Yes, I said it. Apple (AAPL) does not have $137 billion in cash. AAPL has $137 billion in assets, not cash. Every article that mentions "Apple's $137 Billion Cash Hoard" is wrong. AAPL's balance sheet for its most recent quarter can be found here. Let's look at the three categories that assets are placed into and dissect them. I will draw parallels to personal finance. Yes, I know a company balance sheet is not personal finance, however, most of the people that will read this are retail investors looking for a way to supplement their income or help find ideas for their retirement.
Cash and Cash Equivalents - $16,154,000,000
Short-Term Marketable Securities - $23,666,000,000
Long-Term Marketable securities - $97,292,000,000
Total = $137,112,000,000
Cash and Cash Equivalents
AAPL reported $16.154 billion in cash and cash equivalents on its most recent 10-Q. This is the actual amount of cash AAPL has. This is far from the $137 billion that most media reports. So what does this mean?
It is just as it states - cash and cash equivalents. Think of this as the money that you have in your checking account, your savings account, your money market fund or any other account that is 100% liquid, or that you do not get taxed on if you remove the money. This is the money that you have saved up for the 3 to 6 month range, and your first line of financial defense. If you lose your job, this is how you pay your bills for the short term. Same thing for a company - this is accounts payable and account receivable. This is the pot of money that equates to cash flow.
Short-Term Marketable Securities
AAPL reported $23.666 billion in Short-Term Marketable Securities. This is not cash. Yes, it can be sold to raise cash, however, these are short-term investment tools. These include Short-Term Bonds, Certificates of Deposits. Essentially, these are investment tools that allow for a higher rate of return than a savings account and have a 3 to 5 year maturity horizon.
For personal finance, it is the same. This is the second line of financial defense. Once your checking and savings accounts have been depleted, this is the next target. Or once these have matured, you can reinvest in the same instrument or move it to a different category.
Long-Term Marketable Securities
This is the largest category at $97.292 billion, according to the 10-Q. This is where AAPL has long-term Bonds, both corporate and government. However, the majority of this category is composed of other corporate securities, as well as some mortgage-backed securities. This is just as it says: Long-Term. The time horizon on these instruments is 5 to 10 years, at least. Not only does this include investments in other established companies, it also includes investments in start-ups, such as other small technology companies that AAPL may have an interest in buying out, if the technology in the start-up develops is worthwhile.
Think of this category as your 401(k) or your IRA. This category is essentially your retirement account, meant to be there when you need it the most. These accounts do not get touched unless there is a dire need to use them, and even then, there are alternatives.
Stating that AAPL has $137 billion in cash is, at the least, misleading. As AAPL reported on its 10Q, it has $137 billion in assets, not cash. AAPL has $16.154 billion in cash. This is most likely the reason Mr. Einhorn dropped his suit against AAPL, among others. If AAPL liquidated and distributed its assets to the shareholders, it would not be much of a company. All corporations take extra capital and reinvest it in some way, whether they reinvest the capital into their own company to help their companies grow, or a more established company, for example, may invest in other corporations or perhaps start-up companies that have promise.
Do not take at face value with what is said in the mainstream media. If you hear or see something that may seem like it does not look right, then look into it. Do your own research and come to your own conclusions.