Signature Assignment _ Company Selection
Rock$tarGirl
project_week_3_revised_final.pptx.pptx
Financial Statement Analysis
Return on Assets (ROA)
Google’s return on assets is about one quarter of what it should be. Reallocating the excessive amount of cash balances would correct this. Instead of an average 11% ROA the company’s adjusted ROA would vault to almost 45% annually.
Distributing the excess cash balances would not only raise the ROA but could drive up the stock price.
GOOGLE’s Current Year Ratios vs. Prior Year Ratios
| Financial Ratio | Formula | Calculation | 2016 | Calculation | 2017 |
| Profitability ratio | |||||
| Gross Margin Percentage | Sales-Cost of goods sold including depreciation/sales | 90,272 -35,138 /90,272 *100 | 61% | 110,855 - 45,583/110,855 *100 | 58.90% |
| Debt Management ratios | |||||
| Debt-to-Assets Ratio | Total Debt/Total Assets | 28,461/167,497 | 0.17 | 44,793/197,295 | 0.23 |
| Debt-to-Equity Ratio | Total Debt/Total common equity | 28,461/139,036 | 0.2 | 44,793/152,502 | 0.29 |
| Liquidity ratio | |||||
| Current Ratio | Current Assets/Current Liabilities | 105,408/16,756 | 6.29 | 124,308/24,183 | 5.14 |
DuPont Equation
| DuPont Equation | ||||||||
| Total Assets | ||||||||
| Equity Multiplier= | Common Equity | |||||||
| 2017 | 2016 | |||||||
| $ 197,295.00 | 1046.34 | 771.82 | ||||||
| Equity Multiplier= | $ 152,502.00 | Price per earnings= | 18 | 21.35 | ||||
| Equity Multiplier= | 1.294 | Price per earnings= | 58.13 | 36.15081967 | ||||
| $ 12,662.00 | $ 3,969.00 | $ 3,935.00 | ||||||
| Profit Margin = | $ 110,855.00 | Debt-to assets ratio= | $ 197,295.00 | $ 167,497.00 | ||||
| Profit Margin = | 0.11422128 | Debt-to assets ratio= | 0.02012 | 0.02349 | ||||
| $ 110,855.00 | ||||||||
| Total Assets Turnover = | $ 197,295.00 | |||||||
| Total Assets Turnover = | 0.561874351 | |||||||
DuPont Equation 2016
Equity multiplier=total assets/ Common equity=167,497M/139,040M=1.20
ROE=Net income/ Common equity=19,478M/139,040M=14%
ROA=11.67%
Profit Margin = 1948B/89.73B=21.7%
Total assets turnover=53.76%
GOOGLE’s Summary Ratios vs. Industry ratios
During the past 13 years, Google’s highest Current Ratio was 14.97. The lowest was 3.50. And the median was 5.96.
Google has a current ratio of 4.15 as of June 2018, which indicates the company may not be efficiently using its current assets or its short-term financing facilities. Additionally, this may also indicate problems in working capital management.
However, according to GuruFocus (2018), “Google’s Current Ratio is ranked higher than 88% of the 372 Companies in the Global industry.”
References
(2018). Stock Analysis on Net. Analysis of Debt. Alphabet Inc. (GOOG). Retrieved from https://www.stock-analysis-on.net/NASDAQ/Company/Alphabet-Inc/Analysis/Debt
https://www.marketwatch.com/investing/stock/goog/financials
https://abc.xyz/investor/static/pdf/20161231_alphabet_10K.pdf?cache=2c695a9
(2017). UNITED STATES SECURITIES AND EXCHANGE COMMISSION. FORM 10-K. ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2017. Retrieved from https://abc.xyz/investor/pdf/20171231_alphabet_10K.pdf
