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Financial Analysis of Google

by Haripriya Singh and Siddhi Jana

Pages 4 and 5 of 29

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Financial Statement Analysis of GOOGLE

Introduction

Google LLC is a multinational technology company. Its headquarters is located in America that focuses on internet-related products and services. Google's acquisition of media companies allows it to practice sustainable corporate business that enhances its competitiveness. The paper examines Google LLC's financial performance using various ratio analyses to determine its progress over the last few years.

Ratio analysis is the quantitative analysis that studies the financial statements of a given firm that provides insight into the firm' profitability, liquidity, and operational efficiency. Ratio analysis is significant in identifying a company's financial performance over time by analyzing a firm's past and current financial statements and using the results to predict the future. In short, ratio analysis provides points for comparing stocks in the business entity. Ratio analysis is essential to analysts that are not within the company because the primary source of their information is the financial statements. It is important primarily to the corporate insiders because they have more detailed information concerning the organization's operations. Ideally, ratio analysis is most useful when it is used to create trend lines or when it is used in industry comparison.

The fixed assets investments and capital structures of companies in the same industry are usually similar; thus, the ratio analysis of every company should be equal. A considerable deviation ratio analysis of any one of the companies will indicate a company that can potentially be experiencing an issue that is undermining its operational efficiency, profitability, and liquidity, or it could be an indication of a company that has a considerable competitive advantage that allows it record significantly higher profit margins compared to its rivals in the industry. 

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Using ratio analysis for industry comparison provides valuable insight that indicates which sectors in the industry are doing well and, hence, is considered valuable businesses. The ratio analysis is essential in developing sustainable business strategies that enhance value creation in the company, as has been witnessed in the progress of
Google since it was founded. Tbusiness strategies have enhanced shared value creation in the organization and improved the firm's value, making it the world's most dominant search engine company.

A company with a profitability ratio that has a higher value than its rival relative to the same period indicates that the company is performing well than its rival. Liquidity ratios determine the business's ability to offset its short-term accounts whenever they are due using the quick or current assets owned by the company. Market prospect ratios are some of the most commonly used ratios in ratio analysis. They comprise earnings per share, price-to-earnings ratios, dividend payout ratios, and dividend yield. Solvency ratios analyze a firm's debt levels with its profits, assets, and equity to assess the future of the company, that is whether that the company will remain in business by offsetting its long-term debts. The slight increase in inventory turnover in 2019 indicates that the demand for the company's products increased in 2019, which translates to an increase in sales. In 2016 the receivable turnover ratio for the company was about 6.4. Still, the company witnessed a dip in 2017 that can be translated as a decrease in net credit sales or an increase in the average accounts receivable. Even though the profit margin of Google declined in 2019, its company remained profitable.



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Using ratio analysis for industry comparison provides valuable insight that indicates which sectors in the industry are doing well and, hence, is considered valuable businesses. The ratio analysis is essential in developing sustainable business strategies that enhance value creation in the company, as has been witnessed in the progress of
Google since it was founded. Tbusiness strategies have enhanced shared value creation in the organization and improved the firm's value, making it the world's most dominant search engine company.

A company with a profitability ratio that has a higher value than its rival relative to the same period indicates that the company is performing well than its rival. Liquidity ratios determine the business's ability to offset its short-term accounts whenever they are due using the quick or current assets owned by the company. Market prospect ratios are some of the most commonly used ratios in ratio analysis. They comprise earnings per share, price-to-earnings ratios, dividend payout ratios, and dividend yield. Solvency ratios analyze a firm's debt levels with its profits, assets, and equity to assess the future of the company, that is whether that the company will remain in business by offsetting its long-term debts. The slight increase in inventory turnover in 2019 indicates that the demand for the company's products increased in 2019, which translates to an increase in sales. In 2016 the receivable turnover ratio for the company was about 6.4. Still, the company witnessed a dip in 2017 that can be translated as a decrease in net credit sales or an increase in the average accounts receivable. Even though the profit margin of Google declined in 2019, its company remained profitable.