Question

Key figures for the recent two years of both Apple and Google follow. Apple Google $ millions Current Year Prior Year Current Year Prior Year Net income $ 48,351 $ 45,687 $ 12,662 $ 19,478 Net sales 229,234 215,639 110,855 90,272 Current assets 128,645 106,869 124,308 105,408 Current liabilities 100,814 79,006 24,183 16,756 Required: 1. Compute profit margins for (a) Apple and (b) Google for the two years of data reported above. 2. In the current year, which company is more successful on the basis of profit margin? 3. Compute current ratios for (a) Apple and (b) Google for the two years reported above. 4. In the current year, which company has the better ability to pay short-term obligations according to the current ratio?

Answer 1

Please see solution below

Step-by-step explanation:

1. Profit margins :

= Net income / sales

Current year.

• Apple

= (48,351/229,234) × 100

= 21.1%

•Google

= (12,662/110,855) ×100

= 11.4%

Prior year

• Apple

= (45,687/215,639) × 100

= 21.2%

•Google

= (19,478/90,272) × 100

= 21.6%

2. Apple is more successful . This is because the profit margin of Apple is higher than the profit margin of Google in the current year.

3. Current ratio

=Current asset / Current liabilities

Current year

• Apple

= 128,645/100,814

= 1.28 times

• Google

= 124,308/24,183

= 5.14 times

Prior year

• Apple

= 106,869/79,006

= 1.35 times

• Google

= 105,408/16,756

= 6.29 times

4. Google, because it has the highest current ratio, compared to Apple, in the current year.