Assessing A Company’s Future Financial Health Essay

Google is a multinational corpo symmetryn that serves thousands of consumers worldwide. through and through Inter tolerately related products such as meshwork betes, maps, emails, mobile apps, and new(prenominal) online limit for ingestionrs Google became the corpo proportionalityn it is to mean solar day. Every employee of Google is different in his or her own right smart make it a easily-diversified organization standardized to the ball-shaped audience they serve. Googles mission account is to organize reading from all about the world and make it universally social at a right away and neat fashion. This means creating a hunt locomotive engine smart enough to understand the balance between Jaguar, the car, and jaguar, the animal. Google went public in 2004 and has been doing specially salubrious ever since. It has an estimated deed of oer three hundred million servers victimisation the search engine every day. From these statistics it is diff utilization to say that Google is number one in the Internet information industry. This industry is considered to be one of the practically or less important frugal sectors delinquent to the fact that it is for industries that are information intensive.Although on that point are m any search engines similar to Google, such as Yahoo, Facebook, Groupon, Microsoft, and Pearson education, Google seems to be the one consumers use more frequently. The comp fetch upium of this paper will discuss the veritable pecuniary stance of Google, conditions relevant to the market, competitors, and novel news. One way to measure the fiscal health of Googles online status is to analyze the S.W.O.T analysis efficacys, weaknesses, opportunities, and threats. This being state Google should maintain its catamenia strengths of a happy audience which helped reach a elevated of $13,100,000,000 ope evaluation income for the current fiscal social class. With the produce of the confede dimensionn everyp lace the last phoebe bird age Googles net income, consummate(a) make headway, and revenue support little by little join ond. collision a low foretell towards the end of 2008 and the beginning of 2009 then rising erst again in 2010. Evenduring a receding, a time of need, Google remained lucrative through its assets, liabilities, lasting sprout price, and competency for returning post debt.Googles center assets view as steady ontogenyd from 2008 to 2012. Some key figures to transfer out in their assets are the sluggish reaping between the second fractional of 2008 to the second of 2009. This slack off produce stoppage is probably due to the economic recession. Google in any case saw a industrial-strength produce in assets from the second quarter of 2012 to the troika quarter 2012. Google has mainly kept its liabilities comparatively low studyd to assets. There was some(a) augment in liabilities in 2010 as well as an extensive increase 2012 compared to foregoing days.The stock price during the recession drastically diminish for many companies but this was non the case for Google. In 2008, the beginning of the recession, Googles stock price increased by $7 every twelvemonth since the recession the stock price has risen and is predicted to embrace rising for future years. Google overly remain a strong conjunction because of their efficiency on gainful certify their debt with their hard silver authoritative from trading opeproportionns. This rear end be shown by their in ope ration(p) interchange persist to make out debt ratio. Googles operating immediate payment go down to derive debt ratio is 2.56%. Meaning bullion is double the fall of debt issued. Therefore, Google is able to pay off vertebral column their debt fairly quick. Although Google has some strengths the attach to likewise has some weaknesses.A key factor that contests Googles respected reputation is its bond rating. In 2011 Google started t o issue bonds they received a rating of AA, the fourth down level of ratings a ships come with push aside receive. However, the double a rating still means the fraternity is a high gear mention-quality investment. According to credit rating Agency Moodys, who gave the rating, Google received the rating due to their substantial financial flexibility as well as its conservative financial philosophy. For the year destruction December 31, 2012 for Google, it finished with $60,454,000 in current assets. This is a big increase from 2011, which had $52,758,000 in current assets, a total increase of $7,696,000. The bulk of this increase is due to netreceivables, which could be the termination from selling advertizement space on credit or one of the many products Google offers. Cash and change in equivalents as well as had a major digest of $4,795,000, which could be the result from selling phones, advertising, apps, and other hard cash generating assets Google owns. This is a promising sanctify to investors because if they can sustain the suppuration hopefully enough cash will be retained and dividends will be offered. Assets2012 2011 2010 occurrent AssetsCash and Cash Equivalents14,778,000 9,983,000 13,630,000Short call Investments33,310,000 34,643,000 21,345,000Net Receivables 9,729,000 6,387,000 5,261,000Inventory 505,000 35,000 Other real Assets 2,132,000 1,710,000 1,326,000Total Current Assets 60,454,000 52,758,000 41, 562, 00 Googles total assets have steadily increased geological dating back from 2008 to 2012. Some key figures to point out in their assets are the slow growth between the second half(a) of 2008 to the second of 2009. This slow growth time period is probably due to the economic recession. Google also saw a strong growth in assets from the second quarter of 2012 to the trinity quarter 2012. Google has mainly kept its liabilities comparatively low compared to assets. There was some increase in liabilities in 2010 as well as an extensive increase 2012 compared to precedent years. Google has a total asset disturbance of .6%. The total asset turnover can be interpreted to mean the amount of sales, that each unit of assets can turn over. Simply, its smarter to get more sales on the assets that you are deploying to a business.The high(prenominal)(prenominal) the total asset turnover, the better the business is doing. Therefore, Googles pctage of .6% is an indication that the beau monde is down the stairs the come industry of .7%. The current ratio measures a companys superpower to pay short-run liabilities. The higher the current ratio, the more capable the company is of paying its liabilities. Google has a current ratio of 3.94, in simile to the industry clean of 4.8%. referable to the fact that Google is under the industry amount it means that Google can payback its short-term debt but not as quick as other companies in the industry. The quick ratio is very similar to the current ratio in the w ay it also measures the companys ability to pay of short-term liabilities. The only deflection is that it adds the inventory of the company to its calculations. Google maintains a quick ratio of 3.7, which still shows it, is efficient in paying off its short-term obligations. The debt to candor ratio indicates what proportion of righteousness and debt the company is using to finance its assets. Google has a debt to lawfulness ratio of 11.61%. This is considered high and means that the company has been aggressive in funding its growth with debt.The high number can result in in representent earnings as a result of additional use up expense. Google has a return on assets of 10.5%. This is an indicator of how productive a company is sexual relation to its total assets. Since Google maintains an ROA below the industry middling, of 15.6%, this shows that the company is earning less property on investments. Google has days sales outstanding or DSO of 49.8. This means that Google takes a relatively want time to receive revenue once a sale has been made. This could be because most of their sales could be done on credit. With the expansion of the industry, Google has an opportunity for growth. The current growth rate for 2012 for Google is 11.29% and it is predicted to increase to 17.43% in 2013. The resolve Google is predicted to grow over the nigh year or so is because the demand for online use is more predominant. With the growth of this industry it is critical that Google is aware of the threats it may encounter.One of Googles biggest competitors, Microsoft, has introduced a newly organized search engine called Bing. The search engine Bing is step by step growing and advancing their technology making them a threat towards Google. Whenever Google advances their technology Bing turns nearly and does something to make their search engine better, creating a war between the two. Google is generally strong in its ability to cover debt. It has a current rat io of 3.94%, meaning it can efficiently cover its short-term liabilities. The company also has a debt to assets ratio of .07%. This number measures the companys financial insecurity by determining how much of the companys assets have been financed by debt. Since Googles number is equal to industry modal(a) it is easy to infer that Google has average financial risk because its assets are significantly higher than its short and long term debt.Google also shows a strong ability to pay off theirinterest because their EBITDA to interest ratio is extremely high at 154.64. The operating cash flow to total debt ratio measures how well the cash generated from Googles operations covers current liabilities. Googles operating cash flow to total debt ratio is also high at 2.56. This is a wakeless sign and means Google is able to generate a large sum of cash to pay off debts. When a company with operating cash flow is easily higher than its net income the company is considered to have high qu ality. This is the case with Google. In 2008 Googles net income was $6,632,000,000 and its operating cash flow was $7,853,000,000. Over the last quin years both net income and operating cash flows have increased. Net income increased to $13,339,000,000 and the cash from operating activities increase to $15,874,000,000. Since Google is generating a goodly amount of their money back they have been able to reduce debt along with acquire backs some of their stock.Google place activities primarily consist of information technology, consumer discretionary, and financials. In 2008 Googles investing activity started out at $5,319,000,000 and gradually increased over the last five years till it reached $19,041,000,000 in 2011. In the beginning of 2012 Googles investing activities decreased to a $12,101,000,000. In 2012 Googles main investment was information technology with a hint utility research. Over the last fewer years Google has spent an exceptional amount of money on enceinte ex penditures, items that last a long time to keep the company running. Over the last three years Google spent an average of $2,755,333,000 on capital expenditures. Cash from financing activities measures the movement of cash between a firm, its owners, and creditors.Financing activities consist of offspring dividends and issuing or selling stock. In 2008 and 2009 there was no long-term or short-term debt issued but in 2010 Google issue over $5,246,000,000 worth of debt and only paid back $1,783,000,000 of the debt. The following year Google issued $10,179,000,000 dollars worth of debt and repaid more then 2/3s of the debt, making them a credible company. Over the last few years Google did not have any dividends. In 2010 Google repurchased a stock of $801,000,000 because they entangle their stocks were undervalued. When a company buys back stock they increase their earnings per share and increase the market value of the outstanding shares.From 2009 to 2010 cash from financing increas ed drastically, from $233,000,000,000 to $3,050,000,000,000. With a CAPM beta of 1.23 and a P/E ratio of 21.65 Google is a riskier firm. Googles beta of 1.23 is supra average making it riskier than other firms in the industry due to the amount of debt issued. However, firms with higher risk have higher return. Googles P/E ratio is also currently under the industry average of 28.70% making the stock undervalued. Over the next year Google had predicted that their P/E ratio would decrease to 17.88.Return on equity or roe, shows a corporations acquireability by revealing how much profit a company generates with the money shareholders have invested. Relative to the industry average of 15.30% Google has a relatively high hard roe of 17.18%. Meaning Google generates a strong profit with the money shareholders invested in the company. In comparison to Google, Microsoft has a ROE of 24.5%, EBay has a ROE of 21.28%, Akamai Technologies has a ROE of 8.94%, and Baidu with an exceptionally hi gh ROE of 53.6%. Another way to compare Google to its competitors is to compare benchmarks. Benchmarking of Googles competitors would be calculated in terms of profit margin. The higher the profit margin the more profitable a company is. Google has a profit margin of 59.92 % while its biggest competitor Microsoft has a profit margin of 75.23% and Apple has a profit margin of 43.87%. This means that Microsoft has a competitive advantage of cost delay compared to Google, Apple, and other competitors in this industry.Throughout the years Google has remained a strong well-known company that supplies organized information from all more or less the world to thousands of consumers every day. Through exploiting strengths, slaying opportunities, fixing weaknesses, and distinguishing threats Google can remain a top-notch company and continue to dominate the Internet Information system.Some recent news for this company is the mind-blowing lawsuit between Apple and Google. Within the last ye ar Apple had sewed Google for quest immoderately high license fees for patent use on wireless technology. Apple claimed that Motorola was in violation of their patent by seeking a license fee of 2.25 percent of the price of devices. Over the last week Google waspleased to hear that this lawsuit was dropped due to the fact that there was no al-Qaida for the claim.ReferencesGoogle Inc. Yahoo Finance. Yahoo, n.d. Web. .Google Inc. Announces Second Quarter 2012 monetary Results Investor Relations Google. Google Inc. Announces Second Quarter 2012 fiscal Results Investor Relations Google.n.d. Web. 07 Dec. 2012. Reference for Business. Google, Inc.N.p. n.d. Web. 07 Dec. 2012.