The consumer electronics industry has hardly been static, and Apple Inc. (NASDAQ: AAPL) is a prime example. Since the fall of 2014, Apple has captivated technology users with upgraded models of previous devices such as iPhones and MacBooks while also introducing new products such as the Apple Watch. To better meet the industry's demands, Apple adjusted its capitalization structure and altered the way it financed its product offerings.
Since December 2014, Apple has aggressively bought back shares of its common stock. Based on its common stock’s lethargic activity, Apple management decided to take advantage of the stock price and reclaim issued shares. Over a six-month period, Apple bought back $24 billion of its own stock. After ending 2014 with 5.8 billion issued shares of common stock, Apple had 5.5 billion issued shares in December 2015. The market capitalization of these shares decreased $65.2 billion from December 2014 to December 2015; however, during this period, the market capitalization actually reached a peak of $723.2 billion.
Apple's market capitalization per share was just under $115 in December 2014. Although the market capitalization per share reached a peak of almost $127 in June 2015, the ratio settled at less than $109 per share in December 2015, prompting the share buyback program. Stock compensation remains a very minimal component of Apple’s total value. Although total stock compensation since December 2014 has been valued between $11.8 billion and $15 billion, this reflects roughly 2% of total capitalization relating to outstanding equities.
Apple’s common stock buyback strategy directly impacted its debt capitalization. Utilizing low interest rates for borrowing, Apple incurred debt to repossess its common stock. In December 2014, Apple reported short-term debt of $6.3 billion. In the next year, this figure almost doubled to $11 billion. Apple's long-term liabilities in December 2014 came to $29 billion; based on the company's strategic implementation of the share repossession, its long-term debt was $56 billion just one year later. Apple's total debt increased 77.2% from March 2015 to December 2015. This includes the additional $10.1 billion of new debt Apple took on during the last three months of 2015.
One smaller note of consistency from Apple’s debt is the ratio of short-term debt to long-term debt. In December 2014, although Apple's debt was $35.3 billion, the short-term debt to long-term debt ratio was 17.8%. At the end of 2015, with its total debt at $64.5 billion, Apple's short-term debt to long-term debt ratio was 17%.
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While Apple has always been known for holding huge cash reserves, its cash stockpile has only increased since December 2014. At that time, Apple had $25.1 billion in cash and cash equivalents. Twelve months later, Apple reported holding $41.6 billion in cash. Since the end of 2014, Apple reported an increased amount of cash in each of quarter in 2015, including a 19.9% increase from the third quarter to the fourth quarter.
At the end of 2014, Apple had $0.052 of debt for every $1 of equity capitalization. One year later, Apple reported having $0.1053 of debt for every $1 of equity capitalization. Apple's total enterprise value decreased from the end of 2014 to the end of 2015. The company's value increased 8.51% during the first six months of 2015, increasing from $688.6 billion in December 2014 to $747.2 billion in June 2015. However, the second half of the year resulted in a reduction of almost $112 billion. Apple ended 2015 with an enterprise value of $635.3 billion. This was a decrease of 7.7% from the previous 12 months as well as a decrease of almost 15% from just the previous six months.