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Chapter 3: Q2BTN_6 (page 164)

Key figures for the recent two years of both Apple and Google follow.

Required

1. Compute profit margins for (a) Apple and (b) Google for the two years of data shown.

2. Which company is more successful on the basis of profit margin? Explain.

3. Compute the current ratio for both years for both companies.

4. Which company has the better ability to pay short-term obligations according to the current ratio?

5. Analyze and comment on each company’s current ratios for the past two years.

6. How do Apple’s and Google’s current ratios compare to their industry (assumed) average ratio of 2.0?

Apple Google

\( millions Current Year Prior Year Current Year Prior Year

Net income . \) 53,394 \( 39,510 \)16,348 $14,136

Net sales . 233,715 182,795 74,989 66,001

Current assets . . . . . . . . . . . . . . . 89,378 68,531 90,114 78,656

Current liabilities 80,610 63,448 19,310 16,779

Short Answer

Expert verified

Current ratio of Google company is better than the industry while current ratio of Apple company is less as compared to the industry average.

Step by step solution

01

Step-by-Step SolutionStep 1: Definition of current ratio

The current ratio used to determine the ability of company to fulfil its short-term obligation.

02

Comparison of current ratio

The current ratio of the Apple company is 1.10 below the average ratio of industry that is 2.0. That shows that Apple company has not in good condition to pay their short-term obligations.

The current ratio of the Google company is 4.66 which above the average ratio. That shows the company has in good condition to pay its short-term obligations.

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Most popular questions from this chapter

Adjusting entries affect at least one balance sheet account and at least one income statement account.

For the entries below, identify the account to be debited and the account to be credited from the following

accounts: Cash; Accounts Receivable; Prepaid Insurance; Equipment; Accumulated

Depreciation; Wages Payable; Unearned Revenue; Revenue; Wages Expense; Insurance Expense;

Depreciation Expense. Indicate which of the accounts is the income statement account and which is

the balance sheet account.

a. Entry to record revenue earned that was previously received as cash in advance.

b. Entry to record wage expenses incurred but not yet paid (nor recorded).

c. Entry to record revenue earned but not yet billed (nor recorded).

d. Entry to record expiration of prepaid insurance.

e. Entry to record annual depreciation expense.

Cal Consulting follows the practice that prepayments are debited to expense when paid, and unearned

revenues are credited to revenue when cash is received. Given this company’s accounting practices,

which one of the following applies to the preparation of adjusting entries at the end of its first accounting

period?

a. Unearned fees (on which cash was received in advance earlier in the period) are recorded with a debit

to Consulting Fees Earned of \(500 and a credit to Unearned Consulting Fees of \)500.

b. Unpaid salaries of \(400 are recorded with a debit to Prepaid Salaries of \)400 and a credit to Salaries

Expense of \(400.

c. Office supplies purchased for the period were \)1,000. The cost of unused office supplies of \(650 is

recorded with a debit to Supplies Expense of \)650 and a credit to Office Supplies of \(650.

d. Earned but unbilled (and unrecorded) consulting fees for the period were \)1,200, which are recorded

with a debit to Unearned Consulting Fees of \(1,200 and a credit to Consulting Fees Earned

of \)1,200.

In the blank space beside each numbered balance sheet item, enter the letter of its balance sheet classification. If the item should not appear on the balance sheet, enter a Z in the blank.

A. Current assets

B. Long-term investments

C. Plant assets

D. Intangible assets

E. Current liabilities

F. Long-term liabilities

G. Equity

18. Repairs expense

In the blank space beside each numbered balance sheet item, enter the letter of its balance sheet classification. If the item should not appear on the balance sheet, enter a Z in the blank.

A. Current assets E. Current liabilities

B. Long-term investments F. Long-term liabilities

C. Plant assets G. Equity

D. Intangible assets

14. Common stock

What is the difference between the cash basis and the accrual basis of accounting?
See all solutions

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