Alphabet (Google) Inc. Financial Statements and Financial Ratios Analyzed from 2015 to 2019
Hey All,
Thanks for visiting my Alphabet Financial Report page. On this page, you will be able to find preliminary information about Alphabet's current financial performance as well as some historical track records and trends.
For a more detailed examination of Alphabet financial performance, please check out the "Financial Report". In this report, written by myself, Paul Borosky, MBA., Doctoral Candidate, and published author, you will find:
- Summarized income statement for the last 5 years.
- Summarized balance sheet for the last 5 years.
- Summary analysis by myself of important income statement, balance sheet, and financial ratio trends and other happenings.
- Five year’s worth of over twenty common financial ratios presented with formulas, calculations, and analysis tips for each ratio.
- Line by line description, explanation, and analysis tip for most financial statement line items and financial ratios.
- Professional financial analysis tips provided in each section to help YOU conduct your OWN financial analysis!
- Each section includes an “in other words” segment. This is were I use plain English to explain concepts.
Enjoy the preliminary information and for a more detailed analysis, buy the financial report!
Sincerely,
Paul Borosky, MBA.
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Sample Financial Report
Alphabet Inc.: Brief Summary
Alphabet is located at 1600 Amphitheatre Parkway in Mountain View, CA. The company competes in the technological sector. Their industry is related to Internet content and information. Most recent estimates of the company’s employee count is about 98,000. The firm is led by Lawrence Page. Other members of their executive team would include Sergey Brin, Ruth Porat, and David Drummond.
Alphabet Inc., commonly known as Google, offers Internet content and advertising services to residents and businesses in the United States, European Union, Middle East, Africa, Canada, and several other countries. Popular services provided by the firm include advertisements, digital content, cloud services, home connectivity, and other products and software services. The firm was established in 1998.
Alphabet (Google) Financial Report Sources
“Alphabet Inc. (Google) 2019 Financial Statements and Financial Ratios: Defined, Discussed, and Analyzed for 5 Years” was written by, Paul Borosky, MBA. and owner of Quality Business Plan. In this report, the author selected Alphabet's 2019 10k, Alphabet's 2017 10k annual report, Alphabet's 2016 10k annual report, Alphabet's 2015 10k annual report, and Alphabet's 2014 10k annual report as the basis for information gathering. Once all Alphabet's 10k annual statements were collected, the author then inserted Alphabet's income statement information and Alphabet's balance sheet information into a customized financial template.
Section 1: Alphabet Inc. Income Statement Analyzed 2015 to 2019
In this section, I walk through a broad definition as to what an income statement is and why it is important. From this, I then discuss each of Alphabet's important income statement line items, such as revenues, gross profits, etc. in detail. After each line item is defined and discussed, I then offer an analysis of Alphabet's income statement line item from 2015 to 2019, in most cases.
Revenue Growth:
Over the last five years, Alphabet’s average annual revenue growth rate was approximately 21.2%. In 2018, its annual revenue growth rate increased to 23% over the previous year. However, in 2019, the growth rate fell to 18%.
This indicates that the firm may be leveling off in its revenue growth. This could be a sign that the firm is entering a more mature phase of its business cycle. If this is the case, then investors should expect a continued decline in revenue growth.
Cost of Goods Sold:
The company’s cost of goods averages approximately 26% of revenues over the last five years. The company’s cost of goods fell from 30.6% in 2018 to 20.7% in 2019. This shows that the firm is taking steps to reduce the costs of business. As the organization further enters his maturity phase of its business cycle, cost-cutting such as this should be expected throughout the organization.
Alphabet 2019 Income Statement |
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| Column1 | 2019 | 2018 | 2017 | 2016 | 2015 |
| Revenues | 161,857 | 136,819 | 110,855 | 90,272 | 74,989 |
| COGS | 71,896 | 59,549 | 45,583 | 35,138 | 28,164 |
| Gross Profit | 89,961 | 77,270 | 65,272 | 55,134 | 46,825 |
| SG&A | 35,569 | 24,459 | 19,765 | 17,470 | 15,183 |
| Depreciation | - | - | - | - | - |
| R & D | 26,018 | 21,419 | 16,625 | 13,948 | 12,282 |
| Other | - | - | - | - | - |
| Operating Expenses | 127,626 | 110,498 | 84,709 | 66,556 | 55,629 |
| EBIT | 34,231 | 26,321 | 26,146 | 23,716 | 19,360 |
| Other Income | 5,395 | 8,592 | 1,047 | 434 | 291 |
| Interest Expense | 585 | 6,827 | 4,377 | 124 | 104 |
| EBT | 39,625 | 34,913 | 27,193 | 24,150 | 18,965 |
| Taxes | 5,282 | 4,177 | 14,531 | 4,672 | 3,303 |
| Net Income | 34,343 | 30,736 | 12,662 | 19,478 | 16,348 |
| Tax Rate | 13.3% | 12.0% | 53.4% | 19.3% | 17.4% |
Section 2: Alphabet Inc. Balance Sheet Analyzed from 2015 to 2019
For Alphabet Inc. balance sheet, I again go through each important line item from the balance sheet. In reviewing each line item, I will define the Alphabet's balance sheet line item, such as cash, property, plant and equipment, and liabilities between 2015 to 2019. Next, I then offer an analysis of Alphabet's balance sheet line item.
Cash:
Alphabet’s cash position has grown from $16 billion in 2015 to 18.5 billion in 2019. As compared to total assets, the cash position fell from 11.2% in 2015 to 6.7% in 2019. In reviewing this information, it seems like the organization has done a better job allocating cash as a percentage of total assets even though its dollar amount cash position increased. In other words, just because the dollar amount for cash increased, it does not mean that they are doing a poor job managing the cash.
Short-term Investments:
In the last five years, Alphabet has almost doubled its short-term investments. This shows that the firm is continually attempting to divert cash into a more useful asset, which is short-term investments. A better strategy for the use of cash could be to pay out dividends to investors. Not only will this improve the stock price, but it will also be a better usage of total assets.
Alphabet 2019 Summary Balance Sheet |
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| Column1 | 2019 | 2018 | 2017 | 2016 | 2015 |
| Cash | 18,498 | 16,701 | 10,715 | 12,918 | 16,549 |
| Short Term Investment | 101,177 | 92,439 | 91,156 | 73,415 | 56,517 |
| Account Receivable | 25,326 | 20,838 | 18,336 | 14,137 | 11,556 |
| Inventory | 999 | 1,107 | 749 | 268 | 491 |
| Other | 4,412 | 4,236 | 2,983 | - | - |
| Current Assets | 152,578 | 135,676 | 124,308 | 105,408 | 90,114 |
| Net PPE | 73,646 | 59,719 | 42,383 | 34,234 | 29,016 |
| Goodwill | 20,624 | 17,888 | 16,747 | 16,468 | 15,869 |
| Other | 2,342 | 2,693 | 2,672 | - | - |
| Total Assets | 275,909 | 232,792 | 197,295 | 167,497 | 147,461 |
| Accounts Payable | 5,561 | 4,378 | 3,137 | 2,041 | 1,931 |
| Accrued Expense | 31,562 | 26,142 | 18,733 | 13,062 | 10,636 |
| Accrued Taxes | 274 | 69 | 881 | 554 | 302 |
| Notes Payable | - | - | - | - | 3,225 |
| LT Debt - Current | - | - | - | - | - |
| Other | - | - | - | - | - |
| Total Current Liabilities | 45,221 | 34,620 | 24,183 | 16,756 | 19,310 |
| LT Debt | 4,554 | 4,012 | 3,969 | 3,935 | 1,995 |
| Other | 2,534 | 3,545 | 3,059 | 2,665 | 1,822 |
| Total Liabilities | 74,467 | 55,164 | 44,793 | 28,461 | 27,130 |
| Common Stock | 50,552 | 45,049 | 40,247 | 36,307 | 32,982 |
| Treasury | - | - | - | - | - |
| Retained Earnings | 152,122 | 134,885 | 113,247 | 105,131 | 89,223 |
| Other | - | - | - | - | - |
| Total Equity | 201,442 | 177,628 | 152,502 | 139,036 | 120,331 |
| Total Equity & Liability | 275,909 | 232,792 | 197,295 | 167,497 | 147,461 |
Section 3: Alphabet Inc. Financial Ratios Analyzed from 2015 to 2019
For this section, I have chosen about 16 different financial ratios to review for Apple Inc from 2015 to 2019. In reviewing each of Alphabet's financial ratios, I first start with defining the financial ratio. Next, I supply the financial formula for calculating the specific ratio. Finally, I offer a brief analysis of Alphabet's Financial ratio. Ratios calculated for the last five years include:
Alphabet (Google) Current Ratio
Alphabet’s current ratio ended 2015 at 4.6. In 2019, the current ratio fell to 3.4. This shows that the firm is attempting to better utilize its cash by transferring it from the cash line item to short-term investments. From an investor’s perspective, the company should maintain the strategy until its current ratio is about 1.5 or 2.
Alphabet (Google) Fixed Asset Turnover
The organization’s fixed asset turnover fell from 2.58 in 2015 to 2.2 in 2019. This indicates that the company may have excess property, plant, and or equipment. An excellent strategy in this situation is to divest or sell some of the hard assets for liquid currency. Unless, the company may have taken on the additional fixed assets in hopes of future growth. Which may be the case in the situation. From this, investors should play a wait-and-see strategy in relation to whether the firm better utilizes its fixed assets over the next several years.
Alphabet (Google) Return on Equity
The company’s return on equity has increased from 13.6% in 2015 to 17% in 2019. Again, the company is making more money year-over-year on equity invested. The return on equity may not be as high as some other technology companies. But, the continuous growth of the return on equity over a five year period is quite impressive.
Alphabet (Google) Debt Ratio:
Alphabet’s debt ratio has ranged between 1.4% to 2.01%. In 2019, its debt ratio was 1.65%. From an investor’s perspective, the company should be utilizing significantly more debt as compared to equity for growth and operations. There is a multitude of reasons for this. Some of the reasons are tax benefits for interest and generating money on borrowed money. Also, interest rates are at historic lows, so taking advantage of the situation only makes sense.
Alphabet (Google) Liquidity Ratios |
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| Ratios | 2019 | 2018 | 2017 | 2016 | 2015 |
| Current Ratio | 3.37 | 3.92 | |||
| Cash Ratio | 0.41 | 0.48 | |||
| Quick Ratio | 3.35 | 3.89 | |||
| Net Working Capital | 7,426 | 8,057 | |||
Alphabet (Google) Asset Utilization |
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| Ratios | 2019 | 2018 | 2017 | 2016 | 2015 |
| Total Asset Turnover | 0.59 | 0.59 | |||
| Fixed Asset Turnover | 2.20 | 2.29 | |||
| Days Sales Outstanding | 57.11 | 55.59 | |||
| Inventory Turnover | 162.02 | 123.59 | |||
| Accounts Receivable Turnover | 6.39 | 6.57 | |||
| Working Capital Turnover | 21.80 | 16.98 | |||
| AP Turnover | 29.11 | 31.25 | |||
| Average Days Inventory | 0.44 | 0.34 | |||
| Average Days Payable | 0.08 | 0.09 | |||
Alphabet (Google) Profitability Ratios |
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| Ratios | 2019 | 2018 | 2017 | 2016 | 2015 |
| Return on Assets | 12.45% | 13.20% | |||
| Return on Equity | 17.05% | 17.30% | |||
| Net Profit Margin | 21.22% | 22.46% | |||
| Gross Profit Margin | 55.58% | 56.48% | |||
| Operating Profit Margin | 21.15% | 19.24% | |||
| Basic Earning Power | 12.41% | 11.31% | |||
| ROCE | 14.84% | 13.28% | |||
| Capital Employed | 230,688 | 198,172 | |||
| ROIC | 36.59% | 34.19% | |||
Alphabet (Google) Long-term Debt |
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| Ratios | 2019 | 2018 | 2017 | 2016 | 2015 |
| Debt Ratio | 1.65% | 1.72% | |||
| Debt/Equity | 2.26% | 2.26% | |||
| Times Interest Earned | 58.51 | 3.86 | |||