Week 3 Quiz (Creating Instructions for Code)

Question 1

What is the formula for Gross Margin and why is it important for Apple Inc.?

Answer 1

Gross Margin = (Revenue - COGS) / Revenue. It shows how efficiently Apple turns sales into gross profit, reflecting pricing power and cost control.

Question 2

What dataset variables are needed to calculate Gross Margin for Apple?

Answer 2

Variables: tic (AAPL), fyear (2018–2022), sale (Revenue), cogs (Cost of Goods Sold), naics (Industry grouping).

Question 3

How is Gross Margin compared to the industry average?

Answer 3

Group by naics and fyear, then calculate (Total Revenue - Total COGS) / Total Revenue for industry peers.

Question 4

What is the formula for Asset Turnover Ratio and why is it useful for Apple Inc.?

Answer 4

Asset Turnover = Revenue / Average Total Assets. It shows how efficiently Apple uses assets to generate revenue.

Question 5

What dataset variables are needed to calculate Asset Turnover Ratio?

Answer 5

Variables: tic, fyear, sale (Revenue), at (Assets), naics. Requires data from 2017 to 2022 to compute average assets.

Question 6

How is the industry Asset Turnover calculated?

Answer 6

Sum of revenue divided by sum of average assets for all firms in same naics group, year by year.

Question 7

What is the formula for COGS-to-Sales Ratio and why is it useful for Apple Inc.?

Answer 7

COGS-to-Sales = COGS / Revenue. It shows how much revenue is consumed by production costs, helping evaluate cost structure.

Question 8

What dataset variables are needed to calculate the COGS-to-Sales Ratio?

Answer 8

Variables: tic, fyear, cogs, sale, naics.

Question 9

How is the industry COGS-to-Sales Ratio calculated?

Answer 9

Sum of COGS divided by sum of sales for all companies in the same industry (naics), per year.

Question 10

What is the formula for Cash Conversion Cycle and why is it important for Apple?

Answer 10

CCC = DIO + DSO - DPO. It measures how long it takes Apple to convert inventory and receivables into cash, indicating liquidity and supply chain efficiency.

Question 11

What variables are needed to calculate CCC?

Answer 11

Variables: inventory, cogs, sale, rect (receivables), ap (accounts payable), fyear, tic, naics.

Question 12

How is CCC calculated for Apple and the industry?

Answer 12

DIO = (inventory/cogs)365, DSO = (rect/sale)365, DPO = (ap/cogs)*365, CCC = DIO + DSO - DPO; compare Apple to industry average CCC.