If cash is King, then Apple is the King. Apple has piled up $81. 6 billion in cash/investments. Most people think that Apple only has $26 billion in cash, but the way Apple reports it on the balance sheet can be confusing. From an investor’s standpoint, they love companies with cash, the ability to generate cash and that virtually have little or no debt. Apple is one of the company’s that does not have any debt. Whether short term or long term, Apple invests in relatively safe securities made up of mutual funds, U. S. Treasury and agency securities, non-U. S. government securities, CD’s, commercial paper, corporate securities and municipal securities.
All of these items together, pure cash, short-term and long-term marketable securities, added up to $81. 6 billion as of Apple’s last quarter ending in September 2011 (Garvey, 2012). On September 25 2011, Apple entered its current fiscal year with the strongest product line in the company’s history. Apple had an extraordinary fiscal year in 2011 revenue and earnings growth performance, nearly 25% of recognized revenue had flowed to the net income line.
In the fiscal year 2012, Apple will surpass HP in revenue to become the nation’s largest technology company and maintain its position as the most highly valued enterprise in the industry measured by market capitalization. In three of the four most recent fiscal years, Apple’s revenue growth has exceeded 50%. The exception is the recession year of 2009 in which the rate of revenue growth dipped to 14. 4% (Leitao, 2011). A balance sheet is the snap shot of a company’s financial condition.
The balance sheet is the only financial statement that applies to a single point in time of a business calendar year. Apple has the correct order for listing their assets on their balance sheet. They have their cash and equivalents, short term investments, cash and short term investments, accounts and noted receivables, inventories and prepaid expenses. The main categories of assets are usually listed first and usually will be in order of liquidity. Liabilities follow the assets because they are the company’s capital and in the accounting equation the net worth must equal assets minus liabilities.
Many businesses are not paid immediately because they build up inventories of goods and they acquire things like equipment and buildings. Thus, businesses are not able to immediately turn these assets into cash. Cash equivalents are an item on the balance sheet that reports the value of a company’s assets that are cash or can be converted into cash immediately. Cash equivalents can also be referred to as liquid assets. They are investments that are liquid and very safe so it can be considered the same as cash.
Cash and cash equivalents includes: currency, coins, checks received but not yet deposited, checking accounts, petty cash, savings accounts, money market accounts, and short-term, highly liquid investments with a maturity of three months or less at the time of purchase such as U. S. treasury bills and commercial paper. The items included as cash and cash equivalents must also be unrestricted (Averkamp). In March 2012, it was announced that Apple will start paying shareholders a $9. 9 billion annual dividend. That is equivalent to $10. 60 a share. This is the largest initial dividend ever seen in a United States Company.
Apple is now the second largest dividend payer. The Apple shareholders that directly own the shares on or before the record date are going to be the ones paid out. Apple plans to pay the first dividend sometime in the fourth fiscal quarter which starts July 1st. Once the record date is provided, which would be the day an investor must be on the books as owning the shares to receive the dividend. For the investors that own Apple shares indirectly, through exchange-traded funds or mutual funds, they are also entitled to the dividend. These funds are usually distributed periodically through the year once the fund’s expenses are deducted.
References
- Averkamp, H. (n.d.). Accounting Coach. Retrieved August 15, 2012, from What is included in cash and cash equivalents?: http://blog.accountingcoach.com/item-in-cash-and-cash-equivalents/ Garvey, G. (2012, January 12).
- Seeking Alpha. Retrieved August 15, 2012, from Getting Apple’s Cash Right And Why It’s Important: http://seekingalpha.com/article/319116-getting-apple-s-cash-right-and-why-it-s-important Leitao, R. (2011, November 28).
- Behind Apple’s $170B Fiscal Year. Retrieved August 16, 2012, from Seeking Alpha: http://seekingalpha.com/article/310585-behind-apple-s-170b-fiscal-year
