Comprehensive Analysis of Financial Ratios and Share Performance: Google (2010, 2000 words)
The scope of this report is to analyse the financial health of Google, the pinnacle search engine in the present times. It proceeds by giving a brief introduction of the company Google Inc then heading onto the detailed assessment of financial ratios for 3 financial years such as Profit Margin, Return to Equity, Return to Assets, P/E Ratio and EPS as well as share performance. Lastly, it tells about the overall financial condition of the company with respect to the said analyses and results (ratios and share performance).
Google, Google Inc, P/E ratio, EPS, Profit Margin, Return to Equity, Return to Assets, Share performance
Google: Analysis of Financial Ratios and Share Performance
Introduction and Company Overview
Google as it is needs no introduction. It is by default the most popular, fastest and reliable search engine today. Not only it provides the most relevant search results using the keyword selection and identification but also results in every form from images to articles, news results and book results can be obtained. Google, founded in 1998, is the brainchild of Larry Page and Sergey Brin, two Stanford University graduates who were working on a search engine named ‘BackRub’ at that time which later became Google. Finally, Google Inc was incorporated when Andy Bechtolsheim (Sun) helped starting the project by providing them a check of $100,000. Today, it stands at a massive Market cap of $173.30 billion (Google Company Summary, 2010) and is growing by leaps and bounds. Over the span of 11 years, it has developed a number of useful products and tools such as Google Chrome, Google mail, Google maps, Google finance, Google Toolbar, Orkut, Google Earth etc. to name a few. Users can obtain search results in as many as 51 languages and can even translate between them (Google Corporate, 2010) The paper will focus on the financial performance of the company by analyzing the financial ratios as well as stock performance. Comprehensive Analysis of Financial Ratios
The analysis of the company’s ratios is covered under following heads: 1. Profitability Ratios
2. Investor Ratios
3. Dividend Ratio
4. Financial Leverage Ratio
Profitability Ratios: These ratios essentially measure the efficiency of the company with regard to its assets and operations. For the scope of this paper, 3 profitability ratios have been analysed namely Profit Margin, Return on Assets and Return on Equity for three consecutive years 2007, 2008 and 2009. Table 1.1 summarises the results along with respective formulas and computations. One can easily observe the consistent rise in the profit margin of the company which is an indicator of the sound financial health of the company and that how much profit the company derives from $1 of revenue. It can be observed that the profit margin has risen significantly in the year 2009 as compared to the previous years. This could be mainly due to the reason that in 2008 Google has carried out a number of profitable acquisitions such as DoubleClick and launched successful applications such as Picasa, Google Health and a lot more giving a significant boost to business and hence revenues (Google Milestones, 2010). Google’s main revenue comes through paid and pay-per-click online advertising. The launch of its new applications led to an increase in the subscribers, thus, increasing the exposure and clicks on the advertisements. As mentioned, Google earns with every increased click and viewing of the advertisements, an increased number of subscribers did result in higher revenues and business for Google Inc. Gross Profit and Net Profit Ratio for Yahoo! Inc. and Microsoft (Table 1.2)- Microsoft is still ahead of Google and Yahoo in terms of market share, operations and profits and this is clear one look on the profitability ratios of Microsoft, Yahoo and Google together. Yahoo...