HOMEWORK solutions 8b

HOMEWORK solutions 8b - Solutions to HOMEWORK exercises: Ch...

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Solutions to HOMEWORK exercises: Ch 8, part b E8–2. Req. 1 Fixed asset turnover ratio: (in millions) Sales ÷ [(beginning net fixed assets + ending net fixed assets) ÷ 2] 1997 1999 2001 2003 $7,081 ÷ $542.0 $6,134 ÷ $333.0 $5,363 ÷ $438.5 $6,207 ÷ $645.0 13.06 18.42 12.23 9.62 Computation of denominator: 1997 ($486 + 598) ÷ 2 = $542.0 1999 ($318 + 348) ÷ 2 = $333.0 2001 ($564 + 313) ÷ 2 = $438.5 2003 ($669 + 621) ÷ 2 = $645.0 Req. 2 Apple’s fixed asset turnover ratio rose to 18.42 in 1999, then fell to a low of 9.62 in 2003. This suggests that Apple’s management became less efficient at utilizing its long- lived assets over time. The 18.42 turnover ratio in 1999 was due primarily to a large decline in fixed assets from 1997. By 2003, Apple’s average net fixed assets had nearly doubled from 1999 while yielding approximately the same amount of sales. Although the turnover has declined, it is possible that the build-up of fixed assets may lead to increased sales in the future, thus increasing the fixed asset turnover ratio to prior levels. An analyst can use this longitudinal analysis to observe possible trends over
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HOMEWORK solutions 8b - Solutions to HOMEWORK exercises: Ch...

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