Business Analysis and Valuation企业分析和估价-13ans.docVIP

Chapter 13 Communication and Governance Question 1. Apple’s inventory increased from $1 billion on December 29, 1994, to $1.95 billion one year later. In contrast, sales for the fourth quarter in each of these years increased from $2 billion to $2.6 billion. What is the implied annualized inventory turnover for Apple for these years? What different interpretations about future performance could a financial analyst infer from this change? What information could Apple’s management provide to investors to clarify the change in inventory turnover? What are the costs and benefits to Apple from disclosing this information? What issues does this change raise for the auditor? What additional tests would you want to conduct as Apple’s auditor? Apple had annualized sales of $8 billion and an implied annualized inventory turnover rate of 8 at the end of 1994 and $10.4 billion and 5.3, respectively, at the end of 1995. Analysts could view this change in a positive manner if they anticipate that the increase in inventory is a signal that Apple expects higher sales in the future. Apple increased its inventories in the 4th quarter to support new product offerings and price cuts in the next quarter. Once these changes take place, the turnover rate will return to its prior level. Analysts could also view this change in a negative way. While sales have increased, inventories have increased faster, suggesting that Apple is not managing its inventories well. Because Apple has more resources tied up in inventory, it will have to cut back on research and development spending related to improving its operating systems and personal computers. To clarify the reasons for changes in inventory turnover, Apple could provide information about: The types of products in inventory. Is the inventory mainly old products that have not sold and will have to be deeply discounted or written-off or is it new models that have not yet been released to the public? Forecasts of sales by product. Technical s