Using the Annual Report of Apple answer the following questions in the Discussio

Question

Using the Annual Report of Apple answer the following questions in the Discussion... http://investor.apple.com/secfiling.cfm?filingid=1628280-16-20309&cik=320193

Compute the acid-test ratio. If the current liabilities came due immediately, could the company pay them?

Compute the accounts receivable turnover at year end.

Compute days sales in receivables at year end.

Based on the acid-test ratio, accounts receivable turnover, and days sales in receivables, how does the company compare to the industry?

Explanation / Answer

1. Acid-test ratio = (Total current assets - Inventories - Other current assets)/ Total current liabilities

= ($106869 - $2132 - $8283)/ $79006

= 1.22 times

Yes the company could pay off the current liabilities if they come due immediately.

2. Accounts receivable turnover = Net Sales/ Average accounts receivable

= $215639/ [($15754+$16849)/2]

= 13.23 times

3. Days in sales receivables = 365 days/ Accounts receivable turnover

= 365 days/ 13.23

= 27.59 days

4. As compared to the industry, the acid-test ratio is 2.06, therefore the acid test ratio of Apple Inc is quite lower.

As compared to the industry, the accounts receivable turnover ratio is also quite low.

As compared to the industry, the accounts receivable turnover ratio is quite high.

On these statistics, these ratios produce unfavorable results when compared to the industry.

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