Reference no: EM132564213

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") "Company Filings Search" under "Forms."

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

Question 1: Looking at Note 1 (Summary of Significant Accounting Policies), how does Apple define cash equivalents?

Question 2: Looking at the "Report of Independent Registered Public Accounting Firm" supplying an opinion on Apple's internal controls over financial reporting (p. 71 of the 10-K), what was the auditor's opinion regarding the effectiveness of Apple's internal control over financial reporting? What criteria were used to evaluate the effectiveness of these controls?

Question 3: What was Apple's accounts receivable turnover (rounded to two decimal places) in 2015 and 2016? (Accounts receivable were $17,460,000,000 at the end of 2014.) Assuming the industry average for 2016 was 8.53, describe Apple's relative efficiency with its accounts receivable.

Question 4: What was Apple's inventory turnover (rounded to two decimal places) in 2015 and 2016? (Inventories were $2,111,000,000 at the end of 2014.) Assuming the industry average for 2016 was 20.24, describe Apple's relative efficiency with its inventory.
Describe the trend in Apple's accounts receivable and inventory turnover.

Question 5: CONCEPTUAL CONNECTION Assuming 10% interest, how much interest expense did Apple incur due to its deterioriating accounts receivable and inventory turnovers (remember, the numbers are in millions)?

Question 6: What were Apple's gross profit, operating margin, and net profit ratios in 2016? (Note: Round answers to two decimal places.) Assuming industry averages for 2016 were 27.57%, 7.87%, and 4.76%, respectively, describe Apple's profitability.

Question 7: Looking at Note 1 (Summary of Significant Accounting Policies), what method of depreciation does Apple use? What is the range of useful life for internally used software? Do you think this useful life is appropriate?