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APPLE COMPANY
4. A) Return on Assets is the profitability ratio given dividing the net profit before tax and interest by
total assets employed in a business. Return on assets of the firm is high showing the fim is earnin more
revenue in terms of assets it has employed.
b) Return on Equity is a profitability ratio given dividing net profit after tax and interest by total
shareholders’ equity in the business. This ratio for apple firm is high which shows the firm is earning
revenue which can be distributed to shareholders in form of dividends hence they earn revenue.
c) Return on Capital is the profitability ratio given by dividing net profit before tax and interest by total
capital employed in the business. This is 60% which means the business is earning income from the
capital that it has invested in the business.
d) Gross Margin is a profitability ratio given by dividing gross profit with the total sales revenue. It
increases from 39% to 40% meaning the profitability position of the firm is increasing.
e) SG&A Margin means selling and administrative margin. This a total expenses incurred by the company
to promote the firms product and total administrative expenses. It is less than the total sales of the firm
which enable the firm to make a profit.
f) Current Ratio is liquidity and efficiency ratio given by dividing current assets by current liabilities. It
measures ability of the firm to pay short term liabilities as they fall due with current assets. The current
ratio of Apple Company is 111%. This shows the firm is able to meet its short term obligations as they
fall due.
g) Quick Ratio is a liquidity ratio which is given by dividing current assets less inventories by current
liabilities. Measures ability of the firm to meet its liabilities from the most liquid assets. It shows the firm
is able to meet its short term obligations as they fall due from the most liquid assets.
h) Total Debt/Equity is a gearing ratio which measures the company’s financial leverage given by
dividing total liabilities by total stakeholder’s equity. Total Debt/Equity is 102% which means the firm
can meet its debts from shareholders equity.
i) Total Revenue is the total income received from the sale of a given quantity of goods and services.
Given by multiplying the price of goods or services with the quantity of goods or services sold. The firm
has total revenue which has been increasing simultaneously which shows the business is doing well.
j) Gross Profit is a profitability ratio given by subtracting the cost of goods sold by the company from the
total revenue of the firm. Gross profit for the firm has been increasing wich shows that the firm is
making more revenue.
In conclusion, the firm is healthy evidenced from the above ratios. The profitability ratios are high
showing the firm is earning much revenue and the leverage ratios show that the firm is able to meet its
debts on time.
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