It is shocking that a company knead 246,000 million dollars in cash in your checking account. It is a fact that generates headlines and attention. But it is not true, at least in the case of Apple. During the presentation of the results on Tuesday, the company returning to beat records and give us several information of interest about the performance of your products.
It wasn’t until yesterday when Apple reported quarterly report that gives the SEC (the equivalent to the CNMV in Spain). And it is there where all of the detail you want on public finances of the company. Let’s see how much there is of truth in the phrase that heads this article.
Show me the dough!
The first thing we have to ask ourselves is: where do those 246,000 million that Apple has supposedly cash come out? And we find the answer in something as boring as a balance. If we look at the company’s assets, we will see that (figures in millions of dollars):
- Current assets:
- Cash and cash equivalents: 16.371.
- Short-term securities: 44.081.
- Non-current assets:
- Long-term securities: 185.638.
If we do the sum, we will see that the result is of 246.090 billion dollars. Just the amount that it is said that Apple has well kept on the bench, one hundred dollar bills. In mounds.
Different types of liquidity
If we stick to the money in cash, banknotes and coins, Apple has “only” $ 16.371 million. Cash and cash that can be used for anything. The other two points called securities they refer to the ease with which it can be turned into liquids.
Liquidity is better explained with an example. Imagine that someone very generous offers us a deal. You can choose between:
- A ten euro note.
- An object that is worth $ 10, your Bill and all.
- A paper that says that in a week I can charge eleven euros, but if wants it to collect before that date I have only 9.
Not all forms of money are just as fluid. Some of them have to jump obstacles and pay tolls to be cash
It is clear that each has its advantages and disadvantages. Liquidity is defined as the ease of converting something into money in cash, so the ticket is the greatest expression of liquidity. To convert the object into cash, I would have to find someone willing to buy it and don’t always get to sell it for 10 euros (think Wallapop). And the promissory note looks like a good business if I wait a week, but it is not if I need it now.
The same goes for the 246.090 million that Apple “has” in the Bank. It has no more than a fraction barely exceeds 5% of this amount. Securities can be liquids with ease, but they are not cash. Add a step of becoming cash difficulty.
One step that may be more or less difficult to raise and also cost more or less depending on their nature. In the case of Apple, 185.638 million are securities long-term. A nothing easy to “put on” quantity.
Can Apple do what they want with their “money”?
No. Apple cannot do what give you the win with those 246.090 millions of dollars. Indeed, some of that money is already “promised” and has another destination. For starters, the company lacks 49,000 million to complete its program of retribution to the shareholder, as well as the different long-term debt totaling 110,000 millions.
And then there is the location of most of those funds. According to the Chief Financial Officer of Apple, Luca Maestri, slightly more than 90% are outside us. Apple, as well as other multinationals, has not repatriated money because the federal State 35% would be taxes and the company is not prepared to do so. That is why one of the few things that interest to Apple in a Trump administration are the so-called tax holidays, a move that would reduce the tax repatriation largely.
With all this, we can say that Apple does not have 246.090 millions of dollars in cash. It has assets valued at the amount, but only a fraction is effective. The rest would have to go through a series of hoops and obstacles until Apple could have that money. And even so, it wouldn’t entirely.
In any case, it is better to have that have nothing.