As individuals we think that having lots of cash makes us rich.
For companies it’s the opposite. Cash is a liability. If you come
across a company that is cash rich and has nothing else, its
enterprise value will be zero. Companies are valued on their
future cash flows, meaning their ability to generate cash, not how
much they managed to keep. In other words, cash is a measure of
past success and investors are interested only in future value.
That future value comes from the intelligent allocation of
resources toward a valuable goal. A company rich in cash but poor
in vision is likely to be taken private or broken up and shut
down. Cash is an IOU to shareholders with a thank-you note for the
support through the years.
Such a fabulously clear and concise overview of Apple’s financials.