Cash flow is referred to the amount of cash that flows in or out of a certain business at a specific period. It is an important element of financial management. This is because it shows the money available in a business to cater to financial needs, including bills, debts, and new equipment. Cash flow can be positive or negative (Harris & Roark, 2019). Positive cash flow shows that the money entering a business is more than that going out. On the other hand, negative cash flow shows that the money leaving the business is more than that coming in. Positive cash flow benefits a business or a company. It means that the business is generating more cash than it is spending. Therefore, the cash being generated by the business can be used to expand it. On the contrary, negative cash flow means the business struggles to meet its needs. Therefore, the business needs to change and improve its operations. This section will analyze the cash flow statement of Apple company.
Apple is one of the best technology companies in the United States. The company designs, develops, and sells various electronics. Common electronics include computer software and hardware, iPhones, Apple Watch, and AirPods (Harris & Roark, 2019). Apple is one of the most famous and valuable companies in the world. The cash flow statement of Apple company is an important tool for future prediction and proper decision-making. The analysis helps to predict the amount of money required to cover the obligations. The cash flow statement shows how the changes in Apple have affected the cash equivalents and cash. These chances are detected from the income statement and balance sheet accounts. The cash flow analysis is broken down into Apple’s operating, investing, and financing activities. Generally, Apple’s cash flow has been positive since 2019. This means that it has increased its money generation since 2019. In 2020, the cash flow increased was $ 73,365B. This was an increase of 26.7 percent from the cash flow of 2019 (Podolny & Hansen, 2020). In 2021, the cash flow was $92.953B. This was an increase of 26.7 percent from 2020. In 2022, the cash flow was $111.443B, an increase of 19.89 percent from 2021 (Podolny & Hansen, 2020). This shows that the company’s cash flow has been positive since 2019.
To begin with, there are various operating activities from Apple company. These activities involve inflows and outflows of cash. The activities are directly associated with the core business processes of the company. One of these activities is the sales of products. Apple creates most of its revenue through product sales (Harris & Roark, 2019). The company’s common products include iPad, Mac computers, and iPhones. Payment to workers and employees is the second operating activity in the company. The company contains a huge number of suppliers and workers. This operation led to cash outflows because it involved paying wages to employees and other costs to suppliers. Working capital changes are also considered operating activities in the company. The changes occur in accounts receivable and payables. For instance, Apple sells some products on credits. This means that there is always an increase in accounts receivable.
Investing activities include cash outflows and inflows associated with the company’s long-term assets investments. Apple company practices various investing activities. First, it is involved in the procurement of other companies. The company has been involved in various acquisitions involving other companies (Lu et al., 2023). This has helped it to expand its technology and the entire business portfolio. The acquisitions are associated with cash outflows. This is because Apple purchases assets and other interests from different companies. The second investing activity in Apple is buying and selling equipment, plant, and property. Apple invests in equipment, plant, and property to support the company’s operations. The investment helps produce and develop new products in the country. Some specific investment activities include purchasing land, equipment, and buildings. Another investment operation in the company is buying and selling marketable securities. Apple is also involved in investment in marketable securities like bonds and stocks. This helps the company to generate returns on the extra cash reserves.
Financing activities involve different ways a company uses to raise funds and capital that are important in the company’s investments, growth, and operations. Apple company engages in various activities that help t to raise funds for its operations and expansion. The first financial activity is equity issuing. Apple issues new shares to create revenue. Those who purchase the shares may have ownership over the company. They may be offered dividends or part of profits generated by the company. The second financing activity in the company is dividend payment (Danko et al., 2023). Shareholders in the company are provided with some profit in dividends form. This attracts investors interested in investments that create income. Bank borrowing is another financial activity in the company. The company borrows money from the bank through term loans and credits. The funds help Apple to enhance its operation and investment activities. Another financial activity practiced by Apple is debt issuing. Apple issues bonds and debt securities. This activity helps the company to create funds. Investors purchase the bonds. They then receive interest payments. When the bonds mature, they get their principal back.
Changes in cash and cash equivalents involve the increase or decrease of cash or liquid items. Cash equivalents include treasury bills, accounts of money markets, and short-term bonds. In 2020, the cash and cash equivalent was about $191.8 billion. In 2021, the cash increased to $194.8 billion. A further increase in 2022 resulted in $263 Billion (Danko et al., 2023). This shows that Apple company has increased its cash since 2020. There are various reasons behind the change.
First, the demand for Apple’s products is high. Products such as iPad, Mac, and iPhone have strong demand worldwide. In addition, the high-quality products have improved the reputation of Apple. This has helped the company to gain more new and potential customers. The positive financial performance is the second reason the cash and cash equivalents have a positive change from 2020 to 2022 (Danko et al., 2023). Apple has been reporting strong financial outcomes for many years. The strong performance has helped the company to generate a large amount for its operation. Repurchasing shares is another reason for Apple’s increase in cash and cash equivalent. Apple company is actively involved in repurchasing its shares. This has increased the value of its shares, generating more cash from the sale.
Low interest on debts is another factor that has helped Apple increase its cash and cash equivalents. The low rates have helped the company issue many debts. Also, the company has managed to borrow loans at low costs, which has, in turn, helped the company to increase its cash balance. The growth of services has also helped Apple to increase its cash and cash equivalents over the years. The service segments such as Apple Music, App Store, and iCloud has grown rapidly (Danko et al., 2023). This has helped the company increase its sales, hence an increase in cash—overall, Apple is one of the world’s most valued and good-performing companies.
References
Harris, C., & Roark, S. (2019). Cash flow risk and capital structure decisions. Finance Research Letters, pp. 29, 393–397.
Podolny, J. M., & Hansen, M. T. (2020). How Apple is organized for innovation. Harvard Business Review, 98(6), 86-95.
Lu, W. M., Kweh, Q. L., Ting, I. W. K., & Ren, C. (2023). How does stakeholder engagement through environmental, social, and governance affect eco‐efficiency and profitability efficiency? Zooming into Apple Inc.’s counterparts. Business Strategy and the Environment, 32(1), 587-601.
Danko, T. P., Vyazovikova, A. S., Kiselev, V. M., Rauskiene, O., Klimenko, O. I., Semenova, G. N., & Sekerin, V. D. (2019). Impact of intangible assets on competitive positions of the Apple company. Journal of Advanced Research in Law and Economics, 10(6 (44)), 1850-1860.
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