SEC Company exercise (Apple) PDF

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Summary

Use the EDGAR (Electronic Data Gathering, Analysis, and Retrieval system) search tools on the US Securities and Exchange Commission website (https://openstax.org/l/50EDGAR) to locate the latest Form 10-K for a company you would like to analyze....

Description

Introduction: Company name: Apple

Ticker symbol: AAPL

URL to the company’s Form 10-K: https://www.sec.gov/ix? doc=/Archives/edgar/data/0000320193/000032019320000096/aapl-20200926.htm

Body: The net income is the well-known item that I expected to see on the cash flow statement. Since it's the primary source of cash inflows into the company, I was expecting to see it on the statement of cash flows. Also known as "cash flows from operating activities," these are the activities that a company uses to generate profit. Operating cash flows, for example, consist of cash from sales as well as cash required to buy inventory and pay for operational costs like payroll and utilities” (Franklin et al., 2020, p. 958). In fact, because "net income is the basis for computing cash flow from operational activities," "net income is carried over from the income statement and is the first item of the cash flow statement" (Chris, 2020). This is why I assumed the net income would be reported in the cash flow statement.

The acquisition of common stocks in the financing activity section is an unusual item that I didn't expect to see on the statement of cash flows. In truth, I was expecting to find the repurchase of common stock in the statement of cash flows, but instead saw it under the investing activities section. Because “cash flows from investing operations are cash business transactions tied to a firm' investments in long-term assets,” I assumed that repurchasing common stocks was a sort of reinvestment that had to fall within investing activities (Franklin et al., 2020, p. 958).

Now, however, I have learnt that "the biggest cash flow elements in this financing area are dividend payments, buy-backs and proceeds from issuing debts. Dividends paid and shares repurchased are cash uses, whereas loan proceeds are a source of cash." (Fuhrmann, 2020). The repurchase of ordinary stocks boosts a corporation’s cash flow.

Conclusion: Based on Apple’s cash flow statement, I would invest in it. According to financial data, it is one of the world's healthiest companies, if not the healthiest. Apple is already the most valuable company on the planet in terms of capitalization, but I expect stock value to soar in the next few years - as a result of massive savings and profits generated by innovations such as the in-house processor.

References: Peters, J. (2020). Apple is now the world’s most valuable publicly traded company. The Verge. https://www.theverge.com/2020/7/31/21350154/apple-worlds-most-valuable-company-saudi-aramco

Franklin, M. Graybeal, P. & Cooper, D. (2020). Principles of accounting, volume 1: Financial accounting. OpenStax Rice University. https://openstax.org/details/books/principles-financialaccounting.

Fuhrmann R. (2020). Cash Flow Statement: Analyzing Cash Flow from Financing Activities. https://www.investopedia.com/articles/investing/120613/cash-flow-statement-analyzing-cash-flowfinancing-activities.asp

Chris B. (2020). How Do Net Income and Operating Cash Flow Differ? https://www.investopedia.com/ask/answers/042115/what-difference-between-net-income-and-cashflow-operating-activities.asp

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