market value. Apple uses
million in 2015, representing a 42.3% the first-in, first-out (FIFO) method to determine the cost
increase. The increase was primarily due to of its inventories.
an increase in long-term debt and other non-
current liabilities. d. The cost of sales (cost of goods sold) reported by Apple
8. Apple's total shareholders' equity increased for 2015, 2014, and 2013, as per the Consolidated
from $111,547 million in 2014 to $119,355 Statement of Income in its annual report, are:
million in 2015, representing a 7.0%
2015: $140,089 million
increase. The increase was primarily due to
2014: $112,258 million
an increase in retained earnings. 2013: $106,606 million
9. Apple has a strong financial position, with a
high level of current assets and a low level The percentage of cost of sales to net sales in 2015 was:
of current liabilities. However, the company
has a significant amount of long-term debt, (Cost of Sales / Net Sales) x 100%
which has increased in recent years. = ($140,089 million / $233,715 million) x 100%
= 59.98%
CT6.1 Refer to the financial statements of Apple Inc. in
Appendix A.
Instructions
Answer the following questions. Complete the
requirements in millions of dollars, as shown in Apple’s
annual report.
a. What did Apple report for the amount of inventories in
its consolidated balance sheet at September 27, 2014? At
September 26, 2015?
b. Compute the dollar amount of change and the
percentage change in inventories between 2014 and 2015.
Compute inventory as a percentage of current assets at
September 26, 2015.