Can Apple afford $108 billion in long-term debt?
Even the most financially adept companies can find more ways to raise capital strategically.
Stocks over the past 10 years apologize (AAPL 0.61%) trampled on Nasdaq Composite index. The strong financial results have given the business a market capitalization of $2.6 trillion.
Despite this impressive performance, some investors may be concerned that the dominant technology company carries $108 billion in long-term debt. balance sheet. That massive figure alone would make it the 139th most valuable company in the world.
Can Apple afford this huge debt?
Expansion of debt burden
Investors can look at several key indicators to determine whether a company can afford its debt load. If you look closely at Apple in this regard, it’s clear that the company has no problem with leverage.
apple’s debt ratio The 31% ratio comparing liabilities to assets has actually decreased in recent years. And this shows that there are sufficient assets supporting the company.
The business generated an astonishing $114 billion in revenue. operating profit In fiscal 2023, interest payments amounted to just $3.9 billion. This shows that Apple could still easily recoup its payments even if there were a severe recession that would plummet demand for its popular hardware devices and reduce profits in the process.
financial ability
Just because a company has debt on its books doesn’t necessarily mean it’s a risky stock to own. In fact, in this case it points to Apple’s financial strength. big tech I started taking out loans aggressively about 10 years ago to take advantage of ultra-low interest rates. This helped fund share buybacks and dividends.
Moreover, you will be hard-pressed to find a more profitable company than this one. Over the past three years, Apple has generated more than $300 billion in sales. free cash flow. Based on these results, a valid argument could be made that Apple can take on more debt. Anyway, the tech world’s balance sheet is doing very well right now.
Neil Patel and his clients have no stake in any of the stocks mentioned. The Motley Fool has a position at Apple and recommends it. The Motley Fool has a disclosure policy.
