Question

# YOU MUST SHOW ALL CALCULATIONS TO EARN CREDIT.

YOU MUST SHOW ALL CALCULATIONS TO EARN CREDIT.

2017                            2018

BALANCE SHEETS:

Assets:

Cash                                                    74,181                         66,301

Accounts Receivable                          35,673                         48,995

Inventory                                            4,855                           3,986

Other Current Assets                          13,936                         12,057

Fixed Assets, net                                 33,783                         41,304

Investments                                         212,891                       233,082

Total Assets                                        375,319                       405,725

Liabilities and Equity:

Accounts Payable                               44,242                         55,888

Other Current Liabilities                    50,226                         55,416

Long-Term Debt                                 103,703                       102,519

Other Noncurrent Liabilities              43,251                         48,209

Common Stock                                   35,567                         33,293

Retained Earnings                               98,330                         110,400

Total Liabilities and Equity                375,319                       405,725

INCOME STATEMENT:

FY 2018

Revenue                                                                                  265,595

Cost of Goods Sold                                                                 163,756

Depreciation Expense                                                             10,903

Earnings Before Interest and Taxes                                       76,143

Interest Expense                                                                     3,240

Pretax Net Income                                                                  72,903

Income Taxes                                                                         13,372

Net Income                                                                             59,531

1. What was Apple’s Current Ratio at the end of 2018? What was Apple’s Quick Ratio at the end of 2018? What was Apple’s Debt to Equity Ratio at the end of 2018? (AP is not part of Debt for purposes of this calculation)What was Apple’s Times Interest Earned Ratio in 2018?Assuming that all Apple’s sales in fiscal 2018 were on credit, how many days, on average, did it take Apple to sell its inventory in 2018? (For balance sheet accounts, use the average of the beginning and end-of-year balances).Assuming that all Apple’s sales in fiscal 2018 were on credit, what was the company’s Days Sales Outstanding in 2018? (How much did Apple pay out in dividends during fiscal 2018? What was Apple’s dividend payout ratio during fiscal 2018? What was Apple’s Equity Multiplier for 2018? What was Apple’s Return on Equity for 2018 (For balance sheet accounts, use the average of the beginning and end-of-year balances)? If Apple had an average of 4,337 million common shares outstanding during 2018 and its stock is currently worth \$175 per share, what is its Price: Earnings (PE) ratio? If the analysts who follow Apple project 2019 sales to increase by 7.4% over 2018, its after-tax profit margin to remain the same, and anticipate a 60% dividend payout ratio, what are the projected retained earnings by the end of 2019? Assuming that Apple’s net working capital is expected to vary directly with sales, based on a projected 7.4% sales increase in 2019, what is the projected accounts receivable balance at the end of 2019? If the management of Apple projects that by the end of 2018, it was operating at 62% of capacity, what is its full level capacity of sales?

(1) In 2018,

Current ratio = (Cash + Accounts receivable + Inventory + Other current assets) / (Accounts payable + Other current liabilities)

= (66,301 + 48,995 + 3,986 + 12,057) / (55,888 + 55,416)

= 131,339 / 111,304

= 1.18

(2) In 2018,

Quick ratio = (Cash + Accounts receivable) / (Accounts payable + Other current liabilities)

= (66,301 + 48,995) / (55,888 + 55,416)

= 115,296 / 111,304

= 1.04

(3) In 2018,

Debt-Equity ratio = Long term debt / (Common stock + Retained earnings)

= 102,519 / (33,293 + 110,400)

= 102,519 / 143,693

= 0.71

(4) In 2018,

Times interest earned = Earning before interest and taxes / Interest expense

= 76,143 / 3,240

= 23.50