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Review Apple’s Consolidated Balance Sheets for 2017 (which also contains the 2016 information), located here: Apple...

Review Apple’s Consolidated Balance Sheets for 2017 (which also contains the 2016 information), located here: Apple 2017 10K for W5 Discussion.pdf Calculate Apple’s current ratio for these two years. Pick any other ratio discussed in the class, and calculate and explain that. What do the ratios tell you about Apple? Explain the three factors that would influence your evaluation as to whether Apple’s current ratio is good or bad.

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Expert Solution

The following data is taken from the Form 10K report of Apple Inc. for 2017 and 2016 Financial Statements (Balance Sheet) -

Current Ratio = Total Current Assets / Total Current Liabilities

(In Millions)

2016:

Current Ratio = $106,869 / $79,006

= 1.35

Therefore, current ratio in 2016 is 1.35.

2017:

Current Ratio = $128,645 / $100,814

= 1.28

Therefore, current ratio in 2017 is 1.28.

The another ratio which is related to Current Ratio is Quick Ratio is picked -

Quick Ratio = (Total Current Assets - Inventory - Prepaid Expenses) / Total Current Liabilities

(In Millions)

2016:

Quick Ratio = ($106,869 - $2,132 - $0 / $79,006

= $104,737 / $79,006

= 1.33

Therefore, Quick ratio in 2016 is 1.33.

2017:

Quick Ratio = ($128,645 - $4,855 - $0) / $100,814

= $123,790 / $100,814

= 1.23

Therefore, Quick ratio in 2017 is 1.23.

A Current Ratio tells that how a company has strong short-term assets (current assets) which can be convertible into cash within a period of one year to pay all the short-term liabilities (current liabilities).

A Quick Ratio tells that how a company has strong cash and cash equivalents which are readily available to pay all the short-term liabilities at any given point of time.

The current ratio of Apple in 2016 is very strong to pay off all of its current liabilities compare with 2017 where the current ratio is decreased from 1.35 to 1.28 from 2016 to 2017, however, the Apple has still strong short-term assets in 2017 to pay off all of its short-term liabilities because it has current assets more than the current liabilities where in terms of ratios, it has a current ratio more than 1 in both 2016 & 2017.

Therefore, Apple has a good current ratio in both 2016 & 2017 years.

The quick ratio of Apple in 2016 is also very strong to pay off all of its current liabilities compare with 2017 where the quick ratio is decreased from 1.33 to 1.23 from 2016 to 2017, however, the Apple has still strong readily convertible quick assets in 2017 to pay off all of its short-term liabilities because it has current assets more than the current liabilities where in terms of ratios, it has a current ratio more than 1 in both 2016 & 2017.

Therefore, Apple has a good quick ratio in both 2016 & 2017 years.

ekkarill92 answered 2 weeks ago
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