Running Head: FINANCIAL STATEMENT ANALYSIS OF GOOGLE COMPANY FIN 3014 — PRINCIPLES OF BUSINESS FINANCE LAB 6 FINANCIAL STATEMENT ANALYSIS OF GOOGLE, INC Student’s name: University: Date of submission: Financial Statement Analysis Introduction This paper analyses the financial statements of Google, Inc. The stock symbol for this company is GOOG (Google.com, 2015). The analysis covers the fiscal years 2012, 2013 and 2014. This financial statement analysis involves calculations of DuPont decomposition and liquidity ratios of the company and analyzing the results of the calculations. The annual income statements and balance sheets of the company provide information necessary to make these calculations. Finally, the paper makes a conclusion based on financial statement analysis. Calculation of the DuPont decomposition DuPont identity is basically an equation that breaks down Return On Equity (ROE) into three parts (Berk, 2010). Usually, ROE is calculated using the short formula: ROE= Net Income/ Equity However, the above equation can further be broken down into three parts to give an equation known as DuPont identity shown below: ROE = Net Income/Sales *Sales/Assets * Assets/Equity The table below shows the calculation of DuPont Decomposition of Google Company for the fiscal years 2012, 2013 and 2014. DuPont Analysis for Google, Inc Year NI/Equity (%) NI/Sales (%) Sales/Assets (%) Assets/Equity 2012  14.97  23.32  49.08  1.31 2013  14.80  23.27  50.05  1.27 2014  13.82  21.88  50.33  1.25 From the above table, ROE for Google Company has been declining over the three years. ROE is a profitability ratio which assesses the effective use of the company’s resources so as to generate more profits (Berk, 2010). The decline in this ratio may imply that stockholder’s equity was not effectively used over the three years (Berk, 2010). However, by further analyzing the components of ROE, it can be seen that the ratios Net Income/ Sales and Assets/Equity also declined over the three years while the ratio Sales/Assets improved over the three years. The decline in the ratio Net Income/Sales imply that the company generated more sales over the three years but this was not translated into improved net income. A decline in assets/equity ratio implies that the contributions of stockholders increased at a faster rate than total assets over the three years. Finally, the increase in the Sales/Assets ratio implies that the company generated more sales over the three years. In overall, the changes in these three components of ROE led to a decline in ROE over the three years. Since ROE assesses the effective use of re.

1. Running Head: FINANCIAL STATEMENT ANALYSIS OF
GOOGLE COMPANY
FIN 3014 — PRINCIPLES OF BUSINESS FINANCE LAB
6
FINANCIAL STATEMENT ANALYSIS OF
GOOGLE, INC
Student’s name:
University:
Date of submission:
Financial Statement Analysis
Introduction
This paper analyses the financial statements of Google, Inc.
The stock symbol for this company is GOOG (Google.com,
2015). The analysis covers the fiscal years 2012, 2013 and
2014. This financial statement analysis involves calculations of
DuPont decomposition and liquidity ratios of the company and
analyzing the results of the calculations. The annual income
statements and balance sheets of the company provide

2. information necessary to make these calculations. Finally, the
paper makes a conclusion based on financial statement analysis.
Calculation of the DuPont decomposition
DuPont identity is basically an equation that breaks down
Return On Equity (ROE) into three parts (Berk, 2010). Usually,
ROE is calculated using the short formula:
ROE= Net Income/ Equity
However, the above equation can further be broken down
into three parts to give an equation known as DuPont identity
shown below:
ROE = Net Income/Sales *Sales/Assets *
Assets/Equity
The table below shows the calculation of DuPont
Decomposition of Google Company for the fiscal years 2012,
2013 and 2014.
DuPont Analysis for Google, Inc
Year
NI/Equity (%)
NI/Sales (%)
Sales/Assets (%)
Assets/Equity
2012
14.97
23.32
49.08
1.31
2013
14.80
23.27
50.05
1.27
2014
13.82
21.88

3. 50.33
1.25
From the above table, ROE for Google Company has been
declining over the three years. ROE is a profitability ratio
which assesses the effective use of the company’s resources so
as to generate more profits (Berk, 2010). The decline in this
ratio may imply that stockholder’s equity was not effectively
used over the three years (Berk, 2010). However, by further
analyzing the components of ROE, it can be seen that the ratios
Net Income/ Sales and Assets/Equity also declined over the
three years while the ratio Sales/Assets improved over the three
years.
The decline in the ratio Net Income/Sales imply that the
company generated more sales over the three years but this was
not translated into improved net income. A decline in
assets/equity ratio implies that the contributions of stockholders
increased at a faster rate than total assets over the three years.
Finally, the increase in the Sales/Assets ratio implies that the
company generated more sales over the three years. In overall,
the changes in these three components of ROE led to a decline
in ROE over the three years. Since ROE assesses the effective
use of resources provided by the stockholders, the decline in
this ratio means that the stockholder’s equity was not
effectively used to generate more profits over the three years
(Berk, 2010). In other words, the sales increased but this did not
significantly improve the profits of the company. This may
indicate inefficiency in the use of company’s resources (Berk,
2010).
Determination of Google’s liquidity
Google’s liquidity is determined using the liquidity ratios.
These ratios include the current ratio, quick ratio and cash ratio
(Ross, Westerfield & Jaffe, 2005). The liquidity ratios measure
the ability of a company to meet its short-term financial
obligations (Berk, 2010). An increase in these ratios implies
that the liquidity position of the company is improving over

4. time. Current ratio equals current assets divided by current
liabilities whereas the quick ratio equals cash plus cash
equivalents plus accounts receivables divided by current
liabilities. The cash ratio equals plus short-term marketable
investments divided by current liabilities (Berk, 2010).
The table below shows the liquidity ratios of Google
Company for the fiscal years 2012, 2013 and 2014.
Year
Current Ratio
Quick Ratio
Cash Ratio
2012
4.22
3.90
3.35
2013
4.58
4.25
3.69
2014
4.80
4.39
3.83
From the above table, all the three liquidity ratios for
Google Company improved over the three years. This suggests
that the company became more financially stable and improved
its liquidity position over the years. Thus the company is in a
good position to meet its short-term financial obligations
without experiencing a financial distress due to presence of a
strong cash base and other assets which can be easily converted
into cash (Berk, 2010).

5. The improvement in liquidity ratios over the three years
also suggests that the company’s debt has been decreasing
drastically over the three years (Ross, Westerfield & Jaffe,
2005).
Conclusion
In summary, the results of the financial statement analysis of
Google Company are mixed. The ROE which is a profitability
ratio declined over the three years suggesting inefficiency in the
use of company’s resources. However, the three liquidity ratios
increased steadily over the three years suggesting an
improvement in liquidity position of the company over time.
Thus in future, the company may achieve a strong liquidity
position but it needs to take into consideration the effective use
of its resources so as to generate more profits
References
Berk, J. (2010). Fundamentals of corporate finance. Frenchs
Forest, N.S.W.: Pearson
Australia.
Google.com,. (2015). About Google. Retrieved 15 September
2015, from http://www.
google.com/about/
Ross, S., Westerfield, R., & Jaffe, J. (2005). Corporate finance.
Boston: McGraw-
Hill/Irwin.
Yahoo! Finance,. (2015). Google Inc.. Retrieved 15 September
2015, from http://finance.
yahoo.com/q?s=GOOG

6. Running Head: FINANCIAL STATEMENT ANALYSIS OF
GOOGLE COMPANY
FINANCIAL
STATEMENT
ANALYSIS OF
GOOGLE,
INC
Student’s name:
University:

7. Date of submission:
Running Head: FINANCIAL STATEMENT ANALYSIS OF
GOOGLE COMPANY
FINANCIAL STATEMENT ANALYSIS OF
GOOGLE, INC
Student’s name:
University:
Date of submission:

8. FIN3014—PRINCIPLES OF BUSINESS FINANCE LABBeta
Calculation AssignmentDue Date: Nov 17th or Nov 19 in Lab
No late assignments will be accepted. This assignment will
build toward a larger assignment at the end of the semester.
Turning in this assignment gives you the opportunity to receive
valuable feedback for completing future assignments. Be sure
to save your work.
Goals for this assignment:
· Gather historical return data
· Use excel to plot a scatter graph
· Use excel to calculate beta for your stock (the slope of the
regression line)
Your task:
Gather data.
In this exercise, you will be using the monthly return data that
you calculated for your stock and for the S&P500 in your Stock
Prices and Returns assignment. You should have monthly
return data for your company and for the S&P500 from January
2012 through December 2014.
Manipulate data.
There are several methods for calculating a regression in excel.
For this assignment, we will use the charting capability to
calculate beta for our stock. You will begin by choosing the
“insert” option above the excel spreadsheet. You will choose
“chart” and then “XY (scatter)” for the type of chart. The chart
wizard will guide you through the process.

9. You will want to choose the “series” option to tell excel what
data you want to use. Be sure to use your S&P500 return
column for your “X value” and your stock return column for
your “Y value”.
This process will give you a scatter graph that plots your
stock’s return and the S&P500 return. However, it does not
give you a regression line or slope. To get a regression line,
you will need to click your left mouse key to make several of
the data points turn yellow. With your mouse pointing to one of
these yellow data points, right click your mouse. Choose “add
trendline”. We will use the default (linear) trend line.
However, you will want to choose “options” so that you can
place “display equation on chart”.
You may find that your regression equation is difficult to read
if it is placed over the data points. You can move this equation
to the side of the graph (it is in a text box) so that it will be
easier to read.
Make sure that you have properly labeled your graph and that
your graph has a title.
Using the beta you calculated, explain how risky your stock is
relative to the S&P500. Compare the beta that you calculate
with the beta that is provided on the http://finance.yahoo.com
website (or some alternative source) for your stock. If they
differ, why do you think this might be the case?

10. FIN 3014 — PRINCIPLES OF BUSINESS FINANCE LABStock
Return PlotDue Date, in Lab on Oct 27th or Oct 29th
No late assignments will be accepted. This assignment will
build toward a larger assignment at the end of the semester.
Turning in this assignment gives you the opportunity to receive
valuable feedback for completing future assignments. Be sure
to save your work.
Goals for this assignment:
· Calculate monthly returns for your stock and for the S&P500
· Plot a graph
Your task:
Calculate monthly returns.
During the first lab you chose a company that you would be
analyzing during the semester. For the first lab assignment you
collected monthly stock price data for the company and monthly
data for the S&P500. This time we will calculate monthly
returns.
Monthly returns report gains or losses in percentage terms. For
example, we will look at our sample company Valero Energy,
VLO. Assume that I bought VLO stock at the beginning of
January for $23.09 per share. If I wanted to sell the same share
one month later, at the beginning of February, I would have
been able to sell it for $22.76. Thus, I would have lost $0.33.
Looking at percentage returns gives us an ability to compare
how poorly (or well) this VLO investment did relative to other
investments. For example, let’s take a hypothetical company,
Roadrunner Enterprises. Assume that Roadrunner’s stock was

11. selling for $200 a share at the beginning of January. By the
beginning of February, the stock was selling for only $199. If
you had bought one share of Roadrunner stock over this time
period, you would have lost $1.00. In absolute (dollar) terms,
you would have lost more on the Roadrunner investment.
However, looking at percentage returns, we get a different (and
more accurate) picture.
VLO Returns:
(P2-P1)/P1 = (22.76-23.09)/23.09 = - 0.01429 or -1.429%
Roadrunner Returns:
(P2-P1)/P1 = (199-200)/200 = -0.005 or -0.5%
This allows us to compare different investments relative to the
amount of money we have invested in the stock. For example,
if we had had $10,000 at the beginning of January and invested
it all in VLO, we would have lost ($10,000)*0.01429 or
$142.90. If, instead, we had invested the money in Roadrunner,
we would have lost only ($10,000)*.005 or $50.
Using excel, calculate monthly returns for both your stock and
the S&P500 for each month from January 1, 2012 and ending
December 31, 2014. Calculating these returns will require the
“Adjusted Close” for each month-end from January 1, 2012 and
ending December 31, 2014
Plot a graph.
You will want dates on the X axis, the returns of your stock and
the S&P500 on the Y axis. Make sure that your graph is
properly labeled, has a title, and is easy for the reader to
understand.

12. Make observations.
Look at your graph and see what observations you can make.
This observation will vary greatly depending upon the company
you are analyzing. Some things you may want to consider are:
· Has the return on your stock varied significantly from the
S&P500?
· Has the return on your stock been much higher or lower than
the S&P500?
· Has the return on your stock been more variable than the
return on the S&P500?
Looking Forward
This will be part of your company analysis that you will
complete later this semester. Be sure to keep your electronic
files so that you do not have to recreate the work that you have
done.
FIN 3014 — PRINCIPLES OF BUSINESS FINANCE LABStock
Plot AssignmentThursday October 13th or October 15th in Lab
No late assignments will be accepted. This assignment will
build toward a larger assignment at the end of the semester.
Turning in this assignment gives you the opportunity to receive
valuable feedback for completing future assignments. Be sure
to save your work.

13. Goals for this assignment:
· Gather historical price data
· Gather historical S&P500 data
· Use excel to manipulate gathered data
· Plot a graph
Your task:
Collect historical price data.
You have been assigned a company to research this semester.
You will begin by collecting historical stock price data for the
company. Historical stock prices are available on the internet
through at the http://finance.yahoo.com website. At this
website you will put the ticker symbol for your company in the
symbol box and press “go”. At this point you will see a page
that has financial information about your company. On the left-
hand side of the screen there will be a series of option which
you can choose to get more information about your company.
At this point you want to look under “quotes” and choose
“historical prices”.
At this point, you will be given some options about the time
period and frequency of the data you are collecting. You want
monthly data beginning January 1, 2012 and ending December
31, 2014. Once you have specified this time period, push the
“get prices” button. After the historical price information
appears, you will see an option “download to spreadsheet” at
the bottom of the historical price table. Select this option to
bring the information into an excel file.
Collect historical S&P500 data.
We would like to compare the activity of an individual

14. company’s stock price to how stock prices are doing in the
market overall. We will use the S&P500 as our benchmark for
overall stock market performance. Just as we gathered
historical stock prices, we can gather historical S&P500 data
using the http://finance.yahoo.com website. To do this, use the
same procedure as above, but instead of using your company’s
ticker symbol, type “^GSPC” in the symbol box. Collect
monthly S&P500 data for the January 1, 2012 through
December 31, 2014 time period and save the information in an
excel file.
Manipulate data.
Now that you have the information in an excel file, you can use
your excel skills to manipulate it as you need. We will be using
the “adjusted close” column.
Plot a graph.
You will want the date on the X axis, the price of your stock on
the primary Y axis and the value of the S&P500 on the
secondary Y axis. Make sure that your graph is properly
labeled and is easy for the reader to understand.
Make observations.
Look at your graph and see what observations you can make.
This observation will vary greatly depending upon the company
you are analyzing. Some things you may want to consider are:
· Has the movement of your stock price varied greatly from that
of the S&P500?
· Has the price of your stock increased (or decreased)
significantly over the past five years?

15. · How volatile has your stock price been, especially compared
to the S&P500?
Looking Forward
This will be part of your company analysis that you will
complete later this semester. Be sure to keep your electronic
files so that you do not have to recreate the work that you have
done.
stockplotassignment