Everyone was on the edge of their seat before Tuesday. This is when the tech behemoth Apple had to report its financial revenue and gains over the last financial quarter. Nonetheless, analysts were already expecting to see a cash stockpile of $250 billion in the bank. This incredible sum of funds can compete even with foreign cash reserves. When the big event arrived, Apple didn’t fail forecasts this time either.
Due to Current Tax Codes, Apple Kept Majority of Cash Overseas
On Sunday, publications started to align the upcoming Apple’s quarterly report with a fortune of impressive value. The number that circulated the media was a quarter of a trillion dollars. This amount encompasses easily any other fund of a U.S. company during modern times. For instance, the market value of two of top players in the retail industry, Walmart, and Procter & Gamble, are not enough to surpass Apple’s financial influence.
On Tuesday, Apple reported even more than expected. The total cash hoard amounted at $256.8 billion. As such, many people started to give their own opinion on where this fortune is going to go. The company found it wiser to keep the majority of its cash holdings overseas. This decision is the result of a tax system that is based on disincentives. While this tax code allows profits to linger overseas, it charges up to 35% when the funds are introduced in the United States.
However, President Donald Trump is considering eliminating some of the fiscal burdens that put pressure on U.S. companies. As such, he even mentioned a decreased tax rate for repatriated revenue. If this is put into practice, Apple, as well as other organizations, will have no more obstacles in bringing their earnings home.
Apple’s Massive Cash Stockpile Comes with Great Responsibility
Roger Kay, an analyst with Endpoint Technologies Associates, found Apple’s situation a little discomforting. While any business would dream to have such massive financial funds, it is actually unhealthy for a corporation to own such a fortune.
“Normally, you would expect cash to fund investment opportunities, but obviously Apple doesn’t have any use for that much cash.”
Moreover, while unprecedented earnings are still fresh, the company is also swimming in dangerous seas. Its revenue relies heavily on one source of income only, which is its flagship product iPhone. However, the smartphone market grew extremely competitive and saturated as well which might strangle the influence of Apple’s asset. While such financial independence can acquire renowned companies such as Tesla, Netflix or even AMD, the company has the difficult task to think about preserving its culture and brand that made it worldwide famous.