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Finance Assignment

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Through my research and examination of the financial statements and reported performance of Google Incorporated’s, I will provide a detailed analysis of Google’s financial information. In addition, I will describe Google as a publicly traded company in the United States and explain its current financial situation (please see Appendix for financial statements). This description will include information on the company’s business goals, its operations, locations, markets and line of business. Then I will assess Google’s vulnerability to specific financial threats as well as explain how certain financial trends will influence future financial performance. Lastly, I will analyze the company’s stock and determine how it will perform in future periods.
Google Incorporated is a global technology company that helps people to connect information from various locations around the world. Larry Page and Sergey Brin founded Google Inc. in 1998. The company was incorporated on September of the same year. Google’s initial public offering was 19,605,052 shares of Class A common stock. This initial public offering took place on August 18, 2004. Google Inc. has revolutionized how the internet is used and perceived. Google’s main source of revenue is advertising and most of this business comes from the United States.
They have several different aspects to their business. It started with the simple www.google.com search engine. Now Google has an email service, mapping and directions site, various applications, and other aspects. One aspect is Gmail. Gmail was launched on April 1, 2004 as an emailing system that is able to receive and store large amounts of messages. In addition, after their acquisition of a digital mapping company called Keyhole, Google created Google Maps and Google Earth. One of Google's most popular segments is YouTube. Google acquired YouTube in 2006. Lastly, in 2007, Google opened the Android system, which is a platform for mobile devices.
In addition to their various services for individuals, Google offers businesses support to optimize their business potential. Examples of these include advertising, publishing, business management and business applications. These aspects help businesses to run more efficiently without having to come up with these solutions on their own. They can rely on Google for their outsourcing needs. If those businesses were to run into any problems, they would look to Google for help rather than have to maintain their own group of specialized IT personnel. All of this helps businesses to work more efficiently and save money.
Google is a corporation that is recognized by millions of people. Their business has spanned past just internet applications. Google’s operations span to offices all around the world. According to Google’s website, they have more than 70 offices in more than 40 countries. As of the end of the second quarter of 2012, Google reported 54,604 employees (Google Finance). Currently Google’s headquarters is located in Mountain View, California. They also have their hands in mobile technology. Google has been able to design mobile smart phones and tablets. Their technology has caused much buzz around the mobile technology arena. In addition, Google’s mobile technology has been in rivalry with top mobile contenders, such as Apple, Inc. Google has pioneered the Android market in which provides mostly free access to mobile applications. Google’s website had this to say about their mobile technology and endeavors:
“We’re pioneering new technologies and offering new solutions for mobile services that help people all over the globe to do any number of tasks on their phone, from checking email and calendar events to watching videos, not to mention the several different ways to access Google search on a phone. In addition, we’re hoping to fuel greater innovation for mobile users everywhere with Android, a free, open source mobile platform. Android brings the openness that shaped the Internet to the mobile world. Not only does Android benefit consumers, who have more choice and innovative new mobile experiences, but it opens up revenue opportunities for carriers, manufacturers and developers.”
Google’s income statements for the last three years have shown a net income of (in millions) $9,737, 8,505, $6,520.45 in 2011, 2010, and 2009 respectively. Their earnings per share are $29.76, $26.31 and $20.41 in 2011, 2010, and 2009 respectively. In addition, over the last three years their revenue has steadily increased but so has their expenses. Google’s balance sheet has shown that their total assets at the end of 2011 (in millions) are $72,574 and their total liabilities (in millions) are $14,429. Their total liabilities include a newly obligated long term debt of (in millions) $2,986. The financial information for the last quarter, which is second quarter 2012 includes (in millions) $2,785 net income, $86,051 total assets, $21,330 total liabilities, and a net change in cash total of $5,454.
In the last three years, Google’s cash flow includes -$3,647, $3,432, and $1,540.92 in 2011, 2010, and 2009 respectively. 2011 was the only year where they saw a negative cash flow. This was caused by a huge increase in investing activities in 2011. This increase could have been due to the fact that they were preparing to acquire Motorola Mobility Holdings, Inc. On May 22, 2012 Google Inc. completed their acquisition of Motorola. They assumed all assets and liabilities of Motorola Inc.
Google stocks have been pretty good for the past year (please see appendix for historical stock prices). Since September of 2011, Google’s closing stock price hasn’t fallen below $500.00. Even though the stock market hasn’t been very steady for the past decade, Google stocks have still been one of the best stocks to invest in. Google has been turning out profits, which shows to stockholders that they will be able to receive a return on their investment into the company. This also proves that Google’s stock, even in a rough economy, will continue to hold its pricing. Google’s current stock trends show that they will be able to hold onto the higher pricing.
Google is a large multinational corporation. There are a lot of factors that could influence that outcome of Google’s financial future. These factors include their acquisition of Motorola, any economic issues in countries that Google operates, and the long term debt that they took on in 2011. In addition to these financial factors, non financial factors are in place as well. Examples of these factors would include any regulation compliances, lawsuits, security breaches, and competition. I will analyze and describe a few of these factors.
The biggest financial decision that Google has made that will affect its future finances is the acquisition of Motorola. The reason this will be such a factor is because Google has assumed all of Motorola’s assets and debts. In addition, there may be a positive or negative side to the acquisition. This acquisition could prove to be very beneficial to the company’s finances. On the negative side, it could prove that the acquisition did not prove to help boosts the company’s financial standing. This acquisition could prove to be too much for Google to handle or its explorations into the mobile technology market fail. Another financial factor that could affect Google has to do with the economy. Because Google is a multinational company, any economic issues within any of those countries could affect Google’s future.
Non financial factors that could threaten Google’s business are regulation compliance. Google has to make sure that all of the business they do is in compliance with any regulations or laws within that country. Another non financial factor is lawsuits. Corporations of Google’s size and standing have to face the realities of lawsuits. In their case, lawsuits against them for copyright infringement and other types of lawsuits. Security breaches can potentially be a huge risk for Google because they do pride themselves on security. If there were any security breaches within Google, this could negatively affect them in the public and therefore would negatively affect their bottom line. Lastly, competition could also prove to hurt the company financially. Currently Google’s biggest competitor is Microsoft. Google’s Executive Chairman Eric Schmidt states, “we’re more likely to face competition, and there’s lots coming, in these vertical applications that answer questions” (Russell, 2011). This means that Google could one day have major competition from numerous firms.
The reason Google will be able to handle economic risks stem from the fact that they are very well off financially. Google right now has much more assets than liabilities. If the company had to pay all of it debts today, it would be able to. In addition, they have had increasing revenue for the past four years and the company’s profit margin has been pretty steady over the last few years. Because of all of this, my prediction is that Google will be able to sustain itself despite any financial or non financial risks.

References
Google Company. (n.d.). Google company. Retrieved from http://www.google.com/about/company/

Google Finance. (n.d.). Google inc financials. Retrieved from http://www.google.com/finance?fstype=ii&q=NASDAQ:GOOG

Google Investor Relations. (n.d.). Google inc. announces second quarter 2012 financial results . Retrieved from http://investor.google.com/earnings/2012/Q2_google_earnings.html

Cleland, S. (2011, November 15). The top ten threats to google. Retrieved from http://www.forbes.com/sites/scottcleland/2011/11/15/the-top-ten-threats-to-google/

Google Finance. (n.d.). Google inc historical prices. Retrieved from http://www.google.com/finance/historical?q=NASDAQ:GOOG&ei=aX1PUPD7EImQkwPu7AE

Russell, J. (2011, December 27). Eric schmidt discusses google's competitors, china, acquisitions, and more. Retrieved from http://thenextweb.com/google/2011/12/27/eric-schmidt-discusses-googles-competitors-china-acquisitions-and-more/

Appendix
Google Inc. Income Statement
(http://www.google.com/finance?fstype=ii&q=NASDAQ:GOOG#)
In Millions of USD (except for per share items) | 12 months ending 2011-12-31 | 12 months ending 2010-12-31 | 12 months ending 2009-12-31 | 12 months ending 2008-12-31 | Revenue | 37,905.00 | 29,321.00 | 23,650.56 | 21,795.55 | Other Revenue, Total | - | - | - | - | Total Revenue | 37,905.00 | 29,321.00 | 23,650.56 | 21,795.55 | Cost of Revenue, Total | 13,188.00 | 10,417.00 | 8,844.11 | 8,621.51 | Gross Profit | 24,717.00 | 18,904.00 | 14,806.45 | 13,174.04 | Selling/General/Admin. Expenses, Total | 7,313.00 | 4,761.00 | 3,651.24 | 3,748.88 | Research & Development | 5,162.00 | 3,762.00 | 2,843.03 | 2,793.19 | Depreciation/Amortization | - | - | - | - | Interest Expense(Income) - Net Operating | - | - | - | - | Unusual Expense (Income) | 610.00 | 0.00 | 0.00 | 1,094.76 | Other Operating Expenses, Total | - | - | - | - | Total Operating Expense | 26,273.00 | 18,940.00 | 15,338.38 | 16,258.34 | Operating Income | 11,632.00 | 10,381.00 | 8,312.19 | 5,537.21 | Interest Income(Expense), Net Non-Operating | - | - | - | - | Gain (Loss) on Sale of Assets | - | - | - | - | Other, Net | 65.00 | 11.00 | 2.37 | 4.52 | Income Before Tax | 12,326.00 | 10,796.00 | 8,381.19 | 5,853.60 | Income After Tax | 9,737.00 | 8,505.00 | 6,520.45 | 4,226.86 | Minority Interest | - | - | - | - | Equity In Affiliates | - | - | - | - | Net Income Before Extra. Items | 9,737.00 | 8,505.00 | 6,520.45 | 4,226.86 | Accounting Change | - | - | - | - | Discontinued Operations | - | - | - | - | Extraordinary Item | - | - | - | - | Net Income | 9,737.00 | 8,505.00 | 6,520.45 | 4,226.86 | Preferred Dividends | - | - | - | - | Income Available to Common Excl. Extra Items | 9,737.00 | 8,505.00 | 6,520.45 | 4,226.86 | Income Available to Common Incl. Extra Items | 9,737.00 | 8,505.00 | 6,520.45 | 4,226.86 | Basic Weighted Average Shares | - | - | - | - | Basic EPS Excluding Extraordinary Items | - | - | - | - | Basic EPS Including Extraordinary Items | - | - | - | - | Dilution Adjustment | 0.00 | 0.00 | 0.00 | 0.00 | Diluted Weighted Average Shares | 327.21 | 323.25 | 319.42 | 317.51 | Diluted EPS Excluding Extraordinary Items | 29.76 | 26.31 | 20.41 | 13.31 | Diluted EPS Including Extraordinary Items | - | - | - | - | Dividends per Share - Common Stock Primary Issue | 0.00 | 0.00 | 0.00 | 0.00 | Gross Dividends - Common Stock | - | - | - | - | Net Income after Stock Based Comp. Expense | - | - | - | - | Basic EPS after Stock Based Comp. Expense | - | - | - | - | Diluted EPS after Stock Based Comp. Expense | - | - | - | - | Depreciation, Supplemental | - | - | - | - | Total Special Items | - | - | - | - | Normalized Income Before Taxes | - | - | - | - | Effect of Special Items on Income Taxes | - | - | - | - | Income Taxes Ex. Impact of Special Items | - | - | - | - | Normalized Income After Taxes | - | - | - | - | Normalized Income Avail to Common | - | - | - | - | Basic Normalized EPS | - | - | - | - | Diluted Normalized EPS | 31.23 | 26.31 | 20.41 | 15.80 |

Google Inc. Balance Sheet (http://www.google.com/finance?fstype=ii&q=NASDAQ:GOOG#) In Millions of USD (except for per share items) | As of 2011-12-31 | As of 2010-12-31 | As of 2009-12-31 | As of 2008-12-31 | Cash & Equivalents | 5,271.00 | 8,978.00 | 5,895.01 | 5,326.01 | Short Term Investments | 34,643.00 | 21,345.00 | 14,287.19 | 7,189.10 | Cash and Short Term Investments | 44,626.00 | 34,975.00 | 24,484.78 | 15,845.77 | Accounts Receivable - Trade, Net | 5,427.00 | 4,252.00 | 3,178.47 | 2,642.19 | Receivables - Other | - | - | - | - | Total Receivables, Net | 6,172.00 | 5,002.00 | 3,201.72 | 2,642.19 | Total Inventory | - | - | - | - | Prepaid Expenses | 1,745.00 | 1,326.00 | 836.06 | 1,404.11 | Other Current Assets, Total | 215.00 | 259.00 | 644.41 | 286.11 | Total Current Assets | 52,758.00 | 41,562.00 | 29,166.96 | 20,178.18 | Property/Plant/Equipment, Total - Gross | 14,400.00 | 11,771.00 | 8,130.13 | 7,576.34 | Accumulated Depreciation, Total | -4,797.00 | -4,012.00 | -3,285.52 | -2,342.50 | Goodwill, Net | 7,346.00 | 6,256.00 | 4,902.56 | 4,839.85 | Intangibles, Net | 1,578.00 | 1,044.00 | 774.94 | 996.69 | Long Term Investments | 790.00 | 523.00 | 128.98 | 85.16 | Other Long Term Assets, Total | 499.00 | 707.00 | 678.73 | 433.85 | Total Assets | 72,574.00 | 57,851.00 | 40,496.78 | 31,767.58 | Accounts Payable | 588.00 | 483.00 | 215.87 | 178.00 | Accrued Expenses | 4,356.00 | 3,256.00 | 2,246.52 | 1,824.45 | Notes Payable/Short Term Debt | 1,218.00 | 3,465.00 | 0.00 | 0.00 | Current Port. of LT Debt/Capital Leases | - | - | - | - | Other Current liabilities, Total | 2,751.00 | 2,792.00 | 285.08 | 299.63 | Total Current Liabilities | 8,913.00 | 9,996.00 | 2,747.47 | 2,302.09 | Long Term Debt | 2,986.00 | 0.00 | - | - | Capital Lease Obligations | - | - | - | - | Total Long Term Debt | 2,986.00 | 0.00 | 0.00 | 0.00 | Total Debt | 4,204.00 | 3,465.00 | 0.00 | 0.00 | Deferred Income Tax | 287.00 | 0.00 | 0.00 | 12.52 | Minority Interest | - | - | - | - | Other Liabilities, Total | 2,243.00 | 1,614.00 | 1,745.09 | 1,214.11 | Total Liabilities | 14,429.00 | 11,610.00 | 4,492.55 | 3,528.71 | Redeemable Preferred Stock, Total | - | - | - | - | Preferred Stock - Non Redeemable, Net | 0.00 | 0.00 | 0.00 | 0.00 | Common Stock, Total | 20,264.00 | 18,235.00 | 0.32 | 0.32 | Additional Paid-In Capital | - | - | 15,816.74 | 14,450.34 | Retained Earnings (Accumulated Deficit) | 37,605.00 | 27,868.00 | 20,082.08 | 13,561.63 | Treasury Stock - Common | - | - | - | - | Other Equity, Total | -51.00 | 44.00 | 105.09 | 226.58 | Total Equity | 58,145.00 | 46,241.00 | 36,004.22 | 28,238.86 | Total Liabilities & Shareholders' Equity | 72,574.00 | 57,851.00 | 40,496.78 | 31,767.58 | Shares Outs - Common Stock Primary Issue | - | - | - | - | Total Common Shares Outstanding | 324.89 | 321.30 | 317.77 | 315.11 |

Google Inc. Statement of Cash Flow (http://www.google.com/finance?fstype=ii&q=NASDAQ:GOOG#) In Millions of USD (except for per share items) | 12 months ending 2011-12-31 | 12 months ending 2010-12-31 | 12 months ending 2009-12-31 | 12 months ending 2008-12-31 | Net Income/Starting Line | 9,737.00 | 8,505.00 | 6,520.45 | 4,226.86 | Depreciation/Depletion | 1,396.00 | 1,067.00 | 1,240.03 | 1,212.24 | Amortization | 455.00 | 329.00 | 284.28 | 287.65 | Deferred Taxes | 343.00 | 9.00 | -268.06 | -224.65 | Non-Cash Items | 2,004.00 | 1,270.00 | 1,053.52 | 2,023.53 | Changes in Working Capital | 630.00 | -99.00 | 485.99 | 327.23 | Cash from Operating Activities | 14,565.00 | 11,081.00 | 9,316.20 | 7,852.86 | Capital Expenditures | -3,438.00 | -4,018.00 | -809.89 | -2,358.46 | Other Investing Cash Flow Items, Total | -15,603.00 | -6,662.00 | -7,209.32 | -2,960.96 | Cash from Investing Activities | -19,041.00 | -10,680.00 | -8,019.20 | -5,319.42 | Financing Cash Flow Items | 86.00 | 94.00 | 90.27 | 159.09 | Total Cash Dividends Paid | - | - | - | - | Issuance (Retirement) of Stock, Net | -5.00 | -507.00 | 143.14 | -71.52 | Issuance (Retirement) of Debt, Net | 726.00 | 3,463.00 | 0.00 | 0.00 | Cash from Financing Activities | 807.00 | 3,050.00 | 233.41 | 87.57 | Foreign Exchange Effects | 22.00 | -19.00 | 10.51 | -45.92 | Net Change in Cash | -3,647.00 | 3,432.00 | 1,540.92 | 2,575.08 | Cash Interest Paid, Supplemental | 40.00 | 0.00 | 0.00 | 1.56 | Cash Taxes Paid, Supplemental | 1,471.00 | 2,175.00 | 1,895.97 | 1,223.98 |

Google Inc Historical Stock Prices (Weekly) http://www.google.com/finance/historical?q=NASDAQ:GOOG&ei=aX1PUPD7EImQkwPu7AE# Date | Open | High | Low | Close | Volume | Sep 7, 2012 | 684.55 | 712.25 | 673.50 | 706.15 | 9,878,540 | Aug 31, 2012 | 662.99 | 688.99 | 659.24 | 685.09 | 11,418,935 | Aug 24, 2012 | 675.50 | 680.60 | 662.16 | 678.63 | 9,104,208 | Aug 17, 2012 | 647.42 | 677.25 | 646.68 | 677.14 | 13,236,938 | Aug 10, 2012 | 639.61 | 649.38 | 636.13 | 642.00 | 7,592,271 | Aug 3, 2012 | 636.05 | 643.72 | 623.41 | 641.33 | 9,772,299 | Jul 27, 2012 | 600.48 | 635.00 | 598.25 | 634.96 | 12,634,639 | Jul 20, 2012 | 576.37 | 612.94 | 568.40 | 610.82 | 15,827,024 | Jul 13, 2012 | 584.95 | 592.43 | 562.09 | 576.52 | 11,425,633 | Jul 6, 2012 | 581.82 | 600.06 | 576.50 | 585.98 | 7,354,317 | Jun 29, 2012 | 567.33 | 580.13 | 557.21 | 580.07 | 9,070,259 | Jun 22, 2012 | 562.62 | 584.28 | 559.25 | 571.48 | 11,161,638 | Jun 15, 2012 | 584.21 | 585.31 | 556.52 | 564.51 | 13,188,636 | Jun 8, 2012 | 570.22 | 587.89 | 566.47 | 580.45 | 10,040,334 | Jun 1, 2012 | 595.81 | 599.13 | 568.35 | 570.98 | 10,541,049 | May 25, 2012 | 600.51 | 615.69 | 588.28 | 591.53 | 14,781,250 | May 18, 2012 | 600.78 | 637.85 | 596.70 | 600.40 | 18,095,143 | May 11, 2012 | 595.00 | 616.90 | 595.00 | 605.23 | 10,638,149 | May 4, 2012 | 612.99 | 616.08 | 596.81 | 596.97 | 10,096,618 | Apr 27, 2012 | 592.90 | 618.00 | 590.20 | 614.98 | 9,682,410 | Apr 20, 2012 | 623.00 | 623.81 | 595.83 | 596.06 | 17,743,000 | Apr 13, 2012 | 628.48 | 653.14 | 623.54 | 624.60 | 20,788,475 | Apr 5, 2012 | 640.77 | 647.95 | 628.57 | 632.32 | 8,276,684 | Mar 30, 2012 | 645.00 | 658.58 | 639.54 | 641.24 | 10,605,639 | Mar 23, 2012 | 623.12 | 648.80 | 621.24 | 642.59 | 10,534,041 | Mar 16, 2012 | 600.00 | 625.91 | 599.26 | 625.04 | 12,339,384 | Mar 9, 2012 | 620.43 | 622.49 | 593.84 | 600.25 | 10,050,310 | Mar 2, 2012 | 606.59 | 625.70 | 605.06 | 621.25 | 11,610,476 | Feb 24, 2012 | 603.87 | 617.88 | 600.35 | 609.90 | 8,441,069 | Feb 17, 2012 | 610.50 | 613.83 | 597.73 | 604.64 | 11,027,452 | Feb 10, 2012 | 595.01 | 614.50 | 594.01 | 605.91 | 10,362,666 | Feb 3, 2012 | 578.05 | 597.07 | 573.40 | 596.33 | 12,378,565 | Jan 27, 2012 | 586.00 | 588.66 | 564.55 | 579.98 | 18,304,446 | Jan 20, 2012 | 631.98 | 640.99 | 581.70 | 585.99 | 21,554,632 | Jan 13, 2012 | 646.50 | 647.00 | 616.91 | 624.99 | 14,497,771 | Jan 6, 2012 | 652.94 | 670.25 | 651.76 | 652.73 | 11,350,312 | Dec 30, 2011 | 632.00 | 645.90 | 632.00 | 645.90 | 5,311,777 | Dec 23, 2011 | 628.01 | 631.88 | 618.96 | 631.88 | 8,854,683 | Dec 16, 2011 | 621.88 | 636.55 | 612.49 | 625.96 | 16,988,321 | Dec 9, 2011 | 627.64 | 631.90 | 615.30 | 627.42 | 12,965,427 | Dec 2, 2011 | 579.37 | 624.00 | 576.50 | 620.36 | 15,766,123 | Nov 25, 2011 | 587.76 | 588.50 | 561.33 | 563.00 | 6,969,586 | Nov 18, 2011 | 608.00 | 618.30 | 593.75 | 594.88 | 15,256,263 | Nov 11, 2011 | 593.32 | 614.37 | 591.56 | 608.35 | 16,945,231 | Nov 4, 2011 | 595.09 | 599.74 | 576.75 | 596.14 | 13,309,960 | Oct 28, 2011 | 586.72 | 602.70 | 572.86 | 600.14 | 15,130,552 | Oct 21, 2011 | 583.72 | 592.75 | 577.40 | 590.49 | 17,515,901 | Oct 14, 2011 | 525.18 | 599.60 | 523.20 | 591.68 | 22,574,478 | Oct 7, 2011 | 509.85 | 520.50 | 480.59 | 515.12 | 19,448,415 | Sep 30, 2011 | 527.25 | 547.05 | 513.25 | 515.04 | 13,540,851 | Sep 23, 2011 | 540.35 | 558.52 | 514.00 | 525.51 | 14,945,862 | Sep 16, 2011 | 517.96 | 546.84 | 517.50 | 546.68 | 14,216,106 |…...

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