FAP2 - c. What are the differences between the cash and...

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Econ 3A - Financial Accounting - W’09 APPLE INC. Financial Analysis Project–Assignment # 2 Due in class Wednesday, February 25, 2009 . Must be typewritten (not handwritten). DO YOUR OWN WORK!!! I. Use Apple’s annual report on Form 10-K for its 2008 fiscal year, which you downloaded for FAP#1. Remember that the 10-K is word searchable. Answer the following questions. a. What is Apple’s accounting policy for inventories? Identify the assumption, principle or constraint that justifies: (1) carrying inventory on the balance sheet as an asset instead of expensing it when purchased; and (2) valuing inventory at cost rather than market, but (3) reducing cost to market if market is lower than cost. (15 points) b. The balance sheet includes the line item “Property, plant, and equipment, net” at the dollar amount of $2,455 as of year-end 2008. How much was the original cost of PPE and how much was accumulated depreciation as of year-end 2008? (10 points)
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Unformatted text preview: c. What are the differences between the cash and accrual bases of accounting? How much did Apple report for net income for fiscal 2008? How much cash did Apple generate from operations for fiscal 2008? Identify the largest item that accounts for the difference between net income and cash generated from operations. (10 points) II. Ratio analysis: a. Compute the following profitability ratios for the three years 2006-2008 (40 points): Percentage change in Net sales: from 2006 to 2007, and 2007 to 2008 Percentage change in Operating income: from 2006 to 2007, and 2007 to 2008 Gross profit rate = Gross margin Net sales Profit margin ratio = Net income Net sales b. Comment on the trends in each of the foregoing measures of Apples profitability. (20 points) c. What is Apples expectation for its gross profit ratio (gross margin percentage) in 2009? Cite the specific expected approximate amount and recite the reason for it given by Apple. (5 points)....
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