Calculating and Assessing Debt Ratio for Apple, Inc.
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Hi, I need some assistance with the following regarding Apple Inc: Balance Sheet and Market Value of Your Company's Liabilities and Equity.
Refer to Apple's Inc most recent balance sheet. (Find at: http://investor.apple.com/secfiling.cfm?filingID=1193125-11-282113&CIK=320193)
a) Short term liabilities (or debt) and long term liabilities:
In Apple's balance sheet, what is the total of the short term liabilities (short term debt) and long term liabilities (long term debt)?
b) Equity:
What is the number of shares outstanding and most recent price per share of Apple? Multiply these together to find the market value of equity.
If you have a problem finding out the number of shares outstanding you may go to http://finance.google.com and insert Apple.
1) Calculate Apple's debt ratio (total liabilities / total liabilities + equity) and debt to equity ratio (total liabilities divided by total equity). Calculate these ratios for long-term and short-term liabilities only.
2) Given this information, what would be your recommendation to Apple regarding whether these ratios are too small or too large? Should Apple start to pay off its debt or increase its debt?
3) Calculate debt to equity ratios for two companies in Apple's industry. Which company has the highest debt to equity ratio and why did they choose that? Which company has the lowest debt to equity ratio and why did they choose that?
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See attachment for better format, as well as references.
Debt ratio and debt/equity ratio to measure a company's financial leverage - it indicates what proportion of equity and debt the company is using to finance its assets, (Investopedia, nd). Prior to calculating a debt ratio, basic financial data must be researched on the target company. The Form 10-K: Annual Report to Shareholders - represents the most accurate source of such information. It is, however, a report of past events and therefore only represents a snapshot of past reality. Significant changes can occur in a company's financial strategy between annual reports. That said, due to SEC regulations, and commonly accepted accounting practices, the Form 10-K constitutes the most accurate set of data by which to develop such a snapshot.
Table 1: Selected Financial Data for Apple, Inc, (in millions of USD), (Apple, 2011, pg 44).
Fiscal Year Total Liabilities Short Term Liabilities Long Term Liabilities Shareholder Equity
2011 39,756 27,970 11,786 47,791
2010 27,392 20,722 6,670 ...
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