How to read Apple’s balance sheet

For investors in Apple, Inc. (AAPL), the investment has certainly paid off. For those who are late to the party and are considering investing in the Cupertino-based consumer goods giant, a good place to start when evaluating the business is its track record.

A company’s balance sheet presents a picture of its financial situation at a given point in time. For an investor who wants to understand a business and its potential, the balance sheet is a good guide.

Apple’s balance sheet is available in the “Investors” section of the company’s website on its 10-K file with the Securities and Exchange Commission (SEC). Investors can also access Apple’s unaudited balance sheet, which it publishes with its quarterly results.

Key points to remember

  • Apple’s balance sheet can be viewed on its 10-K file with the SEC, which is available on the company’s website in the “Investors” section.
  • A balance sheet, including that of Apple, is broken down into three parts: assets, liabilities and equity. Apple combines the last two under one heading.
  • As of September 25, 2021 (the company’s year-end), Apple had total assets of $ 351 billion, total liabilities of $ 287.91 billion, and total equity of $ 63.09 billion.
  • Apple has a strong current ratio, which measures its current assets to its current liabilities, of 1.07.
  • Apple’s debt ratio has risen over the past five years as it takes on more debt to fund share buybacks, raise dividends and grow.

Balance sheet components

A company’s balance sheet is broken down into its assets (or what it owns), liabilities (or what it owes) and equity (or the money that belongs to shareholders after paying all liabilities) .

The total of its assets is equal to the sum of its equity plus its liabilities. In Apple’s case, as of September 25, 2021 (company year end), this consisted of $ 351 billion in assets, total liabilities of $ 287.91 billion, and total equity of $ 63.09 billion.

Money is king

For Apple, its strong cash flow is a major asset. The company holds $ 34.94 billion in cash and cash equivalents and also holds $ 27.79 billion in marketable securities (on current assets) that can easily be converted to cash. It also holds long-term marketable securities of $ 127.88 billion.

Thus, he has an amply sufficient fund. Much of this money is held overseas, and the company would have to pay US taxes on the money to bring it into the country. This is why the company prefers to borrow money to engage in its share buyback program.

Accounts receivable represent $ 26.28 billion. This represents amounts owed by the companies it does business with, such as cellular network operators, retailers, wholesalers, and government and education customers. Extending credit in business transactions is a risk, and Apple has credit insurance to limit its risk to this exposure.

The company also reports $ 39.44 billion in the property, plant and equipment category. This represents the value of what it owns in property, plant and equipment after accounting for wear and tear from use.

Passive side

Apple’s current liabilities stand at $ 125.48 billion, which includes its accounts payable of $ 54.76 billion, or the amount it owes the companies it does business with, as well as $ 6 billion in commercial paper issued. The company has issued commercial papers to finance activities such as share buybacks in which it is engaged, as well as to pay dividends.

$ 2.94 billion

Apple’s market capitalization as of December 30, 2021.

The company has total long-term debt of $ 109 billion, which includes both fixed-rate debt, on which the interest rate is fixed, and variable-rate debt, on which the interest rate is fixed. could increase.

To manage the risk that interest rates move against the company, Apple also entered into interest rate swaps. The company’s other non-current liabilities, or those that have not been due for some time, amount to $ 53.33 billion.

Analyze the balance sheet

Another way to understand Apple’s financial situation is to look at certain ratios that give an idea of ​​how the company is running its business. One of the main ratios for this purpose is the current ratio, which provides a measure of how easily the company can repay its creditors if needed.

This is obtained by taking stock of Apple’s current assets versus its current liabilities. In Apple’s case, it stands at 1.07 ($ 134.84 billion / $ 125.48 billion), indicating that the company has enough short-term assets to cover its liabilities. short term.

Looking at Apple’s indebtedness or how much debt it owes relative to its equity position also gives investors a sense of how prudently its debt is managed. Too much debt in relation to equity indicates that a business is over-leveraged. This could be a red flag as he will have less leeway if he runs into problems.

In recent years, Apple’s capital structure has changed dramatically, with its debt-to-equity ratio dropping from around 1.43 in 2015 to 4.56 in 2021. This indicates that Apple has raised more cash, than ‘it uses for share buybacks, the potential dividend increases and the growth of the company.

What should I look for in Apple’s track record?

When evaluating a balance sheet, including that of Apple, it is important to take a look at the capital structure of the company; how much equity he has over the debt. Examination of cash, cash equivalents, short-term debt and long-term debt will provide this information. Using financial ratios to understand the structure of capital is also helpful. These ratios include the current ratio, the quick ratio and the debt ratio. It is also important to examine a business’ accounts receivable and accounts payable.

How do I find out how much money Apple has on its balance sheet

To find out how much money Apple has on its balance sheet, you need to access its last filing with the SEC. This can be an annual report or a quarterly filing. Go to the balance sheet section and under “Assets”, then “Current assets”, “cash” will be the first item.

What are the best financial ratios to use when analyzing Apple’s balance sheet?

The best financial ratios to use when analyzing Apple’s balance sheet are Current Ratio, Quick Ratio, Debt Ratio, and Working Capital.

The bottom line

A reading of Apple’s track record certainly suggests that it is a well-run company. It presents its information in a user-friendly format and has no significant exposure to off-balance sheet items that could obscure its true position.

Investors should note that a company’s balance sheet could deteriorate as its earnings situation and the position of the industry change. So, it is important to look at your most recent balance sheet before investing.

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