Question

Determine the capital structure of Apple, Inc. Compare Apple's capital structure to other firms in the same industry. Make sure you discuss any difference between Apple and the industry average and it is good or bad and why.

Answer 1

Apple capital structure is highly inclined towards use of equity capital rather than use of debt capital and it does not have debt capital in its overall capital structure which can affect the value of the firm to a large extent because it does not use debt capital much so other companies like Amazon or other companies in the same technology sector are using a higher amount of debt capital in their overall capital structure in order to gain amount of growth because of lower cost of debt capital but Apple has a high cash on its books of accounts and it does not borrow and it is always maximizing based upon the book value of cash and its reserves.

The debt capital ratio of Apple is hardly .10 whereas other form is taking large amount of debt capital in the proportion of almost 60% to their over on capital structure so it can be said that Apple is relatively outperforming when it comes to use of debt in overall capital structure because debt capital is risky also due to financial cost of insolvency attached to it.