I am an engineer who is increasingly interested in business-related things, and I am reading and learning a lot about what you can derive e.g. from financial statements.

One question I was wondering about is: How can I determine the size of an M&A war chest of a company?

This question is inspired by the following article: http://www.fool.com/investing/2016/07/11/how-apple-can-use-its-233-billion-war-chest.aspx where they determined how big the war chest is.

I am actually not able to retrace the steps, as it seems to me that the calculation was: Total Assets - Total current liabilites - but my assumption would have been that you cannot just take the entire positions?

I was thinking more along the lines of: Cash+Cash equivalent+liquid short-term investments-short-term debt = war chest

Is it correct to say, that the possibilities with the war chests are: 1) Share buybacks 2) M&A 3) Dividend payout

Thank you for your help :)


1 Answer 1


This is more of an introductory finance/financial statement analysis question (which isn't really home in quantfin). However, I'm happy to walk you through the analysis.

From the article

When including cash and equivalents and short- and long-term investments on its balance sheet, the iPhone maker is sitting on 233 billion in cash and liquid assets. Even after subtracting 71.9 billion in debt, Apple still has 161.1 billion in net cash.

Pulling AAPL Q1 10-Q (as this article came out on July 11th before the Q2 filing on July 27th), you can scroll to the consolidated balance sheet.

Balance Sheet

With Cash of 21.514bn, Long term marketable securities of 177.645bn, and Short term marketable securities of 33.769 bn, you get the 232.92 billion sitting in cash and cash equivalents.

You are correct in that broadly speakig a war chest is whatever a company can liquidate in a short term basis to pay for various initiatives. From a corporate governance perspective, share buybacks, M&A, dividends are the only appropriate uses of cash sitting on the balance sheet (which is why AAPL paid out a special dividend several years back).


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