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Google: Financial Statements Analysis

Gus, June, Walt and Frank

Gustavo Lizarraga

on 2 May 2013

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Transcript of Google: Financial Statements Analysis

From 2010 to 2011: 29,321 37,905 29.28%
From 2011 to 2012: 37,905 50,175 32.37% History Google began in 1996 as a project by Larry Page and Sergey Brin
Their initial research project entailed developing a search engine that organized ranking based upon the number of sites linking to pages.
Google’s business is primarily focused around the following key areas: search, advertising, operating systems and platforms, enterprise and hardware products. Google generates revenue primarily by delivering relevant, cost-effective online advertising. Businesses use services such as the AdWords program to promote their products and services with targeted advertising.
In addition, the third parties that comprise the Google Network use the AdSense program to deliver relevant ads that generate revenues and enhance the user experience.
Google also recently began generating revenues from Motorola operations subsequent to an acquisition of the company. Statement of Cash Flow Operating Activities Strong continuous operating cash flow from year to year. Statement of Cash Flows Investing Activities Commercial paper, government debt, municipal bonds, collateralized debt obligations, etc. Statement of Cash Flows Investing Activities Continued Google provides securities for transactions such as short sales.
Cash is received as collateral until the short seller returns the securities sold. Google invests cash received in reverse repurchase agreements. Repurchase agreements are when Google temporarily buys securities to provide short term liquidity to another party. Statement of Cash Flows Financing Activities and Other Changes Debt issuance has increased by 108% from 2010 to 2011, and 48% from 2011 to 2012. Substantial outflows of cash for debt repayment. Statement of Cash Flows Interesting Items Under GAAP, companies expense the fair market value of the options on the date they are granted. For tax purposes, companies are allowed to claim a tax deduction when the options are exercised. Due to the recovering economy, the tax deduction is usually much larger than the expensed amount under GAAP. This benefit is reclassified from operating activities to financing activities. Cash Flow Summary Putting it in Perspective Strong positive cash flow from operating activities.
Large cash outflow for purchase of Motorola in 2012.
Increasing use of debt as source of cash.
Debt issuance cash flows were 96% compared to operating cash flow in 2012.
Considerable investments in marketable securities.
Cash flow from sales of marketable securities were 212% compared to operating cash flow in 2012.
Cash flow for purchase of marketable securities were 201% compared to operating cash flow in 2012. Income Statement Net income
From 2010 to 2011 8505 9737 14.5%
From 2011 to 2012 9737 10737 10.3%
Net profit margin=net income/ revenue Cost of revenue
From 2010 to 2011 10417 13188 26.6%
From 2011 to 2012 13188 20633 56.5% Total costs and expenses:
From 2010 to 2011:18,940 26,163 38.1%
From 2011 to 2012:26,163 37,415 43%

operating margin= income from operations/ net sales June Walt Balance Sheet Operating Analysis (Turnovers) Solvency Analysis Income statement Cont'd Income statement Cont'd Income statement Cont'd Income statement Cont'd Income statement Cont'd Frank Liquidity Analysis Statement of
Stockholders' Equity Statement of
Stockholders' Equity Cont'd Statement of
Stockholders' Equity Cont'd RNOA (2012)=28.9878% Gus RNOA = NOPAT / Average NOA NOA (2011) = $28,178
NOA (2012) = $43,446 (In millions) At January 23, 2013, there were 267,500,149 shares of the registrant’s Class A common stock outstanding and 62,163,063 shares of the registrant’s Class B common stock outstanding for a combined total of 329,663,212 shares.

There are no preferred shares authorized.

Google has never declared or paid dividends to investors nor does it intend to in the foreseeable future.

EPS has seen growth in past years. Diluted EPS grew 13.1% from 2010 to 2011 and grew 8.6% from 2011 to 2012.

Up until 2012 Google held roughly $48.3 billion dollars in accumulated earnings. Net Income (2012) = $10,737 Average Stockholders' Equity (2012) = $64,930 ROE = Net Income / Average stockholders' equity ROE (2012) = 16.5363% Balance Sheet Balance Sheet NOPAT (2012)=$10,381 EPS A Financial Statement Analysis Gustavo Lizarraga, Xiaojun Cai, Walt Simkins and Qi Jin Acquisition of Motorola in 2012
Advertising accounts for 87% of revenue however Google is investing in many other potential revenue streams
Google is experiencing fast growth
Increasing strong operating cash flow year after year
Significant investments in marketable securities Financial Statements Summary
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