Question

1) Compute Cost of Sales,Selling, General and Admin Expenses and taxes as a percent of revenue for 2012,2011 and explain how Google net income has changed over the three year period

2) Compute current and non current assets as a percent of total assets and explain how google asset structure changed from 2011 to 2012

3) Compute current and long term liabilities as a percent of total assets and explain how google reliance on liabilites as a source of financing changed from 2011 to 2012

4) Review the statement of cash flows and comment on whether Google is growing and which financing sources have financed this growth

5) Does the company pay dividends to its shareholders? why or why not ? Are there other methods that Google uses to return cash to shareholders ?

Google Inc.

CONSOLIDATED BALANCE SHEETS

(In millions, except share and par value amounts which are reflected in thousands,

and par value per share amounts)

		As of December 31, 2011				As of December 31, 2012
Assets
Current assets:
Cash and cash equivalents		$	9,983			$	14,778
Marketable securities			34,643				33,310
Total cash, cash equivalents, and marketable securities (including securities loaned of $2,778 and $3,160)			44,626				48,088
Accounts receivable, net of allowance of $133 and $581			5,427				7,885
Inventories			35				505
Receivable under reverse repurchase agreements			745				700
Deferred income taxes, net			215				1,144
Prepaid revenue share, expenses and other assets			1,710				2,132
Total current assets			52,758				60,454
Prepaid revenue share, expenses and other assets, non-current			499				2,011
Non-marketable equity securities			790				1,469
Property and equipment, net			9,603				11,854
Intangible assets, net			1,578				7,473
Goodwill			7,346				10,537
Total assets		$	72,574			$	93,798
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	588			$	2,012
Short-term debt			1,218				2,549
Accrued compensation and benefits			1,818				2,239
Accrued expenses and other current liabilities			1,370				3,258
Accrued revenue share			1,168				1,471
Securities lending payable			2,007				1,673
Deferred revenue			547				895
Income taxes payable, net			197				240
Total current liabilities			8,913				14,337
Long-term debt			2,986				2,988
Deferred revenue, non-current			44				100
Income taxes payable, non-current			1,693				2,046
Deferred income taxes, net, non-current			287				1,872
Other long-term liabilities			506				740
Commitments and contingencies
Stockholders’ equity:
Convertible preferred stock, $0.001 par value per share, 100,000 shares authorized; no shares issued and outstanding			0				0
Class A and Class B common stock and additional paid-in capital, $0.001 par value per share: 9,000,000 shares authorized (Class A 6,000,000, Class B 3,000,000) and 12,000,000 shares authorized (Class A 9,000,000, Class B 3,000,000); 324,895 (Class A 257,553, Class B 67,342) and par value of $325 (Class A $258, Class B $67) and 329,979 (Class A 267,448, Class B 62,531) and par value of $330 (Class A $267, Class B $63) shares issued and outstanding			20,264				22,835
Class C capital stock, $0.001 par value per share, 3,000,000 shares authorized; no shares issued and outstanding			0				0
Accumulated other comprehensive income			276				538
Retained earnings			37,605				48,342
Total stockholders’ equity			58,145				71,715
Total liabilities and stockholders’ equity		$	72,574			$	93,798

See accompanying notes.

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Google Inc.

CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share amounts)

		Year Ended December 31,
		2010				2011				2012
Revenues:
Google (advertising and other)		$	29,321			$	37,905			$	46,039
Motorola Mobile (hardware and other)			0				0				4,136
Total revenues		$	29,321			$	37,905			$	50,175
Costs and expenses:
Cost of revenues—Google (advertising and other)(1)			10,417				13,188				17,176
Cost of revenues—Motorola Mobile (hardware and other)(1)			0				0				3,458
Research and development(1)			3,762				5,162				6,793
Sales and marketing(1)			2,799				4,589				6,143
General and administrative(1)			1,962				2,724				3,845
Charge related to the resolution of Department of Justice investigation			0				500				0
Total costs and expenses			18,940				26,163				37,415
Income from operations			10,381				11,742				12,760
Interest and other income, net			415				584				626
Income from continuing operations before income taxes			10,796				12,326				13,386
Provision for income taxes			2,291				2,589				2,598
Net income from continuing operations		$	8,505			$	9,737			$	10,788
Net loss from discontinued operations			0				0				(51	)
Net income		$	8,505			$	9,737			$	10,737
Net income (loss) per share of Class A and Class B common stock—basic:
Continuing operations		$	26.69			$	30.17			$	32.97
Discontinued operations			0.00				0.00				(0.16	)
Net income per share of Class A and Class B common stock—basic		$	26.69			$	30.17			$	32.81
Net income (loss) per share of Class A and Class B common stock—diluted:
Continuing operations		$	26.31			$	29.76			$	32.46
Discontinued operations			0.00				0.00				(0.15	)
Net income per share of Class A and Class B common stock—diluted		$	26.31			$	29.76			$	32.31
(1)        Includes stock-based compensation expense as follows:
Cost of revenues—Google (advertising and other)		$	67			$	249			$	359
Cost of revenues—Motorola Mobile (hardware and other)			0				0				14
Research and development			861				1,061				1,325
Sales and marketing			261				361				498
General and administrative			187				303				453
		$	1,376			$	1,974			$	2,649

See accompanying notes.

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Google Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

		Year Ended December 31,
		2010				2011				2012
Net income		$	8,505			$	9,737			$	10,737
Other comprehensive income:
Change in foreign currency translation adjustment			(124	)			(107	)			75
Available-for-sale investments:
Change in net unrealized gains			232				348				493
Less: reclassification adjustment for net gains included in net income			(151	)			(115	)			(216	)
Net change (net of tax effect of $52, $54, $68)			81				233				277
Cash flow hedges:
Change in unrealized gains			196				39				47
Less: reclassification adjustment for gains included in net income			(120	)			(27	)			(137	)
Net change (net of tax effect of $52, $2, $53)			76				12				(90	)
Other comprehensive income			33				138				262
Comprehensive income		$	8,538			$	9,875			$	10,999

Answer 1

	2011	2012
Revenues:
Google (advertising and other)	37,905	46,039
Motorola Mobile (hardware and other)	0	4,136
Total revenues R	37,905	50,175
Cost of revenues—Google (advertising and other)(1)	13188	17,176
Cost of revenues—Motorola Mobile (hardware and other)(1)		3,458
Total cost of sales C	13,188	20,634
Sales and marketing(1) S	4,589	6,143
General and administrative(1) G	2,724	3,845
Taxes T	2589	2598
% to total revenue	2011	2012
cost of sales to revenue C/R*100	34.8	41.1
Sales and marketing(1) S/R*100	12.1	12.2
General and administrative(1) G/R*100	7.2	7.7
Taxes T/R*100	6.8	5.2
Net income% of revenue	2010	2011	2012
	29.01	25.69	21.40
	8505/29321*100	9737/37905*100	10737/50175*100
The profitability is declining. It is showing decreasing trend as compare to 2010 and 2011
The cost of sales is incraesing which is the major factor of decraese in income.
ans 2	2011	2012
Total assets T	72574	93798
Current Assets C	52578	60454
Non current assets N= T-C	19996	33344
% Current Assets C/T*100	72.4	64.5	%
% Non current assets N/T*100	27.6	35.5
In 2012 the non current assets were more than in 2011 and the current assets were less in 2012 than 2011. This shows
that the there has been in non current assets in the form of Prepaid revenue share, expenses and other assets, non-current
ans 3
Total assets T	72574	93798
Current Liabilities L	8913	14337
Non current Liabilities M	5516	7746
	(2986+44+1693+287+506)	(2988+100+2046+1872+740
% Current Liabilities L/T*100	12.3	15.3	%
^%Non current Liabilities M/T *100	7.6	8.3
There has been incraese in current and non current libailities as % of total assets in 2012 than in 2011
But still the incraese is not much if we take the total assets %, there major financing is from shareholder equity
ans 4
The net cash flow from operating activities is showing incraesing trend, as the revenue are increasing so the cash inflow
is also increasing
So net cash flow from operating activities is used in purchasing assets. But this is not enough
There has been purchase of property and equipment which is majorily financied by sale of marketable securities.
But overall cash flow has increased