Why Does Apple Have So Much Debt?
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- Опубликовано: 16 июн 2024
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One of the top goals for most of us is to get out of debt whether that be credit card debt, car debt, or mortgage debt. In fact, the only reason many of us even take on debt is because we have to. If we could afford to buy the entire item without taking on debt, most of us would choose that option. Ironically though, one of the most profitable companies in the world, Apple, also has one of the highest corporate debt loads coming in at $222 billion. Over the past two years, Apple has actually been aggressively increasing their debt and reducing their cash reserves. Not only does this allow them to better handle high inflation and leverage low-interest rates, but it also helps them pump up their stock price through technical and fundamental avenues. For example, Apple can use their debt to buy back stock and increase their dividend payments. Similarly, they can also use debt to fund acquisitions and expansion efforts. This video explains the top reasons Apple carries so much debt and why debt is actually beneficial for their business.
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Timestamps:
0:00 - Apple’s Debt
1:28 - Economic Reasoning
5:06 - Technical Reasoning
7:45 - Fundamental Reasoning
10:20 - Apple’s Debt Load
Resources:
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Disclaimer:
This video is not a solicitation or personal financial advice. All investing involves risk. Please do your own research.
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It’s fairly cute how they give a small dividend, just to make themselves look like they’re not hoarding money, yet they also have enough money in their reserves to keep their stock price up. Oil companies don’t seem nearly as interested in retaining lots of cash as they do giving dividends. In that sense they’re more loyal to the shareholders, despite often ripping off the consumers.
That’s true. Most oil companies don’t have any growth left though. So dividends is their only way of attracting investors.
APPL is strategic in understanding having a massively desirable stock is very good for business.
Look at a lot of Institutional investors and ETF's Appl is a major part of their holdings. The stock is up
Over 300% over the past 10 years. I have a Samsung phone paid for by Apples ability to consistently provide a great ROI.
@@julm7744 Yikes... I work for an oil major and your view point on this is a lil whack. I don't mind small dividend payments if I invest in Apple for example. What this means is that Apple is reinvesting into their company instead of paying insane dividend payments that end up effecting investment opportunities that can be used to pivot into a new business for the energy transition and means less reinvestment into the employees. The fact that oil majors rely on strong dividend payments with their limited time in strong cash flow from the core business means that they're not investing in growth opportunities when now is the time to cut back on dividend payments and focus on growing their second core business that plays well after the energy transition.
Dividends are inefficient in USA due to double taxation.
@@julm7744 There's a difference between the amount of shares you own and the % of it. Companies can and do print new shares. Amazon printed a lot. It's the only way they could keep funding themselves for a while. In any case, without dividends, the stock market is just a ponzi scheme. A company could be doing anything with their retained earnings. Apple is fully mature now and doesn't need to grow.
It’s also a tax dodge. Increasing their debt within the US allows them to put off repatriating foreign profits or something. It’s kind of how they started with the debt thing.
source? you know you can minus the loan payments from the company's profits, not the entire loan itself. not really a way for tax dodge, in fact its better for a company to use its own profits to fund self-investment as it keeps expenses low (or non-existent) to avoid paying company tax.
@@MorganPhillipsPage which would be the definition of a tax dodge…
@@MorganPhillipsPage you've just explained tax dodging...
Disagree with this video’s premise that high inflation is the reason for the debt load. It’s more likely that Apple is taking advantage of tax shield and optimizing its capital structure
Way to simple analogy
And incorrect ofc
Long story short it's how they keep SAMSUNG at bay. Everyone has a strategy and Apple has a knack for finance.
Samsung and Apple are not competitors and you’re naive if you think they are. It has nothing to do with Samsung and everything to do with Apple.
Samsung manufacturers many of Apples components.
70% lol
Taxes taxes taxes, the issue is taxes, all the profits from Apple products that it earns worldwide are in accounts in fiscal paradises like Bermuda, if they bring the money back to the US they need to pay taxes on it, therefore it will be less money for shareholders and less share value, so they loan money from Apple Bermuda LLC to Apple USA LLC, it has nothing to do with anything else.
Yup. They will be waiting for a tax holiday or just leave it overseas. Cheaper to take out debt to make stock buybacks or pay dividends than to bring the cash into the US at the relevant tax rate.
Another great video! Thank you for making
I really enjoy you covering quite in depth some important subjects of any kind in technology/social networks/economics
Thanks man!
Well explained. I heard that topic and reason of why they had so much debt, but this was way more flat and extensive👍👏.
Thanks man, I’m glad it was informative!
this was brilliant. ty
Brother, I passed my Series 7 exam this week, hope you had an amazing week and have a great weekend!!
That’s awesome man, what are you trying to do in the finance industry?
Im taking the sie on sept 9th then series 7 a month later. Wish me luck
@@NEXTGENCOMEDY4XBOX Good luck!
Daniel respond to Logically Answereds reply to you 👺
Congrats enjoy your accomplishment may you have many more.
videos coming out nicely keep it up 👍👍
Thanks man!
good videos, I really enjoy the non click baity interesting topics you choose
Thanks Awasme!
Great analysis!
Videos are looking great, Keep at it.
Thank you Philip!
I hardly comment on videos, but that is a must:
1. Buying back shares with debt is not a good use of debt (does not contrubute positively to the core business)
2. Buying back shares has nothing to do with increasing their market cap. The market cap is simply "shareprice * outstanding shares". In case of a buyback (assuming all other conditions stay the same), the shareprice will go up but at the same time the outstanding shares go down which means the market cap remains unchanged but the individual share is worth more as there are simply fewer shares outstanding.
I appreciate the effort you put in this videos, but in this case it is not very "logically answered"
Using a sufficiently low interest loan to buy back stocks probably isn't a bad choice.
Loved the video
Thank you so much man!
Taxes world wide , just search how companies take loans to offset taxes , even if they have 1 trillion dollars they will just take more loans or public debt just to offset taxes and even just invest in R&D even if results are just nothing
I mean this even makes sense for small companies.
The years we are profitable we buy equipment, new tools for our employees, give out bonuses & such because if we have to pay that money anyways we would much rather reinvest it in the business & employees than pay taxes with it.
And we are only a small family business with 7 employees total.
woah im early!!!, could you make a video on the situation in sri lanka and their financial misfortunes thanks!
Thanks for the suggestion man!
Its fine ig, they have 110B in LT debt and 62B in cash leaves us with 48B. over the top they have 120B in long term investments + they have stable earnings to service the current liablities.
They are just taking advantages of tax shield.
With increased debt, they have higher interest expense, and lower taxable profits due to it. Though actually they don’t have a lot of debt, given the level of their profits to begin with.
OH BOY Your selection of topic is just great
IT'S MY HUMBLE REQUEST TO MAKE SOME VIDEOS ON THE STEEL SECTOR AND HOW TO START A STEEL FACTORY AND THE PHARMACEUTICALS SECTORS. THEY ARE HOT TOPICS RIGHT NOW
Apple been making smart and strategic move recently! Good one!
good points
Thank you Simratjit!
I don’t think you are acknowledging the difference between debt and other liabilities. As of Q2 2022, they have 119.7 billion in debt. They also have 48.2B in cash and short term investments and they have 130B in debt securities meaning their debt in relation to liquid assets and profitability are actually pretty low.
Under JB's new Inflation reduction act, there will be a tax on stock buy backs. Could you make a video on how that will impact businesses and the market?
If this is real than I agree.
They do it before it takes effect. Or as much as they can.
more taxes just what we needed
God I love LA's videos
Thank you so much Brayden!
Where can i learn these
really great strategy
Only if you know what you’re doing haha
Consumerism debt is always bad
but corporate debt though, low enough rate and it's good
I have to point out that as inflation increases the interest rates Apple has to pay increases. This counteracts your argument since the effective rate will be the same. Borrowers only win with debt when the rise in inflation is unexpected and they don't have variable rate payments. By now, the inflation rate is already priced in to any debt Apple takes on
I doubt apple is taking variable rate loans.
Actually,
Apple bow to investor
The management hollowing out the company.
PS: This never/didn't happened in steve jobs era. This is tim cook mind.
Why do you put a $ sign in front of 23 cents? 4:10 time stamp. Jan.30, 2023
Can someone explain to me why share buybacks are no longer illegal when it clearly constitutes market manipulation.
I think Apple and other big companies (not only in tech) with a lot of debt might be the next Black Swan.
While the rates are still low and liquidity is abundant, it's difficult to imagine a scenario where these big companies would have trouble to pay back their debt.
But times change fast and very few people are able to predict and prepare for a financial crisis.
What Apple is doing financially is kind of obvious, if it were that simple to save a company from a crisis, there would be no crises ever.
I see u read the book
Hi
Great work man !
If you're reading this can I get a heart ? 😊😊
Early viewer 😂although not 1st
Thanks Rahul, I really appreciate your support!
I've seen a few posts regarding taxes. they are spot on. if they bring there money home they'll get taxed at 10 to 20% taking out loans on future profits is by far cheaper. especially if those loans are at 3% no Brainer. anyone with assets and equities than can get debt for just getting debt does. as paying back that money's interest is tax deductible and that loan is tax free as it's not considered income. I've owned a few properties and the cash out refies are always tax free. but then the higher mortgage is deductible as an expense on the property from the income of rent. no Brainer. they don't really do snatching but feed junkies a shiny phone but have figured out every angle to keep as much profit as possible
Can you write this again in gramatically correct English please.
Thanks
Thanks for watching Cameron!
but when we in debt 40k the banks wanna cut us off lol
Hahaha
Depends on your income. Apple makes a lot of moolah, that’s for sure!
Apple stock will go down
When Warren Buffett start selling 😅
😅 that's true if he sells it's going down
at this rate of him buying in the future if he sells 5% the stock crashes by 2.5%
Apple has enough cash to buy all he sells
The most important reason? Because they can, and the rate is low since they would have no problem paying it back. A debt to equity ratio of 2 is really small in the grand scheme of things. What they do with the money isn't all that relevant. If they don't need it for their business operations, they can issue dividends or buy back stock, so that their investors essentially get the benefit of Apple being able to borrow money cheaply, which they can use to acquire other investments.
The interest rates are adjusted over time it would not be 3% for that whole time
You are the apple of my eye but not my pocket
Using money from pension funds and other investors at low cost to become richer.
Yes
Win win
A company that profitable with so much debt? Reminds me of GE. Apple could be cooking the books.
Most revolutionary company?
I don't know the underlying process but one thing is certain. It must be to somehow pay less money to the government.
Simple Apple thought is could make a return on the borrowed money greater than the cost.
If you believe you can earn/profit more per year than the interest you would pay then you would borrow.
For example if Apple was borrowing money at 3% annually then as the video showed it benefits them greatly to borrow because historically they have far exceeded 3% growth per year
If you believe you can't make more per year than the interest you would pay then you would use other sources of funding.
THIS is why i put when there’s a new release 🤣
You used the wrong logo for Spaces.
Oops my bad
No big deal. I enjoy your content.
I absolutely love your channel! The way you deliver data about Big Tech. companies is brilliant.
I would love if you did a video about how fast Tesla is growing their revenue; and where you see the company 10 years from now.
You don't pay tax on debt. A lot of businesses do this actually, they take out loans to avoid paying tax.
good
You make good videos, but they got to be 50-100% shorter
Why borrow money? To make their stock more desirable. Why do that? Employee compensation.
There is no debt for super rich companies and super rich people. Fundamental rule of this world. Only debt is for common man and salaried individuals.
If you borrow rather than selling stock you don’t care about the level of your stock. With buybacks you will rather have a lower stockprice.
Because our debt driven economy incentivizes debt even when you have the funds to pay it off or not use it. 😶
yup the dollar is debt
When showing the liabilities and shareholders equity page (0:30) , please don't wiggle the image around. Felt sick looking at that.
you kept saying apple came out ahead. but apple paid 23 cents + 90 cents for that 1 dollar. meaning if they did nothing they would have ended up with 13 cents more than if they had gotten the 1 dollar loan. SO how do you see losing money as coming out ahead?
I’d loan apple money for free merch for the next 5 years
Deal! A free sticker every year! Lol.
Actually, I’d love more apple stickers. I treasure mine.
Money reasons
Yes
Apple is not the largest nor the most profitable, the profitable title goes to Saudi Aramco, now the largest title isn't just about market cap, or do you think Tesla is largest than Exxon, ICBC, Tencent, etc? Largest is a pretty complex title that can go to companies like Glencore or Amazon.
Revolutionary? Hold on lol 😂 thats crazy talk
I am an investor in them!! Don't give me bearish news!!!
I think it’s a pretty good investment :)
What did it invent?
GREED is the answer
🤦
That’s the dumbest post I’ve seen today. Had a laugh thanks to you.
Quotes at the beginning of the video: "Apple is the most revolutionary company" 🍏
Then proceeds to use what looks like folding phone at 6:10
Samsung "Hold my beer" 🍺
In 2019 they bought Intel's mobile modem business. I'm curious if this will just be an internal use company or will they leverage their own hardware.
I'm still upset about Apple buying Darksky. I really loved that app!
Hahaha
Sound like evergreen. Largest, most indebted.🤔
Idk
I see
Your economic reasoning only looks at the past year. It's not like Apple took on a lot of debt in 1 year. The main reason why they took on more debt is due to low interest rate environment for the past decade. Cheap debt fueled a lot of the growth you see in tech. At low single digit interest rate it makes sense to pay dividend since it may be cheaper than using straight cash. Also most companies always use debt for capital projects to reduce its impact on their balance sheet and cash flow
TIME TO SHOT APPL
the reason will always be: to make more money
Revolutionary my fucking ass I want to say like over half of Apple's new features have been on Android for years however they usually implemented a little bit better or they give it a little twist but revolutionary no definitely not
What would happen if Apple has no debt? or pays off all the debts.
Debt is stupid, it is build under the presumption you can't just stop working whatever you want.
I hate how debt is naturalized.
Apple is a vast corporation so every single is going to possibly lose amount of money or be in debt.
Money lose value over time as always so paying debt later is more cheap.
Apple richer than my country ZIMBABWE 🇿🇼
Apple is the most valuable company.
For making a phone? Things change but they are not innovative at all.
@@Lee-fc3yf 1/3 of their revenue comes from things like the app store.
They are also moving into advertising. That's why they're limiting app tracking on their phones, so they can see the data themselves.
@@somethinglikethat2176 I'm aware but they are not innovative, Apple sheep get excited about things that have long been on other phones it's hilarious really.
Saudi Aramco
Because debt is so cheap
Fore them
Hi
Hey Daniel!
Whoa
cause debt is cheap.
👍ℹ️
When was the last time Apple was innovative?
2019
2017
2000-2022
TAX DODGE
No company is too big to fail? Grabs popcorn for China
Its mean Samsung is winner. And Microsoft is on 2nd number. Apple is not in the race.
Soon apple will go bankrupt when elon comes with his own teslaphone.
Apple is positioning itself to survive after the iPhone, iPad, and Apple Watch peak. They’re all smart people so I wouldn’t be surprised if they create the next big thing especially in AI.
why does he always say he’s hairy at the end?
😂
His name is Hari
unbelievable, they have not invented anything since apple watch, and they are more and more in debt. What do they do with the money?
Keep it overseas to avoid US taxes on bringing money back into the US. If you keep the cash overseas you avoid taxes. But to pay dividends they need cash in the US. So they take out debt to get cash in the US without paying taxes.
The narrator sounds like he's running out of breath every 3rd word.. jesus
The money you earn in China stays in China. And it is not your call.
Second
first
Thanks for being early anonymous
@@LogicallyAnswered never expected it, but thanks for non biased information and actual facts , keep it up guys🤘
I can answer this easily.
Because they are evil incarnate
I hope Apple sinks
So, Apple might be the cause of our next recession
Faux Science RUclipsr.
🤢🤢🤮🤮