o Note: that you should choose a company in which you are interested and a company for which there

is an annual report to the Securities and Exchange Commission (called the 10-K). o I suggest avoiding federally regulated companies such as banks, insurance companies, and brokerages. o I suggest choosing a company that sells a product which you understand and with which you are familiar.

o Your Name:

o Company Name:

CHAPTER 1 - INTRODUCTION Chapter 1: Select a Company and Gather DocumentsQuestion 1 Fill in the page numbers on the annual report where the following are located. Required information for this Page Required information for this Page workbook project. No. workbook project. No. Managements Discussion and Statement of Cash Flows Analysis (MD&A) Income Statement (Statement of Earnings) Balance Sheet (Statement of Financial Position) Statement of Change in Stockholders Equity Managements Report (Responsibility) on Internal Control over Financial Reporting (Item 9A. Control and Procedures in SEC 10K) Chapter 1: Identify Why You Selected This CompanyQuestion 1 A) What are your motivations and interests in selecting this company? A) Report of Independent Accountants or Independent Auditors Report Five- or Ten-Year Summary of Operating Results Notes to Financial Statements

What question(s) are you seeking to answer? List at least five questions? B) Remember to list at least five questions you seek to answer from your analysis of the companys annual report. 1) 2) 3) 4) 5) 6) 7) 8) 9) 10)

Company and Annual Report Essentials Chapter 1: Company and Annual Report EssentialsQuestion 1 What is the companys complete name?

Chapter 1: Company and Annual Report EssentialsQuestion 2 What is the address of your companys corporate headquarters?

Chapter 1: Company and Annual Report EssentialsQuestion 3 Identify the companys Internet site.

Chapter 1: Company and Annual Report EssentialsQuestion 4 Identify the e-mail address of the companys Investor Relations Department. E-mail address: Chapter 1: Company and Annual Report EssentialsQuestion 5 Which stock exchange lists your company?

Chapter 1: Company and Annual Report EssentialsQuestion 6 What is your companys stock exchange trading symbol?

Chapter 1: Company and Annual Report EssentialsQuestion 7 What is your companys Standard Industrial Classification (SIC) and code? You may skip this question. Chapter 1: Company and Annual Report EssentialsQuestion 8 Locate the board of directors listing. You may have to look on the companys web. How many board members does your company have?

Chapter 1: Company and Annual Report EssentialsQuestion 9 How many of the directors are company employees, labeled inside directors? And how many are non-company directors, labeled outside directors? Why does a company want and need outside directors? (Inside and outside directors can usually be identified as such by their title and company. For example, an inside director will be employed by the company and an outside director will be an employee of another company or perhaps no longer employed.)

Chapter 1: Company and Annual Report EssentialsQuestion 10 Leadership addresses the stockholders, typically, once a year at the annual stockholders meeting. Identify where and when this occurred, if this information is reported in your annual report.

Company Strategy and Business Environment Chapter 1: Company Strategy and Business EnvironmentQuestion 1 Review the chairmans message of your companys annual report or from the investors relations link on your companys website. Does it appear to be uplifting or somewhat apologetic? Identify phrases that support your position.

Chapter 1: Company Strategy and Business EnvironmentQuestion 2 Check below the one primary company strategy identified in the chairmans message. Support your answer with phrases found in the chairmans message that pointed you to the identified corporate strategy. Growth: Vertical Horizontal Concentric or Retrenchment Conglomerate . .

Not growth but rather Stability

Phrases to support your conclusion:

Chapter 1: Company Strategy and Business EnvironmentQuestion 3 Briefly summarize the companys discussion found in Item 1 of SEC Form 10-K. Type of business: Major business segments: Primary customers: Primary products and/or services: Other:

Chapter 1: Company Strategy and Business EnvironmentQuestion 4 Identify broad-based social, political, economic, and technological concerns that may affect your company. This will require some thought since most companies are impacted by each of these categories in some way. Put N/A if one of the categories does not apply. Social: Political:

Economic: Technological: Other:

Wrap-up Chapter 1: Wrap-upQuestion 1 After further review of additional information you should now be confident in identifying the one primary company strategy, beyond the insight provided by the chairmans message? Check below the one primary company strategy identified in the chairmans message and all other supporting documents. Support your answer with phrases. Growth: Vertical Stability Horizontal Retrenchment . Concentric Conglomerate .

Phrases to support your conclusion using all the information gathered from the chairmans message, from Item 1 of the 10-K and other insight gained from completing chapter 1.

CHAPTER 2 - ANNUAL REPORT STRUCTURE Chapter 2: Financial HighlightsQuestion 1 Review the financial highlights of your companys annual report. Identify net sales or revenues, net income, basic earnings per share (BEPS), and total assets for the current and preceding years. These are the most common values included in financial highlights. If your company reports something different, simply cross out an item here and recap what is reported. Current Year Example: Net sales or revenues Net income Basic EPS Total Assets Based on your preliminary review, is your company performing better than, equal to, or less favorably than in the prior year? Briefly explain. One Year Prior Two Years Prior

General Company and Marketing Information You may skip this question. Chapter 2: General Company and Marketing InformationQuestion 1 Identify other types of general information found within the annual report. Look for pictures of product and people that are colorful and send a positive signal to the reader. Exclude the specific components identified in Chapter 1: Select a Company and Gather DocumentsQuestion 1. Category Example: Volunteer Activities Message Ongoing and contributing to the success of the community

Managements Discussion and Analysis Chapter 2: Managements Discussion and AnalysisQuestion 1 Results of Operations: Identify the primary drivers/issues that explain current and future results of operations discussed in the MD&A. For example, the gross profit percentage increased because of improved buyer/supplier relations resulting in greater overall operating performance. Or an increase in operating expenses because of increased fuel costs reduced profits. List the six major drivers/issues of performance you find in the MD&A section of the annual report. 1. 2. 3. 4. 5. 6.

10

Liquidity: Recap in your own words (do not copy and paste) what you find about your companys liquidity in the MD&A section of the annual report. Look for information about the ability of the company to satisfy short-term cash needs and the ability to generate operating cash flows, for example.

Capital Resources: Recap own words (do not copy and paste) what you find about your companys capital resources in the MD&A section of the annual report. Look for information about cash reserves and credit availability. For example, your companys MD&A section may have a disclosure about an established lined of credit to fund future growth.

Reports by Management Chapter 2: Reports by ManagementQuestion 1 Review the Managements Report (Responsibility) on Internal Control over Financial Reporting in your companys annual report. Answer the following questions. Who is responsible for maintaining the internal controls designed to provide reasonable assurance that the books and records reflect the transactions of the company? Record the statement that identifies managements conclusion about internal controls. Who audited managements assessment of the effectiveness of your companys internal control over financial reporting?

11

Independent Auditors Report Chapter 2: Independent Auditors ReportQuestion 1 Review the Independent Auditors Report of your companys annual report and answer the following questions. Who was the companys auditor and where is it located? What is the responsibility of the auditor?

Who is responsible for the preparation of and information within the companys financial statement? The audit was conducted in accordance with what? What was the opinion of the auditor?

Financial Statements and the Related Notes Chapter 2: Multi-year Summary of Operating ResultsQuestion 1 Identify the major components provided in Item 6. Selected Financial Data of the 10-K annual report. Summarize the insight provided by each. Look for stable, increasing or decreasing trends. Consistent, slightly improving performance signals management has control of the business. Inconsistent performance signals management does not have control of the business. Component Example: The Home Depot Statement of Earnings Data Summary of Insight Sales and earnings have grown significantly over time. Operating expenses are growing at an increasing rate.

12

13

CHAPTER 3 - FINANCIAL STATEMENTS The Balance Sheet Chapter 3: Balance SheetQuestion 1 Identify the date shown at the top of your selected companys balance sheet. Current Year 25th September 2010 Prior Year 26th September 2009

Does the companys fiscal year follow the calendar year? If not, why do you think it is different?

No

The companys fiscal year is the 52 or 53 week period that ends on the last Saturday of September.

Chapter 3: Balance SheetQuestion 2 Review the current asset section of your selected companys balance sheet. Explain why the order of individual items begins with cash. In your opinion, would it be more or less appropriate to order these items according to dollar magnitude? Explain.

The order of Individual items begins with cash , because cash is the most liquid item and current assets should always be displayed in the order of liquidity. Arranging the current assets according to the dollar magnitude could be one way of display, but it would be a less appropriate way of arrangement as per my opinion, because the prime criteria of current asset, which is liquidity is ignored then. Chapter 3: Balance SheetQuestion 3 Review your companys balance sheet (or SEC Form 10-K) and compare accumulated depreciation to the historical cost of Plant and Equipment (PE) using the following ratio. Compute the following: Accumulated depreciation= Plant and Equipment $ in million 2466/7234= 34.09% Percentage of Asset Life Used Up High percentage means older assets Low percentage means newer asset.

As per this ratio of 34.09% approximately 1/3 rd life of the asset has been used

14

Show your work by specifying the amount of Accumulated Depreciation and the amount of Plant and Equipment Is the investment in fixed assets, on average, relatively recent? If not, can we assume that these assets will be replaced shortly? No the asset does not required to be replaced shortly as 2/3rd of the asset life is still remaining. Chapter 3: Balance SheetQuestion 4 Since property, plant, and equipment (PPE) and long-term investments in stock represent a companys investment, why do we distinguish between them in the balance sheet? Though all property, plant and equipment and Long term investments in stock represent a companys investment, it should be distinguished from each other as Property, Plant and Equipment (PPE) is a depreciable asset and Long Term Investments are non depreciable assets.

Chapter 3: Balance SheetQuestion 5 Review the noncurrent asset section of your companys balance sheet. Are any intangible assets listed? If so, identify the types of intangible assets and the percent of total assets that the intangible assets represent. Intangible Asset 1: (Goodwill and other Intangible assets ) 90.77% Intangible Asset 2: (Trade Mark) 9.23% Intangible Asset 3: Total Intangible Assets Total Assets = 1.44% If this company were to be acquired by another company, would the intangible assets influence the purchase price? Explain your answer. If this company were to be acquired by another company, the intangible asset would definitely influence the purchase price as that is inclusive of registered Trademarks and even acquired goodwill. But as its a very negligible portion of Total asset of the company i.e. only 1.44%, the influence to the purchase price would be also very negligible.

15

Chapter 3: Balance SheetQuestion 6 Now review your companys total assets for the most recent year. What percentage of total assets is current? Noncurrent? Indicate the amounts of each. Current 55.44% Noncurrent 44.46%

Should companies have a greater investment in current assets or noncurrent assets, or does it depend on the nature of their business? Explain your answer. The company has a greater investment in current assets than non current assets. The company has very high cash and cash equivalent and has a high investment in short term marketable securities. The nature of business does not require such high investments in current assets. Chapter 3: Balance Sheet Question 7 You may skip this question. Chapter 3: Balance SheetQuestion 8 Identify the information that relates to the stockholders equity section of your companys most recent balance sheet. Number of common shares authorized? Number of common shares issued? Number of common shares outstanding? Number of treasury shares held by the company? 1,800,000,000 915,970,050 899,805,500 NIL

Chapter 3: Balance SheetQuestion 9 Answer the following questions relative to the stockholders equity section of the balance sheet. By what amount did retained earnings increase or decrease from the prior year? Was the increase or decrease in retained earnings equal to the companys current year net income or net loss? ( $ in Million ) 13,816 No, the increase in retained earnings was not equal to the net income of the company for the current year, ie, $ 14,013 mn. Out of which common

16

stock issued under stock plan of $ 197 mn. So the net increase in retained earnings is $ 13,816 mn.

17

Chapter 3: Balance SheetQuestion 10 List (write-in) each financial statement element as shown in your companys balance sheet and its related dollar value. Double check the math to ensure that your $assets = $liabilities + $shareholders equity. Assets $ in Million Total Current Assets = 41,678 Long Term Marketable Securities = 25,391 PPE = 4,768 Goodwill = 741 Acquired Intangible asset= 342 Other Asset = 2263 Total Assets = 75,183 Liabilities $ in Million Total Current Liability= 20,722 Deferred Revenue Non Current= 1,139 Other Non Current liabilities = 5531 Total Liabilities= 27, 392 Stockholders Equity Common Stock = 10,668 Retained Earnings = 37,169 Accumulated Other Comprehensive Loss= (46) Total Share Holders Equity= 47, 791

Chapter 3: Balance SheetQuestion 11 From the asset and liability sections of the balance sheet, identify the three major accounts that changed the most from the prior year (e.g., accounts receivable, accounts payable, inventory, etc.). What events might explain these changes? Working to explain why these changes occurred contributes to a greater understanding about a company. Account Vendor Non Trade Receivables Explanation The Company has non-trade receivables from certain of its manufacturing vendors resulting from the sale of components to these manufacturing vendors who manufacture sub-assemblies or assemble final products for the Company. The Company purchases these components directly from suppliers. Vendor nontrade receivables from two of the Companys vendors accounted for 57% and 24%, respectively, of non-trade receivables as of September 25, 2010 and two of the Companys vendors accounted for 40% and 36%, respectively, of non-trade receivables as of September 26, 2009. The Company does not reflect the sale of

18

these components in net sales and does not recognize any profits on these sales until the related products are sold by the Company, at which time any profit is recognized as a reduction of cost of sales. Long Term Marketable Securities Goodwill The company invested more by $ 14,863 million in long term marketable securities. The Companys gross carrying amount of goodwill was $741 million and $206 million as of September 25, 2010 and September 26, 2009, respectively. The Company did not have any goodwill impairment during 2010, 2009 or 2008. During 2010, the Company completed various business acquisitions for an aggregate cash consideration, net of cash acquired, of $638 million, of which $535 million was allocated to goodwill and $107 million to acquired intangible assets.

Chapter 3: Balance SheetQuestion 12 Identify the combined carrying values (dollar amounts) of the following selected account groups taken from your companys balance sheet. Note that you should include all the assets in one of the three asset categories and all of the liabilities into one of the two liability categories, and all of the equity accounts into one of the four equity categories. Account Groups Current Year Prior Year Increase or Decrease (in dollars) Current Assets Net Fixed Assets Intangible and Other Noncurrent Assets Total Assets Current Liabilities Long-term Liabilities Common Stock Additional Paid in Capital Retained Earnings 37169 23353 13816 41678 4768 28737 75183 20722 6670 10668 31555 2954 12992 47501 11506 4355 8210 10123 1814 15745 27682 9216 2315 2458

19

Other Equity Components Total Liab. & Equity = Total Assets

-46 75183

77 47501

-123 27682

Chapter 3: Balance SheetQuestion 13 Prepare a common-sized balance sheet (expressed in percentages) using the following account groups. Account Group Current Year Prior Year Increase or Decrease (current year percent minus prior year percent) Current Assets Net Fixed Assets Intangible and Other Noncurrent Assets Total Assets Current Liabilities Long-term Liabilities Common Stock Additional Paid in Capital Retained Earnings Other Equity Components Total Liabilities and Stockholders Equity You may skip this question. Chapter 3: Balance SheetQuestion 14 Identify the three balance sheet groups from question 13 above that changed most significantly. Within each of these groups, identify the primary balance sheet element that drove this change. What events might explain these changes? Group Name: Explanation: 49.44% -0.06% 100% 49.16% 0.16% 100% 0.27% -0.22% 55.44% 6.34% 38.22% 100% 27.56% 8.87% 14.19% 66.43% 6.22% 27.35% 100% 24.22% 9.17% 17.28% -10.99% 0.12% 10.87% 3.34% -0.30% -3.09%

20

Chapter 3: Balance SheetQuestion 15 Judging by the current ratio, did your company become more or less liquid when comparing this year to last year? Current Ratio for current year (show the amounts): 2.01 Current Ratio for prior year (show the amounts): 2.74

Explain why your company is more or less liquid. The companys current ratio was 2.74 in September 2009 which reduced to 2.01 in September 2010. The companys liquidity reduced. Chapter 3: Balance SheetQuestion 16 Did your company increase or decrease its financial leverage when comparing total long-term debt to total assets from this year to last? Show the amounts you use to compute the total long-term debt to equity ratios. Current Year (show the amounts): Total long-term debt Total assets = Prior Year (show the amounts): Total long-term debt Total assets =

Explain why leverage has increased or decreased: There is no long term debt in the company.

21

The Income Statement or Statement of Earnings Chapter 3: Income StatementQuestion 1 Review the heading of your companys income statement. Does the companys income statement provide two or three years of comparative information? (Insert number to the right.) 3yrs.

Why do you think the SEC requires that balance sheets provide two years of comparative financial information and income statements provide three years of comparative financial information?

The SEC requires three years comparative financial information of Income Statement to compare the growth in the business, companys performance etc. Chapter 3: Income StatementQuestion 2 Review the middle section of your companys income statement. Did operating income (loss) increase or decrease from the prior year and by how much? You may have to compute operating income (loss). Increased by $ ______6645 mn___ Chapter 3: Income StatementQuestion 3 Does the middle section of your companys income statement show a nonoperating income (loss) increase or decrease from the prior year and by how much? You may have to compute nonoperating income (loss). Increased by $ ______________ Chapter 3: Income StatementQuestion 4 Why is it important to know the different sources of incomeoperating or nonoperating? It is important to know the different source of income- Operating and non operating to judge r the companys specified business performance and to bifurcate the non operating profit to know the exact operational profit. Decreased by $ _____177 mn__ Decreased by $ ______________

22

Chapter 3: Income StatementQuestion 5 If any of the irregular events are shown on your companys income statement, describe the nature and the amount. Select the most current year affected by the event if multiple years are affected. Irregular Event Restructuring charge? Discontinued operation? Extraordinary event? Amount NIL NA NIL NA NIL NA Nature of the Change

Importance of the Income Statement Creditors, employees, suppliers, investors, and others use the income statement. The report serves as a measuring stick of how a company has performed, where it appears to be heading, and what future cash flows are likely to be. The first question most users want answered is what is net income? Next, they want to know how that figure compares to the prior years. Chapter 3: Income StatementQuestion 6 Review the lower section of your selected companys income statement. Did net income (loss) increase or decrease from the prior year and by how much? Increased by $ _____5778_________ Decreased by $ ______________

23

Chapter 3: Income StatementQuestion 7 Prepare a common-sized income statement for the categories below. You must include all the income statement items in one of the Account/Category groups so that the percentages add correctly. Your percentages should add down like the Example column. Account/Category Net Sales (revenues) Cost of Goods/Services (if applicable) = Gross Profit Operating Expenses = Operating Income (Loss) Non-operating Income (Loss) = Income before taxes Income Tax Expense = Net Income Chapter 3: Income StatementQuestion 8 Identify the three income statement accounts/categories that changed the most in Question 7 (sales, cost of goods sold, operating expenses, non-operating income, income tax expense). What events might explain these changes? Explanation: Account or Category: Operating Expenses (Hint the MD&A section will provide good information to answer this question.) The Operating Expenses reduced by 2% in current year. R&D expense increased 34% or $449 million to $1.8 billion in 2010 compared to 2009. This increase was due primarily to an increase in headcount and related expenses in the current year to support expanded R&D activities. Also contributing to this increase in R&D expense in 2010 was the capitalization in 2009 of software development costs of $71 million. SG&A expense increased $1.4 billion or 33% to $5.5 billion in 2010 compared to 2009. This increase was due primarily to the Companys continued expansion of its Retail segment, higher spending on marketing and advertising programs, increased stock-based compensation expenses and variable costs associated with Example 100% (40%) 60% (15%) 45% 3% 48% (18%) 30% Current Year 100% 61% 39% 11% 28% 0% 28% 7% 21% Prior Year 100% 60% 40% 13% 27% 1% 28% 9% 19% 1% -1% -2% 1% -1% 0% -2% 2% Increase or Decrease

24

the overall growth of the Companys net sales. Gross Margin The gross margin percentage in 2010 was 39.4% compared to 40.1% in 2009. This decline in gross margin is primarily attributable to new products that have higher cost structures, including iPad, partially offset by a more favorable sales mix of iPhone, which has a higher gross margin than the Company average. The Companys effective tax rates were 24%, 32% and 32% for 2010, 2009 and 2008, respectively. The companys effective rates for these periods differ from the statutory federal income tax rate of 35% due primarily to certain undistributed foreign earnings for which no U.S. taxes are provided because such earnings are intended to be indefinitely reinvested outside the U.S. The lower effective tax rate in 2010 as compared to 2009.

Income Tax

25

Chapter 3: Income StatementQuestion 9 Identify your companys Basic and Diluted EPS amounts. Place a N/A in Diluted EPS if not reported. Basic EPS Current year Preceding year 1 Preceding year 2 15.41 9.22 6.94 Diluted EPS 15.15 9.08 6.78

Why is diluted EPS always equal to or less than basic EPS?

Because for calculation of diluted EPS number of shares are either equal or more than basic EPS. Statement of Cash Flows (SCF) Chapter 3: SCFQuestion 1 Is the SCF dated in the title for a period of time similar to the income statement or for a point in time similar to the balance sheet? Why?

The date of Statement of cash flow is same with balance sheet and operating statement as cash flow is derived on balances of balance sheet and operating statement both. Chapter 3: SCFQuestion 2 Identify the following sections of the SCF and record the amounts. Check the math by summing to the cash balance at end of year. Verify that the ending cash balance reported on the SCF is the same as reported on the balance sheet. Section Net operating cash flows Net investing cash flows Net financing cash flows Effects of exchange rate fluctuations Net increase (decrease) in cash flows Cash balance at beginning of year Current Year 18595 -13854 1257 0 5998 5263 Prior Year 10159 -17434 663 0 -6612 11875 Second Prior Year 9596 -8189 1116 0 2523 9352

26

Cash balance at end of year Does the total match balance sheet cash?

11261 yes

5263 Yes

11875 Yes

Chapter 3: SCFQuestion 3 Record net sales, net income and net operating cash flows below. All three should be trending in approximately the same direction. If so, this is a sign of a well-run business. If one or more are going in a different direction, or random, then you must keep an eye open for an explanation why. Item Net Sales Net Income Net Operating Cash Flows Current Year 65225 14013 Prior Year 42905 8235 Second Prior Year 37491 6119

18595 10159 9596 Explain why net sales, net income and net operating cash flows are trending together or differently. (Hint: Look at depreciation expense and substantial changes in inventory, accounts receivable and accounts payable balances. Explaining why is a key learning point.) All are trending towards the same direction.

Chapter 3: SCFQuestion 4 Identify the primary cash outflows and inflows from investing activities. Description of Activity Cash outflow: Purchase of marketable Securities Cash inflow: Sale of Marketable Secutities Amount $-57793 mn $24930 mn

Consider three key issues at this point: 1) Is the company increasing the amount of plant and equipment? 2) Is the company simply replacing plant and equipment? Is the company reducing plant and equipment? This is an indicator of the companys overall strategy. For example, a company that is increasing its assets is a growing company. What is your company doing in this regard?

27

There is no much changes in Plant and equipments. Chapter 3: SCFQuestion 5 Identify the primary cash inflow and outflow from financing activities. Description of Activity Cash inflow: Proceed from issuance of common stock Cash outflow: Excess Tax Benefit from Stock Based Compensation Amount $912 mn $ 751 Mn

Consider two key issues at this point. How is the company being financed, through debt or equity? Can you determine which is growing faster and why? A sound corporate strategy is to finance a company with debt during stable times (when its easier to make regular payment of principal and interest) and to finance a company with equity during unstable times (because the company is not required to pay dividends). The company is being financed through equity.

The Statement of Stockholders Equity (SSE) Chapter 3: SSEQuestion 1 Identify the elements that comprise the statement of stockholders equity section of your company. Common Stock Retained Earning Accumulated other comprehensive Loss/Income

Chapter 3: SSEQuestion 2 Identify the cash dividends per share. No Cash dividend declared or paid in 2010 and 2009. NIL NIL

Determine the dividend payout percentage. Compute dividend yield.

Is your companys dividend yield a reasonable return given current market conditions?

28

NA

Notes to the Financial Statements Chapter 3: Notes to the Financial StatementsQuestion 1 How does your company define cash and cash equivalents?

All highly liquid investments with maturities of three months or less at the date of purchase are classified as cash equivalents.

Chapter 3: Notes to the Financial StatementsQuestion 2 How does your company value its inventories? Explain the meaning of the inventory valuation method. Are domestic and international inventories valued the same? Service companies will typically not have inventory.

Inventories are stated at the lower of cost, computed using the first-in, first-out method, or market. If the cost of the inventories exceeds their market value, provisions are made currently for the difference between the cost and the market value. The Companys inventories consist primarily of components and finished goods for all periods presented. Chapter 3: Notes to the Financial StatementsQuestion 3 Does your company report any investments in marketable securities? Identify the respective amount(s) invested. Category Trading Securities Available-for-Sale Securities Held-to-Maturity Debt Securities 25391 Current Year Amount 14359

Chapter 3: Notes to the Financial StatementsQuestion 4 You should be able to find this information among the following places: Note 1 on significant accounting policies, the income tax footnote, a separate note on supplemental cash flow information, and/or the bottom of the cash flow statement. What was your companys income tax expense for the current year? (The income tax expense for the year is $ 4527 mn.

29

What is this years effective tax rate for Effective Tax Rate:24% your company? (If not disclosed directly, the effective tax rate can be computed as income tax expense income before tax.) It is useful to know the effective tax rate of a company in comparison to the 35% statutory tax rate. How much cash was paid for income taxes $2697 mn in the current year? (Hint: Look in the SCF or the notes for supplemental cash flow disclosures, or in the income tax footnote. Chapter 3: Notes to the Financial StatementsQuestion 5 Reviewing note #1, any related supporting notes, and/or the 10-K, identify the fixed asset group(s), depreciation methods used, and the estimated useful lives of these fixed assets. Fixed Asset Group Building Equipment Leasehold Improvements Depreciation Method Straight Line Method Straight Line Method Straight Line Method Estimated Lives (range) Lesser than 30 years or remaining Life Five years Shorter of ten years or lease period

Chapter 3: Notes to the Financial StatementsQuestion 6 Review the balance sheet, note #1, and any notes on intangible assets, and identify the amount of goodwill reported in the current year. Amount reported in current year. Identify the amount of any significant write-down of goodwill that occurred during the current year. $ _741 mn__________ NIL

How does management describe how it accounts for goodwill as disclosed in the note(s) to the financial statements? The Company did not have any goodwill impairment during 2010, 2009 or 2008. The Companys goodwill is allocated primarily to the Americas reportable operating segment.

30

Chapter 3: Notes to the Financial StatementsQuestion 7 You may skip this question. Chapter 3: Notes to the Financial StatementsQuestion 8 Review your companys lease footnote and/or the 10-K schedule of contractual obligations, then identify the following amounts: Future minimum lease payments (total) under operating leases As of September 25, 2010, the Companys total future minimum lease payments under noncancelable operating leases were $2.1 billion, of which $1.7 billion related to leases for retail space NIL

Future minimum lease payments (total) under capital leases

As a user of reported financial information, would you be concerned about a significant amount of operating leases that are not reported in the balance sheet? Explain.

If a significant amount of operating lease is not disclosed that is serious matter of concern. Chapter 3: Notes to the Financial StatementsQuestion 9 Review your companys long-term debt note and identify the following (consider the three most significant liabilities only): NIL Instrument Maturity Date Rate Amount Due

How much interest expense was recognized in the current year?

(Identify the financial statement or the footnote or other location where you found this information)

31

How much cash was paid for interest in the current year? (Hint: Look in the SCF or the notes for supplemental cash flow disclosures, or in the long-term debt footnote.)

(Identify the financial statement or the footnote or other location where you found this information)

Chapter 3: Notes to the Financial StatementsQuestion 10 You may skip this question

Chapter 3: Notes to the Financial StatementsQuestion 11 Based on your review of the contingencies note, briefly identify specific events that have led to the accrual of contingent liabilities in your selected companys the balance sheet. The Company is subject to various legal proceedings and claims that have arisen in the ordinary course of business and have not been fully adjudicated, which are discussed in Part I, Item 3 of this Form 10-K under the heading Legal roceedings.

Chapter 3: Notes to the Financial StatementsQuestion 12 Based on your review of the segment-reporting note to the financials, identify the reported operating segments, their related revenues, and operating income. Identify the largest three if more than three are disclosed. Reportable Operating Segments America Europe Japan Net Sales Revenue $ 24 498mn $ 18692 mn $ 3981 mn Net Operating Income $ 7590 mn $ 7524 mn $ 1846 mn

32

Chapter 3: Notes to the Financial StatementsQuestion 13 Based on your review of the segment-reporting note to the financials, identify the geographical segments and their related revenues. Identify the largest three if more than three are disclosed. Country Net Sales Revenue America Europe Japan Chapter 3: Notes to the Financial StatementsQuestion 14 Based on your review of the notes to the financials or the statement of stockholders equity, identify the components (no more than four) that comprise Other Comprehensive Income for your company. Component Foreign Currency Translation Gain in sale of available for sale securities Unrealised gain in derivatives Amount $-14 mn $123 mn $ -253 mn $ 24 498mn $ 18692 mn $ 3981 mn

33

CHAPTER 4 - FINANCIAL ANALYSIS Summary Financial Analysis Report Profit Margin % Answers how well the business performed. Gross Margin Pre-Tax Margin Net Profit Margin Gross Profit / Total Revenue Operating Income / Total Revenue Net Income / Total Revenue Company Two Years Prior 35% 22% 16% Company One Year Prior 40% 27% 19% Company Industry S&P 500 NA NA NA

39% NA 28% NA 21% NA

. Financial Statement Financial Statement Financial Statement

Company Two Years Prior 37491 8327 9596

Company One Year Prior 42905 11740 10159

Company

Industry Not required Not required Not required

S&P 500 Not required Not required Not required

Sales Operatin g Income Operatin g Cash Flows

65225 18385 18595

Evaluate Profitability The profitability of the company is in increasing trend.

34

Financial Condition Signals ability to take on additional debt and liquidity. (Total Liabilities Current Liabilities) / Total equity Current assets / Current liabilities (Cash+cash equivalents + Short term investments + Total receivables, net)/ Current Liabilities Interest EBIT/ Coverag Interest expense e Evaluate Financial Condition ( NA NA NA NA Company Two Years Prior Company One Year Prior 0.14

Company

Industry

S&P 500

0.14 NA

NA

Debt/ Equity Ratio Current Ratio

2.74 1.87

2.01 NA 0.96 NA

NA NA

Quick Ratio

The financial position of the company is good as its Debt Equity ratio is quite low and current ratio is also at a comfortable position. Investment Return % Signals performance for managers and owners. Return On Equity Return On Net Income / Total Equity Net Income / Total Assets Company Company Two Years One Year Prior Prior 26% 17% Company 29% 19% Industry S&P 500

35

Assets Return On Equity (5-Year Avg.) Return On Assets (5-Year Avg.)

Not required

Not required

Not required

Not required

36

Evaluate Investment Return The investment in the company is showing a healthy return.

Management Efficiency Signals how well the company was run by management. Income/ Employee Revenue/ Employee Receivable Turnover Company Company Two Years One Year Prior Prior Not required Not required (Show work) Not required Not required 1.99 Company 0.30 1.39 Industry S&P 500

Inventory Turnover

Asset Turnover

Total 3.28 Revenue / Average Accounts Receivable Trade, Net Average is defined: (end of last year + end of this year) / 2 Cost of (Show 1.19 1.99 Revenue, work) Total / Average Total Inventory Total (Show 0.90 0.87 Revenue / work) Average Total Assets

37

Evaluate Management Efficiency

The management is running the business efficiently.

38

CHAPTER 5 - DECISION-MAKING PROCESS N ow you must make two decisions.

Chapter 5: Decision-making ProcessQuestion 1 Based upon your review, do the numbers support the companys explicit strategic focus: a growth, stability or retrenchment focus? Why or why not?

Chapter 5: Decision-making ProcessQuestion 2 Return to the first question in this project. Chapter 1: Identify Why You Selected This CompanyQuestion 1 A) What is/are your motivation(s) or interest(s) in selecting this company? B) What question(s) are you seeking to answer? Prepare a thorough, yet concise answer to your original questions A and B above. Begin your answer by reiterating what your initial interest and questions were. Support your response with the information gathered throughout your annual report study.

39

40