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Financial Analysis - Google

Left with a ton of money, your grandparents want to invest in a company and trust you to recommend which one is best. You decide to make 3 sets of documents for your grandparents to consider: business analysis, combined income and cash flow statement, and trend analysis.

Business Analysis

Complete a business analysis (external and internal) for Google. Possible sources include the following:

-Annual report or form 10-K
-Magazine or newspaper articles
-Company Web sites
-Government information
-Industry information
-Rating agencies
-Analyst reports
-Internet articles

Combined Income and Cash Flow Statement

Download Google's most recent annual report.

- Does the firm's income, dividends, and other capital transactions explain change in equity for the most current year?

- Does the firm's cash flow statement begin with the net income in the income statement?

- Does the firm's cash flow statement show an equal change in cash to the difference between cash from the balance sheet at the start of the year and end of the year? In Excel, construct a combined income statement and cash flow statement.

Answer the following:

If there was a big difference between the net income amounts and the reported cash flow amounts what would you do?

How could technology limit the likelihood of this happening again?

Trend Analysis

Create a trend analysis of operating ratios for at least 3 years' worth of financial data. Prepare it in Excel.

If you adjusted for any nonrecurring items in step 1, explain the adjustments in a separate Word document. Use any other information in Google's annual report to explain the change in revenues, gross margin percentage, and operating margin percentage. Add this information to the Word document.

Solution Preview

Attached you will find the Excel sheet with the financials.

Company profile:

Google Inc is one of the most profitable companies in recent period thus financial analysis to determine its position. Google was established in 1998 and its main focus is assisting people to connect with information. Reuters (2011) provides that the company's primary source of income is from online advertising. Google has business areas that can be classified into search, enterprise, operating systems and platforms and advertising. Its search component requires the company to maintain online content and index of websites and information contained therein is made available to users through the search engine. There are features integrated in the search service to offer users specialized services that is tailored to individual search.

Operating systems and platforms generated by the company include Google Chrome, Google TV and Books and also Android (Reuters, 2011). Android has been successful in the mobile market because it is an open software that allows developers to use in creating mobile applications. Google's enterprise provides company technologies for business setting. Reuters (2011) provides that the company hosts web based applications used by individuals when connected to the internet and using a browser.

Google carries out advertising using Google Search, Google mobile, Google display and Google local. The company uses AdWords in advertising whereby a marketer creates advertisement and this advertisement appears in different websites (Reuters, 2011). Using this format a marketer pays Google depending on number of clicks on the advertisement. Customers also pay depending on number of times their advertisements appear in websites (Reuters, 2011).

In its industry Google is in competition with Apple, Yahoo Inc, Facebook, Twitter and Microsoft Corporation.
Google can be termed as a relatively new company since it became public in 2004 and its growth can be reflected by its stock pricing whereby the initial price was $ 85 but is currently trading at $ 495, and this is an increase amounting to 482% (MSN, 2011). In late 2007 Google stock recorded high value being traded at $ 750 and this is 882% increase. Google financial analysis requires an analysis on company profitability, management efficiency, financial position, growth and investment returns.

Our first financial analysis into Google is going to examine the Balance Sheet and this will provide the business worth. Information provided by Google Investor Relation indicate that major aspects of the balance sheet such cash, property and plant, and capital increased in the financial year 2010 compared to 2009. current assets ...

Solution Summary

Financial analysis for investment of grandparents inheritances are examined.