Net working capital (NWC) in general is defined as the difference between company’s

current assets and current liabilities. Current asset generally consist of cash, account receivables

and inventory.

Net Working Capitals = Current Assets – Current Liabilities

Less NWC implies a lower financing in working capital, while a higher NWC indicates a

higher interest in working capital. Higher NWC may help improve the financial position of firms

since it can invigorate deals, counteract creation interference, and fortify an association's long

haul association with their clients. However, that higher investment in working capital may be an

essential reason for bankruptcy of firms. This is based on discussion that investment in working

capital speaks to the measure of cash freeze up, which could have been invested into productive

chances. A higher NWC implies that a firm should discover elective methods for financing the

funds in working capital[ CITATION Afr16 \l 1033 ].

Income Statement of Apple Inc.

Breakdown 2019 2018 2017

260,174,00 265,595,00 229,234,00
Total Revenue 0 0 0
161,782,00 163,756,00 141,048,00
Cost of Revenue 0 0 0
101,839,00
Gross Profit 98,392,000 0 88,186,000
Operating Expenses      
Research Development 16,217,000 14,236,000 11,581,000
Selling General and Administrative 18,245,000 16,705,000 15,261,000
Total Operating Expenses 34,462,000 30,941,000 26,842,000
Operating Income or Loss 63,930,000 70,898,000 61,344,000
Interest Expense - 3,240,000 2,323,000
Total Other Income/Expenses Net 1,807,000 2,005,000 2,745,000
Income Before Tax 65,737,000 72,903,000 64,089,000
Income Tax Expense 10,481,000 13,372,000 15,738,000
Income from Continuing Operations 55,256,000 59,531,000 48,351,000
Net Income 55,256,000 59,531,000 48,351,000
Net Income available to common shareholders 55,256,000 59,531,000 48,351,000
Reported EPS      
Basic - 12.01 9.27
Diluted - 11.91 9.21
Weighted average shares outstanding      
Basic - 4,955,377 5,217,242
Diluted - 5,000,109 5,251,692
EBITDA 76,477,000 81,801,000 71,501,000
Source Yahoofinance.com

Balance Sheet of Apple Inc.

Breakdown 9/29/2019 9/29/2018 9/29/2017

Assets      
Current Assets      
Cash      
Cash And Cash Equivalents 48,844,000 25,913,000 20,289,000
Short Term Investments 51,713,000 40,388,000 53,892,000
100,557,00
Total Cash 0 66,301,000 74,181,000
Net Receivables 22,926,000 23,186,000 17,874,000
Inventory 4,106,000 3,956,000 4,855,000
Other Current Assets 12,352,000 12,087,000 13,936,000
162,819,00 131,339,00 128,645,00
Total Current Assets 0 0 0
Non-current assets      
Property, plant and equipment      
Gross property, plant and equipment - 90,403,000 75,076,000
- -
Accumulated Depreciation - 49,099,000 41,293,000
Net property, plant and equipment 37,378,000 41,304,000 33,783,000
105,341,00 170,799,00 194,714,00
Equity and other investments 0 0 0
Goodwill - - 5,717,000
Intangible Assets - - 2,298,000
Other long-term assets 32,978,000 22,283,000 10,162,000
175,697,00 234,386,00 246,674,00
Total non-current assets 0 0 0
338,516,00 365,725,00 375,319,00
Total Assets 0 0 0
Liabilities and stockholders' equity      
Liabilities      
Current Liabilities      
Total Revenue 16,240,000 20,748,000 18,473,000
Accounts Payable 46,236,000 55,888,000 49,049,000
Taxes payable - - -
Accrued liabilities - - 25,744,000
 Deferred revenues 5,522,000 7,543,000 7,548,000
Other Current Liabilities 37,720,000 32,687,000 0
105,718,00 116,866,00 100,814,00
Total Current Liabilities 0 0 0
Non-current liabilities      
Long Term Debt 91,807,000 93,735,000 97,207,000
Deferred taxes liabilities - 426,000 31,504,000
Deferred revenues - 2,797,000 2,836,000
Other long-term liabilities 50,503,000 45,180,000 40,415,000
142,310,00 141,712,00 140,458,00
Total non-current liabilities 0 0 0
248,028,00 258,578,00 241,272,00
Total Liabilities 0 0 0
Stockholders' Equity      
Common Stock 45,174,000 40,201,000 35,867,000
Retained Earnings 45,898,000 70,400,000 98,330,000
Accumulated other comprehensive income -584,000 -3,454,000 -150,000
107,147,00 134,047,00
Total stockholders' equity 90,488,000 0 0
338,516,00 365,725,00 375,319,00
Total liabilities and stockholders' equity 0 0 0
Source Yahoofinance.com

NWC = Current assets - Current liabilities

= 162,819,000 – 105,718,000

= 57,101,000

It can be seen that Apple had a substantial positive working capital which shows its potential to

pay its short term obligations and to invest and grow.

Cash Conversion Cycle

Cash Conversion Cycle or CCC is such a helpful method by which we can without much

of a stretch and rapidly survey the liquidity of the firm. It perpetually measures the time slack

between cash payment for acquisition of inventories and collection of receivables from clients. It

is a dynamic proportion of consistent liquidity management, which involves both balance sheet

and income statement information with time dimension[ CITATION Das14 \l 1033 ]. In simple
words it is the time difference between when the firm receives the cash from the sales and when

firm has to pay for the inventory.

Cash Conversion Cycle = Operating cycle – Account payable period.

Inventory turnover = cost of goods sold / average inventory

= 161,782,000 / 4,031,000

= 40.13

Average Inventory = (Beginning inventory + Ending inventory) / 2

Inventory Period = 365 / Inventory Turnover

= 365 / 40.13

= 9.09 days

It is found that apple had a very low inventory period i.e. time required to purchase and sell

inventory was around 9 days.

Receivable turnover = sales / average receivables

= 260,174,000 / 23,056,000

= 11.28

Account receivable period = 365 / receivable turnover

= 365 / 11.28

= 32.35 days

Time required to collect credit on sales for apple is found to be around 32 days.

Now, Operating cycle = Inventory period + account receivable period

= 11.28 + 32.35

= 43.63 days
This implies that time apples spends around 43 days in between purchasing inventory and

collecting the cash from the sales of inventory.

Payable Turnover = Credit purchase / Average Payables

Credit purchase = Cost of goods sold + Ending Inventory – Beginning Inventory

= 161,782,000 + 4,106,000 – 3,956,000

= 161,932,000

Payable turnover = 161,932,000 / 51,062,000

= 3.17

Payable period = 365 / payable turnover

= 365 / 3.17

= 115.14

Apple has a high payable period of around 115 days which is the time between the purchase of

inventory and payment for inventory.

Finally,

Cash conversion cycle = Operating cycle – Payable period

= 43.63 – 115.14

= (71.51) days

This shows that apple cash conversion cycle is negative. This implies that apple is generating

revenue from its customers before it has to pay for its inventory to suppliers.

Trend Analysis

Looking at the cash conversion cycle of Apple it has been operating in negative cash flow

cycle. Apple does not need to pay for the inventory even after the sale of product. Apples

conversion cycle in between Sep. 30 2018 to Sep 30 2019 was around (72) days. This means that
apple is about to hold its cash for about 70 days before it has to be paid out. By receiving cash

upfront eases the burden of operating and other expenses. Apples inventory turnover is very

quick. Basically negative cash conversion cycle is an interest free approach to back their

activities by borrowing from their suppliers.

References
Afrifa, G. A. (2016). Net working capital, cash flow and performance of UK SMEs. Review of

Accounting & Finance, 15(1), 21-44.

Das, S. (2014). Effects of Cash Conversion Cycle on Cash Management - A Study on IT Sector.

International Journal of Banking, Risk and Insurance, 2(1), 47-63.