24 Table P24 shows financial statements for Apple d Quick ac

2.4 Table P2.4 shows financial statements for Apple (d) Quick (acid-test) ratio Computer Corporation. The closing stock price for (e) Inventory-turnover ratio Apple was $68.11 on September 30, 2013. The aver- (f) Day\'s-sales-outstanding age number of outstanding shares was 6.03 billion. On the basis of the financial data presented, compute the various financial ratios and make an informed analysis of Apple\'s financial health. (a) Debt ratio (b) Times-interest-earned ratio (g) Total-assets-turnover ratio (h) Profit margin on sales (i) Return on total assets G) Return on common equity (k) Price/earnings ratio (1) Book value per share (c) Current ratio

Solution

Calculation of Ratios

S NO

Ratio

2013

2012

1.

Debt – equity ratio

Total Liabilities / Equity share capital

Total Liability

83,451,000

57,854,000

Total Stockholder’s equity

123,549,000

118,210,000

Debt – equity

0.6754

0.4894

2

Times interest earned

EBIT / Interest Expense

EBIT

50,155,000

55,763,000

Interest expense

0

0

Times interest earned ratio

Cannot be determined

Cannot be determined

3.

Current Ratio

Current Assets / Current Liabilities

Current Assets

73,286,000

57,653,000

Current Liabilities

43,658,000

38,542,000

Current Ratio

1.6786

1.4958

4.

Quick Ratio

(Cash + Accounts Receivable + Short term Investments) / Current Liabilities

Cash + Accounts Receivable + Short term Investments

14,259,000 + 26,287,000 + 24,094,000 = 64,640,000

10746000 + 18383000 + 21275000 = 50,404,000

Current Liabilities

43,658,000

38,542,000

Quick Ratio

1.48

1.3077

5

inventory turnover

Cost of goods sold / Average Stock

COGS

106,606,000

87,846,000

Stock (Closing assumed average)

1764,000

791,000

Inventory Turnover

60.434

111.05

6

asset turnover

Net Sales / Average total assets

Sales

170,910,000

156,508,000

Average Assets (Closing assumed average)

207,000,000

176,064,000

Asset Turnover

0.82

0.889

7

Profit Margin =

Net Profit / Sales

Net Profit

37,037,000

41,733,000

Net Sales

170,910,000

156,508,000

Profit Margin Ratio

21.67%

26.66%

8

rate of return on assets,

Profit / Average Assets

Profit

37,037,000

41,733,000

Average Assets

207,000,000

176,064,000

Return on assets

17.89%

23.70%

9

8. Return common stock equity

Net Profits / Common Stock

Profits

37,037,000

41,733,000

Common Stock

123,549,000

118,210,000

Return common stock equity

29.98%

35.30%

10

Price Earning Ratio

Market Price / EPS

Market Price

68.11

EPS

37.037 billion / 6.03 = 6.14 per share

PE Ratio

11.093

S NO	Ratio	2013	2012
1.	Debt – equity ratio	Total Liabilities / Equity share capital
	Total Liability	83,451,000	57,854,000
	Total Stockholder’s equity	123,549,000	118,210,000
	Debt – equity	0.6754	0.4894
2	Times interest earned	EBIT / Interest Expense
	EBIT	50,155,000	55,763,000
	Interest expense	0	0
	Times interest earned ratio	Cannot be determined	Cannot be determined
3.	Current Ratio	Current Assets / Current Liabilities
	Current Assets	73,286,000	57,653,000
	Current Liabilities	43,658,000	38,542,000
	Current Ratio	1.6786	1.4958
4.	Quick Ratio	(Cash + Accounts Receivable + Short term Investments) / Current Liabilities
	Cash + Accounts Receivable + Short term Investments	14,259,000 + 26,287,000 + 24,094,000 = 64,640,000	10746000 + 18383000 + 21275000 = 50,404,000
	Current Liabilities	43,658,000	38,542,000
	Quick Ratio	1.48	1.3077
5	inventory turnover	Cost of goods sold / Average Stock
	COGS	106,606,000	87,846,000
	Stock (Closing assumed average)	1764,000	791,000
	Inventory Turnover	60.434	111.05
6	asset turnover	Net Sales / Average total assets
	Sales	170,910,000	156,508,000
	Average Assets (Closing assumed average)	207,000,000	176,064,000
	Asset Turnover	0.82	0.889
7	Profit Margin =	Net Profit / Sales
	Net Profit	37,037,000	41,733,000
	Net Sales	170,910,000	156,508,000
	Profit Margin Ratio	21.67%	26.66%
8	rate of return on assets,	Profit / Average Assets
	Profit	37,037,000	41,733,000
	Average Assets	207,000,000	176,064,000
	Return on assets	17.89%	23.70%
9	8. Return common stock equity	Net Profits / Common Stock
	Profits	37,037,000	41,733,000
	Common Stock	123,549,000	118,210,000
	Return common stock equity	29.98%	35.30%
10	Price Earning Ratio	Market Price / EPS
	Market Price	68.11
	EPS	37.037 billion / 6.03 = 6.14 per share
	PE Ratio	11.093