Introduction
Google LLC is a multinational search engine company founded by Larry Page and Sergey Brin in 1998, with its headquarters in Mountain View, California, USA. It is not only the leader of the technology industry from the United States to the world but also the world’s largest search engine company, Android system developer, but also the virtual reality technology leader, quantum computer development company, etc., said in Si, M., Si, Z., & Ye, Y. (2022, March)
Background
Overall about google
In August 2015, Google announced an asset restructuring, a move that separated Google’s core search and advertising businesses from emerging businesses such as Google’s self-driving cars.
According to Choi and Varian (2017), Google operates millions of servers in data centers around the world, processing hundreds of millions of search requests and about twenty-four petabytes of user-generated data every day, which is equivalent to Handling more than 70 percent of the world’s online search requests, this critical capability puts the company at the heart of the experience of many Internet users.
Google’s rapid growth since its inception has also led to a series of product development, mergers and acquisitions and partnerships, not just the company’s core web search business. Google provides a wealth of online software services, such as cloud drives, Gmail email, Google Buzz and social networking services including Google+. Google’s products also enter the user’s desktop in the form of application software, such as Google Chrome web browser, Picasa image organizer and editing software, Google Hangouts instant messaging tool, etc. In addition, Google has also developed the Android operating system for mobile devices and the Google Chrome OS operating system. Among them, it is worth noting that the Android system is still one of the main operating systems of the mobile terminal so far (Google LLC, 2018).
Google Covers Industries
In recent years, with the continuous advancement of technology, google has begun to set foot in more and more industries. Not only online software services, mobile applications and wearables – Google Glass, but also mobile phones, drones, autonomous driving, virtual reality, robotics and more.
We can see from Guizzo, E. (2019). Google acquired the world’s second-ranked robotics company – Boston Dynamics and Schaft in 2013 and 2014, respectively. To its commercial potential, in 2017, Google agreed to sell it to SoftBank Group, suspending the robotics business. Although the robotics industry is not as good as expected, they also have excellent investment properties, such as growth capital investment fund CapitalG and Alphabet’s venture capital firm GV.
Google Company’s Financial Statement from 2016 to 2020
Consolidated balance sheets
(In millions, except share amounts which are reflected in thousands, and par value per share amounts)
Income statement
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Financial Ratios Analysis
Google Company’s income statement from 2016 to 2020 is summarized in the table below.
| 2020 | 2019 | 2018 | 2017 | 2016 | |
| Revenues | 182527 | 161857 | 136819 | 110855 | 90272 |
| Cost of revenues | 84732 | 71896 | 59549 | 45583 | 35138 |
| Research and development | 27573 | 26018 | 21419 | 16625 | 13948 |
| Sales and marketing | 17946 | 18464 | 16333 | 12893 | 10485 |
| General and administrative | 11052 | 9551 | 6923 | 6872 | 6985 |
| European Commission fines | 0 | 1697 | 5071 | 2736 | 0 |
| Total costs and expenses | 141303 | 127626 | 109295 | 84709 | 66556 |
| Income from operations | 41224 | 34231 | 27524 | 26146 | 23716 |
| Other income (expense) net | 6858 | 5394 | 7389 | 1047 | 434 |
| Income before income taxes | 48082 | 39625 | 34913 | 27193 | 24150 |
| Provision for income taxes | 7813 | 5282 | 4177 | 14531 | 4672 |
| Net income | 40269 | 34343 | 30736 | 12662 | 19478 |
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A critical analysis of Google’s financial performance reveals that the company’s revenue has been on an increasing trend since 2016. Google’s revenues have increased steadily from $90,272 million in December 2016 to $182,527 million in December 2020. This implies that the company’s revenues have increased by $92, 255 million (102%) in five years.
Besides revenues, the company’s net income has also increased tremendously over the same period. For instance, Google’s net income increased from $19,478 million in 2016 to $40,269 million in 2020. [Identify what a good net income percentage is for the industry type (add CITATION here)]. The increase in Google’s net income and profit is widely attributed to the company’s effective management, smart investment decisions on high-tech infrastructure, and adoption of consumer- centric business operations.
Over the past five years, the company has implemented various financial decisions that have resulted in both positive and negative impacts on its overall financial performance and growth. For instance, Google’s payout ratio has been flat since 2009. Google’s free cash flow decreased from 2016 to 2020. However, the reverse is observed with the company’s working capital, as it has been increasing steadily since 2016. [Tell us what is a good cash flow and working capital , compare it with competitors: Amazon and Microsoft(CITE)].
Key Ratios
| 31-Dec-20 | 31-Dec-19 | 31-Dec-18 | 31-Dec-17 | 31-Dec-16 | |
| Current ratio | 3.07 | 3.37 | 3.92 | 5.14 | 4.36 |
| Acid-test ratio | 2.96 | 3.25 | 3.76 | 4.99 | 4.16 |
| Debt ratio | 0.32 | 0.25 | 0.22 | 0.18 | 0.18 |
| Average collection period | 61.85 | 57.11 | 55.59 | 60.37 | 57.16 |
| Inventory turnover | 0.86% | 1.39% | 1.86% | 1.64% | 0.76% |
| Return on equity | 18.09% | 17.05% | 17.30% | 8.30% | 12.77% |
| Operating return on assets | 12.90% | 12.41% | 11.82% | 13.25% | 14.16% |
| Operating profit margin | 22.59% | 21.15% | 20.12% | 23.59% | 26.27% |
| Total asset turnover | 57.11% | 58.66% | 58.77% | 56.19% | 53.89% |
| Fixed asset turnover | 2.15 | 2.20 | 2.29 | 2.62 | 2.64 |
| Net Margin | 22.06% | 21.22% | 22.46% | 11.42% | 21.58% |
| Quick Ratio | 1.01 | 0.97 | 1.08 | 1.20 | 1.12 |
| Return on Assets | 12.90% | 12.41% | 11.82% | 13.25% | 14.16% |
Add citations and comparison with competitors in the following 3 paragraphs, also explain the net margin derease in the form,
From the above analysis, it is evident that Google’s Net Margin % has been dwindling over the past five years. Net Margin % decreased from 21.58% in 2016 to 11.42% in 2017. It later increased to 22.06% in 2020. Googles’ return on assets decreased from 14.16 % in 2016 to 13.25% in 2017, which later decreased to 12.90% in 2020. This financial ratio reveals that 2017 was somehow a difficult year for Google LLC
Google’s total current assets decreased slightly by 0.8% between 2016 and 2017, and then recently increased by 4.8% in 2018. The company’s long-term debt decreased by 0.3% in 2018, which is a key financial improvement for the company. Although Google LLC operates in different markets with changing political, economic, and social factors that are beyond its control, the company strives to diversify its business model and maintain the health of its financial stability.
Concerning the company’s liquidity, Google’s financial leverage has increased steadily over the past three years. In sharp contrast, the company’s current and quick ratios have both decreased over the same time frame. Google’s debt/equity decreased from 0.03 in 2016 to 0.02 in 2017 but remained constant until December 2018.
https://owl.purdue.edu/owl/research_and_citation/apa_style/apa_style_introduction.html
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References
Abdelsalam, A., & Nobanee, H. (2020). Financial Statement Analysis of Google. Available at SSRN 3647444.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3647444
Anna, A. (2021). Tech giants’ growth overshadowed by regulatory risks, ad challenges.
https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/tech-giants-growth-overshadowed-by-regulatory-risks-ad-challenges-64260571
Annie, G. (2020). Google’s 3 Biggest Challenges for 2020.
https://www.thestreet.com/investing/google-alphabet-3-biggest-challenges-in-2020
Choi, H., & Varian, H. (2017). Predicting the present with Google Trends. Economic Record, 88, 2-9.
Guizzo, E. (2019). By leaps and bounds: An exclusive look at how Boston dynamics is redefining robot agility. IEEE Spectrum, 56(12), 34-39.
https://ieeexplore.ieee.org/abstract/document/8913831
Google LLC (2018). Google LLC annual report for 2018 FY. Retrieved July 23, 2019, from https://abc.xyz/investor/static/pdf/20171231_alphabet_10K.pdf?cache=7ac82f7
Markets Insider. (2019). Google LLC stock prices today. Retrieved July 23, 2019, from https://markets.businessinsider.com/stocks/goog-stock
Sibirskaya, E. V., Oveshnikova, L. V., Mikheykina, L. A., & Lyapina, I. R. (2019). Statistics of Financial Outcomes of Company Operations. In Economic Systems Analysis: Statistical Indicators (pp. 127-139). Springer, Cham.
Si, M., Si, Z., & Ye, Y. (2022, March). The Analysis of Google’s Monopoly in The Search Engine Industry. In 2022 7th International Conference on Financial Innovation and Economic Development (ICFIED 2022) (pp. 2168-2173). Atlantis Press.
https://www.atlantis-press.com/proceedings/icfied-22/125971725
Williams, E. E., & Dobelman, J. A. (2017). Financial statement analysis. World Scientific Book Chapters, 109-169.
Wilmers, N. (2018). Wage stagnation and buyer power: How buyer-supplier relations affect US workers’ wages, 1978 to 2014. American Sociological Review, 83(2), 213-242.
Google Company’s Financial Statement
2020 & 2019: https://www.sec.gov/Archives/edgar/data/1652044/000165204421000010/goog-20201231.htm
2018 & 2017 : https://www.sec.gov/Archives/edgar/data/1652044/000165204419000004/goog10-kq42018.htm#s12257BECA84B57BDA458EA0A7C02E9C6
2016: https://www.sec.gov/Archives/edgar/data/1652044/000165204418000007/goog10-kq42017.htm#s8EA9B2C52778A3A42DF578DB9C94AC32
