With the success of products such as the Ipod, and most recently the IPad, Apple is a long way

from the down years of the 1990s when the company was on the brink of bankruptcy. The success of the company, and specifically the vision of CEO Steve Jobs, has cemented Apple as one of the largest and most technologically advanced companies in the world. As shown in the embedded financial statements, Apples financial performance over the last several years is remarkable. As of September, 2010 (fiscal year end), the company had $51 billion in cash, cash equivalents, and marketable securities- an increase of $17 billion from September, 2009. The key driver of this net increase was cash generated by operating activities of $18.6 billion. In addition to its strong cash and cash equivalent position, the company tripled revenue over the last five years with annual sales surpassing $65 billion for fiscal year 2010. Operating income and net income was more than seven times what it was in 2006 reaching $18.39 billion and $14.01 billion, respectively in 2010. Gross profit was nearly four times its 2006 level at $25.68 billion for 2010.

From a detailed review of the companys financial statements (balance sheet specifically), you can see current assets are more than 50% of total assets, with cash and cash equivalents equaling 40% of the total. It is clear that Apple has a strong ability to generate cash from its core businesses. Assets urrent Assets ash And ash quivalents hort erm Investments Net Receivables Inventory ther urrent Assets Total Current Assets Long erm Investments roperty lant and quipment oodwill Intangible Assets Accumulated Amortization ther Assets Deferred Long erm Asset harges Total Assets

, ,000 4, 5 ,000 ,5 0,000 ,05 ,000 ,44 ,000 41,678,000 ,000 ,000 4 ,000 4 ,000 , ,000 75,183,000 5, 4,

5, ,000 , 0 ,000 , ,000 455,000 ,444,000 31,555,000 0,5 ,000 , 54,000 0 ,000 4 ,000 ,0 ,000 , ,000 47,501,000

, 5,000 , 5,000 , 5 ,000 50 ,000 ,540,000 34,690,000 ,455,000 0 ,000 5 ,000 4 ,000 , ,000 39,572,000

Cash flow statement detailing source of $18B in cash generated from operating activities in FY10. A 94% increase from the same period in 2008.

Period Ending Net Income

25-Sep-10 14,013,000

26-Sep-09 8,235,000

27-Sep-08 4,834,000

Operating Activities, Cash Flows Provided By or Used In Depreciation 1,02 ,000 4,000 Adjustments To Net Income 2, 4 ,000 1, ,000 Changes In Accounts Receivables -4,8 0,000 ,000 Changes In Liabilities 8, 02,000 4 2,000 Changes In Inventories - 9 ,000 4,000 Changes In Other Operating Activities -1, 4,000 - 9,000 Total Cash Flow From Operating Activities 18,595,000 10,159,000

4 ,000 1 0,000 - 8 ,000 , 1 ,000 -1 ,000 -2,4 0,000 9,596,000

In looking at what Apple does with its cash, it is clear that a significant amount is used for investment purposes. On the surface it may appear that Apple invests too heavily, as the net cash amount from investing activities is a negative amount for the previous three year period. What should be understood is that using cash for investment purposes allows Apple to lower its tax liability by reducing the net cash on hand amount. The statement below details the net in and out of cash for investment purposes. Period Ending 25-Sep-10 Investing Activities, Cash Flows Provided By or Used In Capital xpenditures -2,00 ,000 Investments -11,09 ,000 Other Cash flows from Investing Activities ,000 Total Cash Flows From Investing Activities -13,854,000 26-Sep-09 -1,144,000 -1 ,14 ,000 -14 ,000 -17,434,000 27-Sep-08 -1,091,000 - , 0,000 - 8,000 -8,189,000

The next cash flow statement category is cash from financing activities. uring 2008-2010, the company did not pay dividends to shareholders and had no significant long term debt outstanding. The bulk of cash from financing resulted from the sale of company stock. Period Ending 25-Sep-10 Financing Acti ities, Cash Flows Provi ed By or Used In Dividends Paid Sale Purchase of Stock 912,000 Net Borrowings Other Cash Flows from Financing Activities -406,000 Total Cash Flows From Fi ancing Acti ities 1,257,000 Period Ending Change In Cash and Cash Equivalents 25-Sep-10 5,998,000 26-Sep-09 475,000 -82,000 663,000 26-Sep-09 -6,612,000 27-Sep-08 483,000 633,000 1,116,000 27-Sep-08 2,523,000

Overall, the companys cash position is incredibly strong with a net change in cash and cash equivalents in FY10 of nearly $6B, representing a 191% increase from the same period in FY09. Cash and equivalents of $25B and a fairly liquid long term investment amount of $25B provide the company a comfortable $50B+ of liquidity. What some analysts question is why so much cash on hand is needed hand. With the company only generating .75% on cash, 1.43% on cash equivlanets, and 3.44% on martable securities, there are clearly better uses of this money. As of this writing, the company has held firm on their position to not pay stockholder dividends, nor do they have plans to make any sizable investments or acquisitions. They can certainly repay short term debt (currently ~$5B), however with interest rates remaining low I dont expect they will. That said, there is no foreseeable reason why Apple wont continue to add large amounts of cash to the already overflowing coffers.