Vertical analysis

The condensed income statements through income from operations for Dell Inc. and

Apple Inc. for recent fiscal years follow (numbers in millions of dollars):

 

Â	Dell Inc.	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):

 

Â	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.