Financial statement development and analysis – act 10

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For this Activity, you will complete a preliminary report on Apple Computer’s operating performance and asset utilization. The majority of this report requires computing return on investment (ROI) measures and charting them, rather than analyzing investment returns. (The Stand-Alone Project will require detailed operations and asset utilization analysis of Apple and its competition.) The first page of this report should create an additional worksheet labeled “Ratios” worksheet. The next five (5) pages will consist of selected operating performance and asset utilization charts (one (1) chart per page, five (5) charts) in the “PC Charts” workbook. The 1½-page will be a Word document addressing a few operating performance and asset utilization considerations.

 

Your Activity responses should be both grammatically and mechanically correct and formatted in the same fashion as the Activity itself. If there is a Part A, your response should identify a Part A, etc. In addition, you must appropriately cite all resources used in your response and document them in a bibliography using APA style. (100 points) (A 1½-page response and five (5) charts are required.)

 

Part A  Compute the following cash flow ratios for 1999-2002 in the “Ratios'” worksheet of your Apple Solution workbook.  (35 points)  (The “Ratios” worksheet with the additional five (5) ratios is required.)

            1.         Profit Margin (do not adjust net income for net interest expense)

            2.         Asset Turnover

            3.         Financial Structure Leverage Ratio

            4.         Return on Assets (do not adjust net income for net interest expense)

            5.         Return on Equity (do not adjust net income for preferred dividends)

                         

Part B  Use your “PC Charts” workbook to create the following five (5) “line” charts plotting each measure over time from 1994 through 2002.  For this Part you will only chart Apple’s operating performance and asset utilization measures.  Future assignments will require other charts for other statement analysis components.  Use data from Appendix A of the text for 1994-1998 measures and your computations from 1999-2002 to plot the following.  (35 points)  (The “PC Charts” workbook with the five (5) additional charts is required.)

            1.         Profit Margin

            2.         Asset Turnover

            3.         Financial Structure Leverage Ratio

            4.         Return on Assets

            5.         Return on Equity

                         

Part C  Discuss in one (1) paragraph why it was unnecessary to technically adjust return on assets for net interest expense and return on equity for preferred dividends.

(10 points)  (A ½-page response is required.)

                         

Part D  Discuss in one (1) paragraph why return on equity always exceeds return on assets from 1999-2002.  (10 points)  (A ½-page response is required.)

                         

 

Part E  In one (1) paragraph, identify and explain the impact upon financial statement analysis of any transitory expenses in Apple’s standardized income statements from 1999 to 2002.  (10 points)  (A ½-page response is required.)

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