Question

Obtain Apple's fiscal 2016 10-K (filed October 26, 2016) either through the "Investor Relations" portion of its website ( web search for "Apple Investor Relations") or go to www.sec.gov and click "Company Filings Search" under "Forms."

Using Apple's 10-K, answer the following questions:

6. How many days' sales does Apple have in receivables and inventory for 2015 and 2016? (When added together, this is its operating cycle.) (Note: Round all answers to two decimal places.)

How do I find days sales in receivables, inventory and operating cycle?

Answer 1

All amounts are in $ and are in millions

The details from the form 10-K of 2016 are as follows

Sales for 2016 = 215,639

Cost of Goods Sold for 2016 = 131,376

Accounts receivable for year end 2016 = 15,754

Accounts receivable for year end 2015 = 16,849

Inventories for year end 2016 = 2,132

Inventories for year end 2015 = 2,349

Average accounts receivable = (15,754+16,849)/2 = 16,301.5

Average invetory = (2,132+2,349)/2 = 2,240.5

Days Sales outstanding and Days Inventory in Sales can be calculated in two ways

1. Using average inventory & average accounts receivable

2. Using ending inventory and ending accounts receivable

Days Sales Outstanding = (Average accounts receivable/ Sales in 2016) x 365

= (16,301.5/215,639) x 365

= 27.59 days

Days Sales Outstanding = (Ending accounts receivable/ Sales in 2016) x 365

= (15,754/215,639) x 365

= 26.67 days

Days Sales in inventory = (Average inventory/ Cost of goods sold) x 365

= (2,240.5/131,376) x 365

= 6.23 days

Days Sales in Inventory = (Ending Inventory/ Cost of goods Sold)

= (2,132/131,376) x 365

= 5.92 days

By taking Average inventory & Average Receivables, we get Operating cycle days of 33.82 days (27.59 + 6.23)

By taking Closing Inventory & Closing receivables, we get Operating cycle days of 32.59 days (26.67 + 5.92)

Generally, Closing balances of these are taken for calculation of Operating Cycle, at times we can also take average balances to calculate Operating Cycle.