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Apple has no long term debt, how is the firm managing its long term financing without...

Apple has no long term debt, how is the firm managing its long term financing without debt?

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Expert Solution

Apple has lesser of debt than equity it possesses. it is not completely true to say that Apple is completely a debt free company but the proportion of debt to equity is really minuscule.

Apple has a large amount of Reserve and surplus and and equally large amount of cash holdings that helps in keeping it highly liquid and helps it to fund various new projects without going to the debt market for seeking any kind of the debt.

Apple has very high reserves of cash in hand which is approximately 95 billion dollars in 2019. Since the company is making multiple profit and it has very lesser to pay so that the payout to the debt holders are also very less so it adds to the total value of the firm year on year.

Debt always have a multifold negative impact on the profits and growth the company . It can be seen that companies growth is hindered by continuous debt repayment schedule . Apple has been lucky in this case because the debt to equity ratio is very low so repayments to debt holders in form of short term liabilities in bonds and debentures are also very low so the profits are transferred directly to the cash reserves and it is used to fund several reinvestment projects and sometimes equity buybacks too.

jeff jeffy answered 1 year ago
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