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PLEASE SHOW CALCULATIONS 2017 2018 BALANCE SHEETS: Assets: Cash 74,181 66,301 Accounts Receivable 35,673 48,995...

PLEASE SHOW CALCULATIONS

2017 2018

BALANCE SHEETS:

Assets:

Cash 74,181 66,301

Accounts Receivable 35,673 48,995

Inventory 4,855 3,986

Other Current Assets 13,936 12,057

Fixed Assets, net 33,783 41,304

Investments 212,891 233,082

Total Assets 375,319 405,725

Liabilities and Equity:

Accounts Payable 44,242 55,888

Other Current Liabilities 50,226 55,416

Long-Term Debt 103,703 102,519

Other Non-current Liabilities 43,251 48,209

Common Stock 35,567 33,293

Retained Earnings 98,330 110,400

Total Liabilities and Equity 375,319 405,725

INCOME STATEMENT:

FY 2018

Revenue 265,595

Cost of Goods Sold 163,756

General and Administrative 14,793

Depreciation Expense 10,903

Earnings Before Interest and Taxes 76,143

Interest Expense 3,240

Pretax Net Income 72,903

Income Taxes 13,372

Net Income 59,531

Please assist with the following questions based on the above information. Thank you

1.Assuming that all Apple’s sales in fiscal 2018 were on credit, how many days, on average, did it take Apple to sell its inventory in 2018? (For balance sheet accounts, use the average of the beginning and end-of-year balances).

2.. Assuming that all Apple’s sales in fiscal 2018 were on credit, what was the company’s Days Sales Outstanding in 2018? (For balance sheet accounts, use the average of the beginning and end-of-year balances)

3. How much did Apple pay out in dividends during fiscal 2018?

4. What was Apple’s dividend payout ratio during fiscal 2018?

5. What was Apple’s Equity Multiplier for 2018?

Solutions

Expert Solution

1. We are asked here to find the Inventory Turnover (in days) for the year 2018

Inventory Turnover Ratio for the year 2018 (times) = Cost of Goods Sold / Average Inventory

= COGS / [(Opening Inventory + Closing Inventory) / 2] = 163,756 / [ (4855+3986)/2] = 163,756 / 4420.5 = 37.04468 times

No. of days taken to sell inventory = 365 days / Inventory Turnover Ratio = 365 / 37.04465 = 9.85 days

Note: Cost of goods sold is a better measure than sales, as sales also contains the profit portion, whereas inventory and cost of goods sold are both valued at cost. Further, it does not matter for the calculations of Inventory turnover whether the sales are in cash or credit, as we are asked in what time inventories are sold. We are not asked that in how much time sales amount is recovered from customers.

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2. Day Sales Outstanding is a measure which tells the number of days it takes to collect the credit sales amount. For this calculation, we have to take the credit sales figure compulsorily.

We are advised to take average of the beginning and end period balances for balance sheet accounts.

Day Sales Outstanding for year 2018 = (Average Account Receivables / Credit Sales in 2018) * No. of Days in the year 2018

= [ (35,673 + 48,995) / 2] / 265,595 *365 = 42334 / 265595 *365 = 58.18 Days

Thus, it takes Apple, Inc. around 58.18 days to collect its account receivables.

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3. Amount Paid in Dividend during year 2018 = Net Income in 2018 - Incremental Retained Earnings

= Net Income in 2018 - (Retained Earnings Balance in 2018 - Retained Earnings Balance in 2017)

= 59531 - ( 110,400 - 98,330 ) = 47,461

Note: Net Income is earned in an year after payment of taxes. part of it is paid as dividends and the remaining balance is retained earnings. That is, Net Income = Dividends paid + Transferred to Retained Earnings. From this we understand that Dividends paid = Net Income in 2018 - Incremental Retained Earnings.

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4. Dividend Payout Ratio is measures the percentage of net income which is paid as dividend to the shareholders of the company.

Dividend Payout Ratio = (Dividends Paid / Net Income for Year 2018) *100 = (47,461 / 59,531 ) *100 = 79.72%

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5. Equity Multiplier tells how the assets of a company are financed. It is measured as Total Assets / Net Shareholders' equity. Thus, a higher Equity Multiplier means less assets are financed using equity and more assets are financed by debt (as the shareholders' equity is in denominator), that is, a higher financial leverage.

Equity Multiplier for 2018 = Total Assets / Net Shareholders' Equity = Total Assets / (Common Stock + Retained Earnings)

= 405,725 / (33,293 + 110,400) = 405,725 / 143,693 = 2.82 times

jeff jeffy answered 1 year ago

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