Financial Research Report: Google Essay

The paper will analyze a corpo symmetryn to determine whether a fiscal advisor should recommend the ac participation to an investor. The paper will, first, devote the phoner background. Second, the paper will discuss the type of investor the corporation would appeal to. Third, the paper will go over the monetary health of the company. Fourth, after analyzing the financial information, the paper will discuss the company risk. Fifth, the paper will discuss final recommendations as to whether the company is the right fit for the investor.Company InformationGoogle, incorporate was originally a expect engine company founded in 1998 by Larry Page and Sergey Brin (Google, n.d.). The company went public in 2004 and has since broadened their horizons in the amount of products and services they offer. accord to Alexa, a website analytics program, Google.com is ranked 1 popular website in the U.S. and in the world. Google ongoingly has a bulky public figure of products and services that slew use daily. Google has stated that the meet Over 1 billion users per week. Over ascorbic acid billion searches per month. Over 1 billion Android activations. Over 1 billion YouTube users per month (Mohan, 2014). round popular Google products be Google.com A search engineGoogle+ A social sharing siteGmail WebmailGoogle Chrome A web browserGoogle Play insert A digital application distribution platform for Android Google Play Music A platform to transfer music and share music on Android devices YouTube A website to share musicGoogle Maps A digital navigation system to find local businesses and residential areas Android Software Operating bundle package for mobile devicesGoogle Wallet An application that allows the user to shop online with payment cards Picasa Application that organizes, edits and shares photos(Mohan, 2014)Google believes in innovation and is constantly trying to evolve with the mission of people using Google products in all aspects of thei r lives. Some products the company is currently working on are Google Smart Watch Wearable computers that connect to the users mobile devices Google applesauce Glasses that act as a computer and connect to the users mobile devices Google Fiber A device utilize to provide users with faster, more reliable internet service Project Loon A means of internet service through balloons as opposed to cables and name lines Google Home Automation A smart home service where the homeowner can bind the home through mobile devices Google Smart Contact electron lens A contact lens that can monitor glucose levels for diabetics Google Self-Driving Car A car that can drive by itself with robotics engineering Chrome Tablet A mobile tablet with Android software(Amadeo, 2014). flow rately, Larry Page, ace of the founders of the company, is CEO of the company. He has graced Forbes Magazines Most Powerful People list twice at 17 in 2013 and 20 in 2012, Forbes 400 Richest People in America Cate gory at 13, and Forbes Worlds Billionaires list at 20 in 2013 and 13 in the United States (Forbes, 2013). This young mogul has a net worth of $24.9 billion dollar bills (Forbes, 2013). With his vision he helped turn a 2 person operation to a business with over 30,000 employees worldwide. (Google, n.d.) He helped expand Google from merely being a search engine to creating computer software, phones and making counseling for new technology such as driverless cars and teleport machines. Larry Pages management style can be described as someone who is data track his business like a startup. He believes in innovation and staying ahead of his competition. As a technology based company, you are only as just as your next big idea. Page encourages his employees to think of crazy ideas and cultivate the best of them. When no one else is crazy enough to do it, you have puny competition, he says. (Elmer, 2011).Investor ProfileThe client is a young investor. She is interested in seeing her mo ney grow over 10 15 years. She is a multi-millionaire and has the require to be anaggressive investor. She wants to accumulate a substantial amount of wealth in the future and is open to investing in a start- up company. though the company has been around for approximately 16 years, Google is run like a start-up company and is relatively young compared to some of its competitors (i.e. Microsoft and Apple). The company is always trying to create itself with a diverse portfolio of products and services. They spend a lot of money on research and development to cultivate innovation and improve their products already on the market. Google does not pay stockpileholders dividends. It uses the dividend money for R&D, data centers, legal issues and diversification (Rosoff, 2012). Since the client is not interested in an instant money baffler and can pay fluctuations in the market, Google may be a good fit for her to invest in.Financial DataThe financial advisor must use a number of ra tios to determine the financial health of the company. Five ratios what will be used are current ratios, quick ratio, earnings per share, price earnings ratio, and debt to equity ratio.Current RatiosCurrent ratios give the investor the opportunity to see the companys ability to pay back its short-term liabilities with its short-term assets (Current Ratios, n.d.). The higher the current ratio, the more up to(p) the company is to pay back its debts which would be great for a bank lender. But a high current ratio could also mean the company has a lot tied up in nonproductive assets (Brigham & Ehrhardt, p. 99, 2014). Current ratios are determined by dividing totality assets by total liabilities (Brigham & Ehrhardt).20112012201352,758 / 8,913 = 5.960,454 / 14,337 = 4.272,886 / 15,908 = 4.6Companies generally get under ones skin for a ratio of 1 to ensure their current assets can at least cover the short term obligations. Having a ratio greater than 1 gives the company a better contin gency to be able to cover those obligations. The company started out with a high current ratio of 5.9 in 2011. This means, in 2011, the company was able to cover 5.9 times their short term obligations. It dropped down to 4.2 in 2012, but rose by .4points in 2013. The drastic fluctuation may be due to the acquisition of Motorola Mobile in 2011 (Goldman, 2012). Both current assets and current liabilities would increase due to the increase of inventory and debt. The technology industriousness medium current ratio is 2.33 (Reuters, n.d.). For all three years, the current ratio is almost twice the manufactures amount. Due to the high current ratio, the company is not at risk of bankruptcy.Quick RatiosQuick ratios tell the investor what the companys liquidity position is or how quickly it can be converted to immediate payment at the going market price (Brigham & Ehrhardt). To cipher quick ratios the formula is current assets minus inventories divided by current liabilities. 20112012 201352,758 35 /8,913 = 5.960,454 505 / 14,337 = 4.272,886 426 /15,908 = 4.6As of 2013, the current technology perseverance quick ratio average is 1.26 (Technology Sector, 2014). The past three years has been higher than the industry average. The higher the quick ratio in equivalence to the industry average shows that the company is less likely to be overwhelmed by debt in the near future. A higher ratio is safer than a lower one because it means the company has excess cash. This is a favorable consideration for an investor. Prior to 2011, Google, Inc. did not have any inventories listed on their balance sheets. Google started as a search engine in 1998 and have provided technology services that did not require inventory.In 2011, Google acquired Motorola Mobility, taking it from a strictly software company to a software and hardware company (Goldman, 2012). This puts Google in direct competition with technology companies such as Apple, Inc. and Microsoft, Corp. In partnership wi th HTC and Samsung, Google has created their line of Nexus smartphones and tablets. They also have Google Glass that is expected to launch for consumer purchase by the end of 2014 as well as the Google Smart Watch. Other items Google is working on for the near future are the self-driving car, Project Loom, and Google Home Automation.Total Assets Turnover RatioTotal assets turnover ratio determines how productive the company is. It shows how much revenue the company generates for each dollar in assets.Total assets turnover ratio is calculated by dividing total revenue from the income statement by total assets from the balance statement. 20112012201337,905 / 72,574 = 0.5250,175 / 93,798 = 0.5359,825 / 110,920 = 0.54The average turnover ratio for Google is 0.53. This means for both dollar worth in assets, the company generates 53 cents in revenue. Some companies have less assets than others, in which the total assets turnover ratio will be lower than a more assets-intensive company. G oogle is primarily a service related company, so it has less assets than the majority of its competitors who fetch a vast number of products. Some of Googles most popular products are the Google search engine, Google+, Gmail, Google Maps, Google Play Store, Android software, and YouTube. The company does not require as many physical assets. The technology industry total assets turnover ratio is 1.07 (Reuters, n.d.). Though Googles ratio is lower than the industry average, it is not necessarily a bad matter considering most technology based companies sell a physical product and Google mainly sells services, thus less assets than its competitors.Debt to EquityDebt to equity ratio is a supplement ratio which explains how much of the companys assets are financed by debt and stockholders equity. The debt to equity ratio is calculated by dividing the total debt by the total common equity. The total debt is determined by adding current liabilities with long term debt.20112012201314,429 / 58,145 = .2522,083 / 71,715 = .3123,611 / 87,309 = .27 From the three years, the average debt to equity ratio is .28. This ratio translates that Google has 28 cents of debt for every dollar of equity. The technology industry average is 31 cents. The lower number is more favorable because it shows that the company is less risky. The lower numbers indicate that the company relies on less out-of-door lenders than other companies. In 2012, the ratio increased by .06.In May 2012, Google, Inc. completed its acquisition of Motorola Mobility in which it acquired the companys debts as well as its assets. The following year, Google may have paid some of the debt. Stockholders equity increased by having a significant increase in retained earnings. Retained earnings are part of the net income that goes back intothe company instead of the company distributing dividends to the stockholders (Brigham & Ehrhardt, p. 1114, 2014).Net Profit MarginNet cyberspace margin measures a companys profitab ility. The net profit margin is calculated by dividing the net income by sales. This ratio can determine if a company earns enough money to cover its operating costs. If it does not, the company could eventually shut down which would make it a bad investment. 2011201220139,737 / 37,905 = .2610,737 / 50,175 = .2112,920 / 59,825 = .22 Based on the past three years, Googles profit margin dropped by 5% between 2011 and 2012. It slightly increased by 1% between 2012 and 2013. In all three years, the profit margins were higher than the technology industry averages for those years. In 2011, the industry average was 19% in 2012, the industry average was 16% and in 2013, the industry average was 19% (Profitability Analysis, 2014). If the companys net profit margin is higher than the industrys profit margin, it is a good investment.Company Risk LevelBased on the financial analysis for Google, the company has a low risk level based on the industrys averages. The current ratio average for the t echnology industry is 2.33. Googles average is 4.9. This means that the company has a contingency to be able to take care of their short-term obligations over twice the industry average. The industry average for quick ratios is 1.26. Googles quick ratio average over the past 3 years is 4.9. This shows that the company is least likely to be overwhelmed by debt in the future compared to its competitors. The average turnover ratio for Google is .53 indicating that for every dollar the company has in assets, it generates 53 cents. This is a low number mainly because the company has a low amount of assets unlike its competitors. Google is mainly a service company and does not have a vast number of assets like its competitors that produce products such as tablets, phones, computers, etc.The technology industrys average for debt to equity is 31. Googles debt to equity average is 28. This means that there is 28 cents of debt for every dollar of equity. The lower number is more favorable bec ause it means that thecompany depends less on external lenders. The industrys profit margin average was 18%. Googles profit margin average over the course of the past three years was 23%. This shows that compared to most of its competitors, it is generating more of a profit. A companys beta measures the companys volatility in the stock market. A companys beta depends on how much the company fluctuates within the market. The stock market itself has a beta of 1.0 (McClure, 2012). Anything above 1.0 is considered risky. Anything below 1.0 is considered more stable.According to Yahoo Finance, Google has a beta of 1.14. This means it is 14% above the stock market average and is considered a risky investment. Though the company is considered risky, it has the potential for high returns. The downfall of betas is that they only calculate what happened in the past. Its assessment does not calculate for the future of the company.RecommendationsDespite the market risk of the technology based c ompany, Google has shown appendage over the past year. According to the Financial Post, Googles shares have risen 58% in 2013. In January 2014, the companys stock rose U.S. $2.37 to U.S. $1,141.23 (Ratner, 2014). Of the 48 analysts covering Google, 35 of them recommend buying the stock whereas 13 of them recommend keeping it (Ratner, 2014). Google maintains a strong position in the driving the market share on online advertising in the mobile and video departments. The company has strong control over four pillars of the mobile department operating system, apps, app store, and payment. YouTube is a leading advertising and video sharing medium. Unlike its competitors, Google has had a steady 20% growth annually (Ratner, 2014). Under the direction of CEO Larry Page, the company constantly improves already existing products as well as produce innovative products.Larry Page wants to make Google a household name so that a person would need to use Google products several times throughout the course of their day. Currently, Google has well over 100 products that, in some cases, have become a necessity in everyday life. There are a number of phones and tablets that have been uploaded with Android software as an operating system. Googles search engine has become so increasingly popular that when a person wants to do a web search on a topic they simply Google it. The website has become the 1 site globally and nationally according to Alexa.com. YouTube is a popular video websitewhere people upload everything from home videos, tutorials, music videos, and ad campaigns. Also, one of the most reliable mobile navigation applications is Google Maps. The company is constantly updating its maps to provide better locations and directions. The company has a number of future products that will diversify their product portfolio.For example, Google Glass is a mobile device used as glasses which is like a own(prenominal) computer or tablet and also interfaces with the consumers mobi le phone. So far the product is generating a lot of attention with the public. Google is also working on the driverless car, Google Contacts, Project Loom, Google Fiber, and the Google Home Automation. Google is expanding their spectrum from a search engine and mobile apps to automobiles, health care, the internet, and home security. All of these projects show a promising future for the company. For an aggressive investor who does not mind investing in a risky company and is looking to invest for the long-term, Google is a good investment to have. The company has seen a consistent increase in growth and has shown financial stability over the years. 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