Till negatively affected by: liquidity, credit deterioration, financial

Till date AAPL has not realized any significant losses
on its cash, cash equivalents and marketable securities, but, there is always
the risk that any fluctuations in their value in future could result in
significant losses. From the company’s 10K we see that the company’s credit
ratings and pricing of its investments can be negatively affected by: liquidity,
credit deterioration, financial results, economic risk, political risk and sovereign
risk. The company’s 10K shows that AAPL’s exposure to credit risk on its trade
receivables is higher in certain international markets and APPL’s ability to
mitigate the risks is confined. The company is also exposed to credit risk on
its trade accounts receivable and vendor non-trade receivables related to its long-term
supply agreements. The company’s 10K shows that trade receivables as of
September 2017, in which AAPL had two customers that individually represented
10% or more of total trade receivables, each of which accounted for 10%. On the
vendor non-trade receivables side on September 2017, AAPL had three vendors,
which accounted for 42%, 19% and 10% showing that the vendors individually
represented 10% or more of total vendor non-trade receivables.

terms of managing the counterparty risk the company’s 10K confirms that AAPL
has procedures to monitor and limit the company’s exposure to credit risk on its
trade and vendor non-trade receivables, as well as long-term prepayments. In
certain instances AAPL requires its vendors to provide with a collateral to
limit the credit risk. The 10K also shows that the company enters into master
netting arrangements. The master netting arrangements are designed to reduce
credit risk by allowing net settlement of transactions with the same
counterparty. Now let’s understand what a master netting arrangement is. A
master netting arrangement is a master contract between two counterparties that
have multiple derivative contracts opened with each other. In an event of
default or on termination of any one contact, the master agreement provides for
the net settlement of all contracts which are opened between the two
counterparties, as well as cash collateral, through a single payment, in a
single currency. We also see that the net cash collateral received by AAPL
pertaining to derivative instruments under its collateral security arrangements
as of September, 2017 and September, 2016 was $35 million and $163 million,
respectively. Further the 10K also provides information that AAPL limits the
company’s credit risk on trade receivables with credit insurance for certain
customers, requiring third-party financing, loans or leases to support credit

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