IMPORTANT NOTES YOU NEED TO CONSIDER BEFORE WRITING THIS PAPER
Apple has a pile of cash that is valued at around $285 billion. Most everyone knows that Apple is sitting on a pile of cash valued as high as $285 billion.
It is a widely held belief that Apple is sitting on about $285 billion of cash. Most people attribute this money to be Free Cash Flow (FCF); however, it is much less than that. Apple’s FCF is just $64 billion, meaning that the company has not reinvested any of its cash flows into new projects or acquisitions since it was founded in 1976 by Steve Jobs and Steve Wozniak.
Apple’s total cash on hand stands at $246 billion as of November 2013—which includes the return from its recent investment in Didi Chuxing (the Chinese ride-hailing company). That figure doesn’t include other investments made by Apple such as Cirrus Logic or Autodesk Inc., which were also recently acquired by Apple Inc.’s subsidiary company Alphabet Inc., respectively
What is FCF?
FCF is the money left over from actual cash coming in after all the expenses and Capital expenditures have been paid. This amount can be higher or lower than Net Income depending on a company’s needs to reinvest cash into the business.
How much of Apple’s $285 billion hoard is actually Free Cash Flow? Apple has never reported its “true” Free Cash Flow (FCF) number, but we do know that it has been growing at a healthy rate since 2003—when it was only about $3 billion—and reached an incredible $125 billion last year alone! If you look at Apple’s annual reports for this period, you’ll see that most of their cash came from sales of new products like iPhones and iPads: about 80% went toward capital expenditures like equipment purchases; just 20% went toward buying back shares from shareholders (although those buys were mostly made through secondary markets).
Apple ’s Financial Statements show that their FCF for 2016 was $64 billion; their total cash, on the other hand, at the end of 2016 stood at $246 billion. So, where did the rest come from and what is it doing in Apple’s bank account? The answer lies in Apple’s Financial statements as well. Section: If you look at the Notes to Financial Statements, Apple has invested Capital into investments in companies such as Groupon (GRPN), Autodesk (ADSK), Cirrus Logic (CRUS), TripAdvisor (TRIP) and others. Their most recent investment was into Didi Chuxing (a Chinese ride-sharing company). Some could argue that they are undervaluing these assets as they are writing them down in value each year as they lose value; however, that discussion is for another day.
As you can see from the above section, investments are not part of FCF, but rather a form of business risk. This means that if you invest in another company and it fails, then your investment will be at risk too! So while Apple’s Financial Statements show that their FCF for 2016 was $64 billion; their total cash, on the other hand, at the end of 2016 stood at $246 billion. So where did this extra money come from and what is it doing in Apple’s bank account?
The answer lies in Apple’s Financial statements as well. If you look at the Notes to Financial Statements (pages 29-30), Apple has invested Capital into investments in companies such as Groupon (GRPN), Autodesk (ADSK), Cirrus Logic (CRUS), TripAdvisor (TRIP) and others . Their most recent investment was into Didi Chuxing . Some could argue that they are undervaluing these assets as they are writing them down in value each year as they lose value; however, that discussion is for another day
As you can see, Apple has been investing money back into their business. This is one way that they are trying to grow their operations and generate more cash flow (and reduce losses). It also shows how they view their position in the market; as long as they have enough cash on hand, they will continue to grow their operations and make more investments into new products.
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