Vertical analysis
Response to the following problem:
The condensed income statements through income from operations for Dell Inc. and
Apple Inc. for recent fiscal years follow (numbers in millions of dollars):
| |
Dell nc. |
Apple Inc. |
|
Sales
|
$56,940
|
$156,508
|
|
Cost of sales
|
44,754
|
87,846
|
|
Gross profit
|
$12,186
|
$68,662
|
|
Selling, general, and administrative expenses
|
$ 8,102
|
$10,040
|
|
Research and development
|
1,072
|
3,381
|
|
Operating expenses
|
$ 9,174
|
$13,421
|
|
Income from operations
|
$ 3,012
|
$55,241
|
Prepare comparative common-sized statements, rounding percents to one decimal place. Interpret the analyses.
Deere & Co. manufactures and distributes farm and construction machinery that it sells around the world. In addition to its manufacturing operations, Deere & Co.'s credit division loans money to customers to finance the purchase of their farm and construction equipment.
The following information is available for three recent years (in millions except per- share amounts):
|
Year 3
|
Year 2
|
Year 1
|
|
Net income (loss)
|
$3,064 .7
|
$2,799 .9
|
$1,865 .0
|
|
Preferred dividends
|
$0 .00
|
$0 .00
|
$0 .00
|
|
Interest expense
|
$782 .8
|
$759 .4
|
$811 .4
|
|
Shares outstanding for computing earnings per share
|
397
|
417
|
424
|
|
Cash dividend per share
|
$1 .79
|
$1 .52
|
$1 .16
|
|
Average total assets
|
$52,237
|
$45,737
|
$42,200
|
|
Average stockholders' equity
|
$6,821
|
$6,545
|
$5,555
|
|
Average stock price per share
|
$79 .27
|
$80 .48
|
$61 .18
|
1. Calculate the following ratios for each year (Round percentages to one decimal place):
a. Rate earned on total assets
b. Rate earned on stockholders' equity
c. Earnings per share
d. Dividend yield
e. Price-earnings ratio
2. What is the ratio of average liabilities to average stockholders' equity for Year 3?
3. Based on these data, evaluate Deere & Co.'s performance.