Question: Apple Inc. is one of the country’
Apple Inc. is one of the country’s most successful computer technology companies. The company designs, manufactures, and sells computers, digital music devices, communication devices, and various software products. The company’s net income has increased each year since 2002, and in 2009, Apple sold 10.396 million computers, 54.132 million iPods, and 20.731 million iPhones. Information relating to the company’s business segments can be found in the company’s annual report, an excerpt of which follows.
1. Where does Apple generate most of its revenues? Its profits?
2. The profitability of each dollar of revenue is measured by the ratio (Operating income/Net sales). Compute this ratio for each of Apple’s five operating segments in 2009. Which segment has the highest profitability per dollar of revenue?
3. The extent to which a segment uses its assets to efficiently generate revenues is measured by the ratio (Net sales/Assets). Compute this asset turnover ratio for each of Apple’s five operating segments in 2009. Which segment has the highest number of dollars of revenue generated for each dollar of assets?
4. The return on assets ratio (Operating income/Assets) measures how well a segment combines profitability and efficiency to generate profits with the existing assets. Compute return on assets for each of Apple’s five operating segments in 2009. Which segment has the highest operating profit generated for each dollar of assets?
5. Based on your answers to parts (1) and (2), how critical is Apple’s Retail segment to the company’s overall success? Before you answer this question, think about how the company is able to sell and promote its computers and other products.
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Net Sales by Operating Segment: 2009 2008 2007 Americas net sales $18,887 $16,447 $11,907 Europe net sales . 11,810 9,233 5,469 Japan net sales . 2,279 1,728 1,084 Retail net sales 6,656 7,292 4,362 Other Segments net sales (a). 3,273 2,791 1,756 Total net sales.. $42,905 $37,491 $24,578 Operating Income Americas. $ 6,637 $ 4,874 $ 2,998 Europe 4,296 3,022 1,350 Japan 961 549 233 Retail 1,677 1,661 876 Other Segments (c). 1,121 775 389 Other corporate expenses, net (a) (2,242) (2,038) (1,197) Stock-based compensation expense. (710) (516) (242) Total operating income $11,740 $ 8,327 $ 4,407 Assets Americas. $ 1,882 $ 1,678 $ 1,250 Europe 1,352 1,069 586 Japan 483 272 158 Retail 1,344 1,139 908 Other Segments (c) . 543 405 249 Corporate Assets 41,897 31,608 21,727 Total Assets. $47,501 $36,171 $24,878
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