Alphabet Inc. Financial Statement and Financial Ratios Analysis

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.  The most recent estimate of the company’s employee count is about 174,000.  The firm is led by Sundar Pichai.  Other members of their executive team would include Lawrence Page, Ruth Porat, and Sergey Brin (8/22).

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) 2021 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 of 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

In this section, I walk through a broad definition of what an income statement is and why it is crucial.  From this, I then discuss each of Alphabet's essential 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 items in most cases.

Revenue Growth:

Alphabet’s revenues were $110.8 billion in 2017.  In the next four years, Alphabet’s revenues would climb to $257.6 billion in 2021.  On average, this is an annual growth rate of approximately 23.9%.  For multinational organizations such as this, this is extraordinarily impressive.

Analyst Grade: A

Alphabet (Google) Summary Income Statement 2021
Column1	2021	2020	2019	2018	2017
Revenues	257,637	182,527	161,857	136,819	110,855
COGS	110,939	84,732	71,896	59,549	45,583
Gross Profit	146,698	97,795	89,961	77,270	65,272
SG&A	22,912	28,998	35,569	24,459	19,765
Depreciation	11,555	12,905	10,856	8,164	6,103
R & D	31,562	27,573	26,018	21,419	16,625
Other	-	-	1,697	5,071	-
Total Operating Expenses	66,029	69,476	74,140	59,113	42,493
EBIT	78,714	41,224	34,231	26,321	26,146
Other Income	12,020	6,858	5,395	8,592	1,047
Interest Expense	346	135	100	114	109
EBT	90,734	48,082	39,625	34,913	27,193
Taxes	14,701	7,813	5,282	4,177	14,531
Net Income	76,033	40,269	34,343	30,736	12,662

 

Section 2: Alphabet Inc. Balance Sheet Analyzed

For Alphabet Inc.'s balance sheet, I again go through each important line item from the balance sheet.  In reviewing each line item, I will define Alphabet's balance sheet line item, such as cash, property, plant and equipment, and liabilities.  Next, I then offer an analysis of Alphabet's balance sheet line item.

Cash:

Alphabet’s cash position was $10.7 billion in 2017.  As compared to sales, this would be 9.7%.  In the next four years, Alphabet’s cash position increased to $20.9 billion in 2021.  As compared to sales, this would be 8.1%.  This trend indicates that the organization is increasing its cash position. However, they are not increasing it as fast as sales are growing.  This shows that the company is able to meet its short-term liabilities utilizing less cash as a percentage of sales.  An excellent strategy and structure.

Analyst Grade: A

Alphabet (Google 2021) Summary Balance Sheet
Column1	2021	2020	2019	2018	2017
Cash	20,945	26,465	18,498	16,701	10,715
Short Term Investment	118,704	110,229	101,177	92,439	91,156
Account Receivable	39,304	30,930	25,326	20,838	18,336
Inventory	1,170	728	999	1,107	749
Other	-	-	-	-	-
Current Assets	188,143	174,296	152,578	135,676	124,308
Net PPE	97,599	84,749	73,646	59,719	42,383
Goodwill	22,956	21,175	20,624	17,888	16,747
Other	-	-	-	-	-
Total Assets	359,268	319,616	275,909	232,792	197,295
Accounts Payable	6,037	5,589	5,561	4,378	3,137
Accrued Expense	45,125	39,717	31,562	26,142	18,733
Accrued Taxes	808	1,485	274	69	881
Notes Payable	-	-	-	-	-
LT Debt - Current	-	-	-	-	-
Other	-	-	-	-	-
Total Current Liabilities	64,254	56,834	45,221	34,620	24,183
LT Debt	14,817	13,932	4,554	4,012	3,969
Other	-	-	-	-	-
Total Liabilities	107,633	97,072	74,467	55,164	44,793
Common Stock	61,774	58,510	50,552	45,049	40,247
Treasury	-	-	-	-	-
Retained Earnings	191,484	163,401	152,122	134,885	113,247
Other	-	-	-	-	-
Total Equity	251,635	222,544	201,442	177,628	152,502
Total Equity & Liability	3,592,668	319,616	275,909	232,792	197,295

 

Section 3: Alphabet Inc. Financial Ratios Analyzed

For this section, I have chosen about 16 different financial ratios to review for Alphabet.  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 was 5.14 in 2017.  In the next several years, the company took steps to reduce its current ratio ending in 2021 at 2.9.  Keeping in mind that the gold standard for the current ratio is 1.0, Alphabet seems to be mismanaging its current assets.  A better strategy would be for the organization to divest significant portions of its cash into operations, expansion, and or dividend payouts.  From an investor’s perspective, this is a poor trend.

Analyst Grade: C

Alphabet (Google) Return on Assets (ROA)

Alphabet’s return on assets (ROA) was 6.4% in 2017.  In the next three years, ending 2020, the company would almost double its return on assets ending the year at 12.6%.  Further, in 2021, the company’s return on assets would jump significantly, ending the year at 21.1%.  This trend shows that the company is continually generating additional revenues using the assets of its management.

Analyst Grade: A

Alphabet (Google) Liquidity Ratios
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
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
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
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