On October 1 an article appeared in the Financial Times, which talks about a push by Carl Icahn for share buyback by Apple. Carl Icahn appeared on CNBC stating that $150bln in cash that Apple has offshore can be returned to shareholders as he thinks that Apple can obtain a reasonable-interest loan to repurchase shares. Apple’s shares rose by 2.2%.

Mr. Icahn is known for “pushing” his policy when he obtains a large enough share of a company. At some point he even tried to force the sale of Yahoo!. Apple did not comment on the matter, however, it earlier announced that it was evaluating a $100bln program of returning cash to shareholders in the form of dividends and share buyback via a combination of both methods.

Certainly, as Apple’s cash pile continues to increase and interest rates are still very low, it makes sense for them to leverage the company sightly by borrowing funds and returning money to shareholders. When Apple does borrow, it will incur a liability (increase of liability, balance sheet will be affected), increase cash (assets increase, balance sheet effect). When it buys back shares,  Treasury stock will increase (equity section increase, balance sheet). In case of dividends, Apple’s cash will again decrease, Retained Earnings section will decrease (both are balance sheet effects). Income statement will not be affected except for the per share numbers, since the number of shares  outstanding will decrease.

If you would like to read more, please look at the article http://www.ft.com/intl/cms/s/0/4bdc4e02-2ac3-11e3-8fb8-00144feab7de.html#axzz2gZYnzEhu , you may have to login, though.