To analyze nonoperating investments in marketable debt and equity securities, consider the following questions that will help us understand both companies’ level of excess cash and how they invest it:
- • What is the magnitude of the investments in common-size terms? Has this changed over time? What proportion is short-term versus long-term?
- • What types of investments does the company hold debt, equity, private company equity?
- • What explanation do the companies provide for their level of investments? Does the MD&A section of the Form 10-K discuss plans for expansion or other strategic initiatives that would require cash?
Calculate the quick ratio, current ratio, stockholders’ equity ratio, debt-to-equity ratio, operating cost ratio, operating profit margin, price-earnings ratio, and asset multiple based on Apple’s financial statements.
