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Refer to the financial statement (Form 10-K) for Apple dated 9/29/2018 and the financial statement (Form 10-K) for Google (Alphabet) dated 12/31/2018 to answer these questions. A. Refer to BTN 4-2 page 221 Please answer the following questions for both Apple and Google. 1. What is the dollar amount of gross margin and the gross margin ratio for 2018 & 2017? 2. Which company earns more in gross margin for each dollar of net sales? How do they compare for the industry average of 45% 3. Did the gross margin ratio improve or decline for these companies? Apple Inc. CONSOLIDATED BALANCE SHEETS (in Millions, except number of shares which are reflected in thousands and par value) September 29, September 30, 2017 ASSETS: 5 Current assets Cash and cash equivalents Marketable securities Accounts receivable, net Inventories Vendor non-trade receivables Other current assets Total current assets 25,013 40,388 23,186 3,956 25,809 12,087 131,339 20,289 53,892 17,874 4,855 17.799 13,936 128,645 Non-current assets: Marketable securities Property, plant and equipment, net Other non-current assets Total non-current assets Total assets 170.799 41,304 22,283 234,386 365,725 194,714 33,783 18,177 246,674 375 319 LIABILITIES AND SHAREHOLDERS' EQUITY: $ Current liabilities: Accounts payable Other current liabilities Deferred revenue Commercial paper Term debt Total current liabilities 55,888 32,687 7.543 11,964 8.784 116,866 44.242 30,551 7.548 11,977 6,496 100.814 Non-current liabilities: Deferred revenue Term debt Other non-current liabilities Total non-current liabilities Total liabilities 2.797 93.735 45,180 141,712 258,578 2,836 97,207 40,415 140,458 241,272 Commitments and contingencies Shareholders' equity Common stock and additional pald-in capital, $0.00001 par value: 12,600,000 shares authorized 4,754,986 and 5, 126,201 shares issued and outstanding, respectively Retained earnings Accumulated other comprehensive income/loss) Total shareholders' equity Total liabilities and shareholders' equity 40,201 70,400 (3.454) 107,147 365,725 35.867 98,330 (150) 134 047 375,319 $ COMPARATIVE ANALYSIS AZ APPLE GOOGLE IN 4-2 Key comparative figures for Apple and Google follow. 1.Compute the dollar amount of gross margin and the gross murgis rutia for the two years shows for each of these companies, 2. Which company carns more in pross margin for each dollar of metales? How do they come to the industry average of 450T 3. Did the gross margin ratio improve or decline for these compani e d Table of Contents Alphabet Inc. Alphabet Inc. CONSOLIDATED BALANCE SHEETS (In millions, except share amounts which are reflected in thousands, and par value per share amounts) December 31, 2017 December 31, 2018 $ 10,715 91,156 101,871 18,336 369 749 2.983 124,308 7.813 680 42,383 2,692 16.747 2,672 197 295 16,701 92.439 109,140 20,838 355 1,107 4,236 135,676 13,859 737 59,719 2.220 17,888 2.693 232,792 $ Assets Current assets: Cash and cash equivalents Marketable securities Total cash, cash equivalents, and marketable securities Accounts receivable, net of allowance of $674 and $729 Income taxes receivable, net Inventory Other current assets Total current assets Non-marketable investments Deferred income taxes Property and equipment, net Intangible assets, net Goodwill Other non-current assets Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Accrued compensation and benefits Accrued expenses and other current liabilities Accrued revenue share Deferred revenue Income taxes payable, net Total current liabilities Long-term debt Deferred rever , non-current Income taxes payable, non-current Deferred income taxes Other long-term liabilities Total liabilities Commitments and Contingencies (Note 9) Stockholders' equity Convertible preferred stock, 50.001 par value per share. 100,000 shares authorized; no shares issued and outstanding Class A and Class B common stock, and Class C capital stock and additional paid-in capital, $0.001 par value per share: 15.000.000 shares authorized (Class A 9,000,000. Class B 3,000,000, Class C 3,000,000): 694,783 (Class A 298,470, Class B 46,972, Class C 349,341) and 695,556 (Class A 299,242, Class B 46,636. Class C 349,678) shares issued and outstanding 3,137 4,581 10.177 3,975 1,432 881 24.183 3.969 4,378 6,839 16,958 4,592 1,784 340 12,812 430 3,059 44,793 34,620 4,012 396 11,327 1,264 3,545 55,164 40.247 45,049 View Go Tools Window Help Google (Alphabet) Consolidated Balance Sheet 12_31 2018(1) (page 2 of 2) Q Search Accumulated other comprehensive loss Retained earnings Total stockholders' equity Total abilities and stockholders' equity (992) 113.247 152,502 197,295 (2,305) 134,885 177,628 232.792 $ See accompanying notes BTN 4-2 Apple Google 2018 2017 2018 2017 7 Gross Margin (s Millions) 1 9 Gross Margin Ratio IT 11 TUT 10 11 How did the Gross Margin Ratio Compare 12 to the Industry Ratio of 45% (Higher or Lower) 13 HH HILL 14 Which company had a higher gross margin ratio in 2018? 15 16 Which company had a higher gross margin ratio in 2017? 17 18 Did the gross margin ratio for Apple improve or decline in 2018 19 compared to 2017? How much? 20 21 Did the gross margin ratio for Google improve or decline in 2018 22 compared to 2017? How much? 32 What is the relative size of Apple's inventories compared 33 to its other types of assets (higher, lower, about the same)? 35 36 What accounting method did Apple use to compute 37 inventory amounts on its balance sheet? 2018 2017 40 91 Inventory Turnover 3 Days Sales in Inventory APPLE GOOGLE TN 4-2 Key comparative figures for Apple and Google follow. Apple Google $ millions Current Year Prior Year Current Year Prior Year Net sales ................... Cost of sales ..... $233.715 140,089 $182,795 112,258 $74,989 28.164 $66,001 25,691 equired 1. Compute the dollar amount of gross margin and the gross margin ratio for the two years shown for each 2. Which company earns more in gross margin for each dollar of net sales? How do they compare to the ind 3. Did the gross margin ratio improve or decline for these companies? ETHICS CHALLENGE C1 P2

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