Analyzing Stockholders' Equity to Generate Cash
The purpose of this assignment is to analyze stockholders' equity to recommend strategies for generating cash. Understanding a company's position as it relates to stockholders and stockholders' equity is important when considering options and making decisions related to the strategies that should be implemented to generate cash for the company.
The chief executive officer (CFO) of the company wants to generate cash for the organization and has tasked you to review the current stockholders' equity position for the company and use your findings to recommend strategies for generating cash flow. The CEO has requested you summarize your findings in a memo that is addressed to the CFO, but one that could be shared with other stakeholders
Refer to the “Annual Reports for Approved Companies” and access the Form 10-K for one of the companies. Review and study the following information related to stocks:
Identify and discuss the current types of stock, such as common or preferred stock, currently issued, and outstanding. Include a narrative description along with the values and number of shares found on the balance sheet.
Identify the presence of treasury stock and its impact on overall stockholders' equity. If the company does not have treasury stock, indicate the absence of treasury stock and provide some discussion as to why the company may not have purchased back any of its originally issued stock.
Review the notes to the financial statements to determine if the company has any convertible bonds and summarize the characteristics of those bonds. If there are no convertible bonds in the notes, discuss why a company may want to consider convertible bonds in the future.
Discuss the pros and cons of issuing new stock, reissuing treasury stock (if applicable), and issuing convertible bonds.
In addition, include your recommendations on how the company could generate cash from issuing new common stock, preferred stock, convertible bonds or reissuing treasury stock. Support your recommendations with examples that show the impact on cash.
General Requirements:
Using the five items above as a guide, summarize your findings and recommendations for the CFO.
Submit the Word memo document to the dropbox. with the naming convention LastnameFirstinitial.T6memo.
While APA style is not required for the body of this assignment, solid academic writing is expected, and documentation of sources should be presented using APA formatting guidelines, which can be found in the APA Style Guide, located in the Student Success Center.
This assignment uses a rubric. Please review the rubric prior to beginning the assignment to become familiar with the expectations for successful completion.
You are required to submit this assignment to LopesWrite. A link to the LopesWrite technical support articles is located in Class Resources if you need assistance.
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MEMO: Raising New Capital
Student’s Name
Affiliation
Course
Professor
Due Date
MEMO: Raising New Capital
To Chief Financial Officer,
Apple currently offers only common stocks. Common stock is described as a market security that represents its holder ownership of a given company (Lessambo, 2022). To this end, a common stock allows its holder to vote on the individuals who should constitute the board of directors, as well as vote on issues that determine the common policies. Based on the balance sheets, Apple Inc. has authorized common 50,400,000 common stocks at the par value of US$ 0.00001. As of 2022, the number of common stocks issued was 15,943,425 with the number of outstanding shares being 16,426,786. The total book value of the common stock and additional paid-in capital as of the financial year 2022 was US$ 64.849 billion.
Apple has treasury stocks. The term treasury stock refers to the previously outstanding shares that Apple repurchased from the shareholders with the effect of decreasing the number of its shares available in the stock market. In 2022, the company directors authorized the company to repurchase 569 million shares at the value of US$ 90.2 billion. The presence of treasury stock has the effect of reducing the shareholder's equity on the balance sheets. In addition, treasury stock increase the face value of the common stock in the sense that the reduced number of outstanding share would result in increased earnings per share (Brown & Davis, 2006).
Though Apple has issued commercial papers, there are no convertible bonds in the balance sheet. When raising money, Apple could consider raising capital with the use of convertible bonds as they are viewed more favorably in the market than the issuance of a new form of equity. The positive reception of convertible bonds is based on the premise that bondholders are likely to convert their debt into shares only in instances where the stock prices of a company appreciate, thereby having minimal influence on the prices of the existing shares (Boursicot, Gauthier, & Pourkalbassi, 2019). In addition, the use of convertible bonds eases the process of raising capital given their high levels of attractiveness to investors. Convertible bonds are considered secure in the view that bondholders are paid before a company’s shareholders in the case of bankruptcy. Further, Apple would benefit from the issuance of convertible bonds in the sense that convertible bonds attract lower interest rates compared to other forms of bonds.
Three potential approaches that Apple c...