Managerial Finance

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FINANCIAL ANALYSIS GOOGLE AND COMPETITOR MICROSOFT

Financial Analysis of Google and competitor Microsoft

This paper is to examine the future financial health of Google Inc. and its competitor Microsoft Corporation. Of note the two competitors are prominent technology giants. Both Google and competitor Microsoft Corporation are publicly traded companies. Google is a prominent provider of a widely popular search engine. In addition Google is also a world class leader of other products and services which include digital advertising, cloud computing, Web app, browser, internet analytics, and operating system development. Contrastingly Microsoft is known to manufactures, supports, develops and sells electronics, personal computers, computer software and services. It is recognized for Edge web browsers, Internet Explorer, and Microsoft Windows brand of operating systems

The analysis of the financial health of the two companies Google and Microsoft will include the funding of the operations of the business from external sources namely debts, debentures and repurchases of stock.

External Financing Needs

For an organization to have a precisely healthy financial position, it is imperative to endeavor its cash and its debt cautiously. Google’s capital structure is comprised of a blend of debt and equity that takes full advantage of the stock price, so as to safeguard and support the financial structure. Google primarily generates revenues from providing affordable digital adverting. The company finances its operations through debt financing, and equity.

Consequently Google’s debt to equity ratio for the quarter which ended June, 2016 is 0.03 % this may perhaps suggest Google has a sensible percentage of its general assets financed by debt. A high debt to equity ratio in general denotes a company has been forceful in financing its progress with debt. Moreover the value of Google’s assets remarkably exceeds the company’s complete debt (SEC Google, 2015).

Google’s current debt to equity ratio represents the value of common shareholders’ equity which also astoundingly outshines that of general liabilities. Additionally, the company has ample resources from investors to bolster its long-term obligations. Google has demonstrated the prospect to offer a substantial return on investment for investors; however its deficiency to distribute dividends in the near future may be a drawback for stockholders in regards to short-term stock holdings.

On the other hand, Microsoft external financial necessities are met by issuing debt to yield benefit of positive liquidity and pricing in the debt marketplace. Microsoft provides a particular fixed securities and income to generate returns on investments. The earnings of these issuances will be utilized for corporate operations, which includes, funding for working capital, repurchases of capital stock, repayment of existing debt, capital expenditures and acquisitions (SEC Microsoft, 2015).

Target Sources of Finance

Google technologies, new products, services, and business strategies remain profitable for the business and continue, to grow tremendously. Particularly Google adverting business is its chief source that drives operating income. Evidently as documented, advertising generates at least 87 % of the company’s total income of 59 billion dollars. Analyzing Google relatively technology industry, the company was considered robust and resistant based on its liquidity in the technology marketplace (Google Inc., 2015).

Google financial plan is offering new products and services to the general public globally increasing its debt sources and equity investments to generate more revenue for acquiring new investment and growth of the business. Google equity investments are offered to privately held companies. These investments which are applied using the equity method had a booming value of about 1.3 billion and 1.6 billion as of December 31, 2015 and 2014. In addition Google also issue commercial paper through a debt financing platform which adds up to a sum of 3 billion dollars (SEC Google Inc., 2015).

Microsoft generates returns primarily by licensing, supporting and developing a vast range of software services and products. The company also produces returns from certification and training on several Microsoft products.

In addition to the financial plan of producing products and services Microsoft investments also integrate corporate notes that are categorized as held to maturity investments, which included in equity. Microsoft offer particular fixed income and equity securities in order to intensify investments returns. Notably as of June 30, 2014 and 2015, the documented bases of common and preferred stock were $561 million and $520 million (SEC Microsoft, 2015).

Viability of 3-5-year plan

The viability plan denotes the established objectives of a company to achieve the financial goals. Therefore it helps the company to be possibly preview the company future and be proactive in the opportunities and challenges that may arise.

Google has unquestionably been blossoming in recent years. Google’s fortes consist of its well renowned presence and position in the global technology marketplace as a valued brand, and its substantial financial and commercial growth in recent years. Google has a solid plan which comprises increasing profits, prioritizing the investments that will boost the value of the company, expanding and procuring new business.

Google also has prospects for unrelenting success by fabricating calculated obtaining of smaller companies, moving ahead in the digital advertising marketplace, and further developing and validating the Android smart phones. The key shortcoming of Google is its insufficiency of product integration a difficulty or concern that could possibly hinder the company from accomplishing its full profit potential.

Notwithstanding the viability of this 3-5 years plan Google face possible challenges such as aggressive competition within the technology industry, security issues, and instabilities of exchange rates. Granting these challenges may be disadvantageous for Google. The company will have to implement measures to control these possible challenges so that the company may continue to flourish and control the market position in current years (Gramlich & Wright, 2011).

Similarly Microsoft Corporation also has a robust plan for the future in regards to the company financial and operating plans. Microsoft plan is to remain the leading software company globally and also to continue to be highly profitable, with a concrete 3- 5 years growth in operating income and revenue. The plans includes to continue to provide quality products and services and connect with their consumers. In addition the company plan to remain their position in the global technology and digital advertising marketplace. To enable this process the company is focus on financing these activities through issuance of new debts and shares.

CONCLUSION

In conclusion both companies are competitors in the technology industry and have position their brand, products and services strategically in the marketplace. The report precisely specifies the analysis of Google and Microsoft reports topping the particulars of the external financing, target sources and viability of 3-5 years plan for both companies.

References

Google Inc. (2015). Corporate Information: Company. Retrieved from http://www.google.com/intl/en/about/corporate/company/

Gramlich N, & Wright, A. (2011). Google Inc. financial analysis. Retrieved from https://www.lycoming.edu/schemata/documents/ACCT225_Gramlich-Wright.pdf

United States Securities and Exchange Commission. Google Inc. (SEC). (2015 December). Retrieved from https://www.sec.gov/Archives/edgar/data/1288776/000165204416000012/goog10-k2015.htm

United States Securities and Exchange Commission. (SEC). Microsoft Corporation. (2015 June 30). Retrieved from https://www.sec.gov/Archives/edgar/data/789019/000119312515272806/d918813d10k.htm

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