Introduction and Company Overview
Apple is an integrated designer and marketer of consumer electronics. The company’s products include computers, smartphones, tablets, wearables, as well as the software that powers these devices. Apple is based in California, but contracts out manufacturing to third parties, typically in China. It runs physical retail stores, and online stores, in dozens of countries around the world. The global nature of Apple’s business presents significant challenges for the finance department. In recent years, the company has been so profitable that it had massive cash holdings. These have typically been either returned to shareholders via dividends, and or invested in short-term securities, both of which provide more work for finance. This paper will serve as an introduction to the finance function within Apple.
Finance Touches Everything
In most companies, and Apple is no exception, the Finance department operates as its own team, but it serves all of the other teams, as well as the company as a whole. The essential truth is that everything a company does is an economic transaction. There are either direct financial implications (i.e. money changing hands) or there are indirect implications (actions generate either costs or profits), and all of this must be measured. Since everything the company does has financial implications, finance touches on all areas of the company.
At the individual, transactional level, finance is responsible for things like ensuring suppliers get paid, revenue is collected, and expense accounts are settled. For a company the size of Apple, these functions are vast and varied, and the finance team is responsible for the smooth execution of all of them.
Where the most serious work is done, the work that a lot of non-financial talent might be unaware of, is at the high level. This includes risk management, portfolio management, and the management of financial returns. Key areas that the finance team must consider are optimal capital structure, foreign exchange exposure, and controls. Much of the following explanation of the finance function will focus on these key subject areas.
Risk Management
Risk management in finance encompasses a lot of different things. The most basic concept is that most risk from a corporation’s perspective is financial. Risk reflects what might happen to the company’s valuation. Valuation is subject to a lot of unknowns, and these unknowns carry with them a downside. Risk management seeks to balance the need to grow, with the need to minimize downside risk. By identifying and analyzing the uncertainty of activities in business, and putting some numbers to the potential outcomes related to those uncertainties, the risk management team at Apple is able to advise senior management about the potential consequences of different courses of action (Investopedia, 2018).
In a smaller company, there is risk associated with things like theft and fraud, so risk management often pertains to things like signing authority for spending, and tracking inventories. For a larger international company like Apple, foreign exchange rate and other...
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