Google Financial Ratios
Financial ratios are used by companies, investors, and by students. The purpose of financial ratios is to determine the whether a company is able to pay off debts, use its assets to regenerate cash, or determine how much profit a company is making from every dollar they make. A study of two internet giants, Google and Yahoo!, will show that although one company is not generating as much as the other is, there are ways that it can improve future cash flows.
Current RatioThe current ratio of an organization shows its ability to meet its short-term financial obligations (Investor Words, 2009), by taking the current assets divided by current liabilities. At the end of 2008, Google 's ratio was $8.77 million and $8.49 million at the end of 2007 …show more content…
Google ended 2007 and 2008 with free cash flow in the amount of $3.37 billion and $5.5 billion respectively. Yahoo! ended 2007 with free cash flow in the amount of $1,316.6 million and $1,205.4 million in 2008. Yahoo struggles to match Google 's massive cash flow.
According to Google 's cash flow statement for 2007 and 2008, Google 's cash flow from its operating activities totaled $5.7 billion and $7.85 billion (Google Inc. 2009). The increase of Google 's operating activities in 2008 over 2007 shows that Google generates its cash flow from company 's operations.
In 2007 and 2008, cash from Google 's financing activities totaled $403.1 million and $87.6 million (Google Inc. 2009). Cash from financing activities is cash flow that takes place between organizations and stockholders and includes loans from bondholders and other creditors (Financial Education 2007). According to Google 's numbers, the company is under no risk since the company does not rely solely on outside sources to generate its cash …show more content…
's top competitor as in past years. At year-end 2008, Yahoo! had a total cash flow provided by operating activities of $1,880.2 million and $1,918.9 in 2007. This was a decrease in cash flow of 2% over 2007 (Seyboldonline 2009). As with Google, cash used for Yahoo! 's investing activities continue to negatively increase. In 2007 and 2008 investing activities for Yahoo! totaled ($1,311,783) million and ($572.5) million respectively (Yahoo! Inc., 2009) causing Yahoo! 's cash flow to decrease twice as much over 2007. Based on Yahoo! 's past financial history, this could be an indication that Yahoo! incurred losses from investments made in an effort to generate more cash flow to compete with
Current RatioThe current ratio of an organization shows its ability to meet its short-term financial obligations (Investor Words, 2009), by taking the current assets divided by current liabilities. At the end of 2008, Google 's ratio was $8.77 million and $8.49 million at the end of 2007 …show more content…
Google ended 2007 and 2008 with free cash flow in the amount of $3.37 billion and $5.5 billion respectively. Yahoo! ended 2007 with free cash flow in the amount of $1,316.6 million and $1,205.4 million in 2008. Yahoo struggles to match Google 's massive cash flow.
According to Google 's cash flow statement for 2007 and 2008, Google 's cash flow from its operating activities totaled $5.7 billion and $7.85 billion (Google Inc. 2009). The increase of Google 's operating activities in 2008 over 2007 shows that Google generates its cash flow from company 's operations.
In 2007 and 2008, cash from Google 's financing activities totaled $403.1 million and $87.6 million (Google Inc. 2009). Cash from financing activities is cash flow that takes place between organizations and stockholders and includes loans from bondholders and other creditors (Financial Education 2007). According to Google 's numbers, the company is under no risk since the company does not rely solely on outside sources to generate its cash …show more content…
's top competitor as in past years. At year-end 2008, Yahoo! had a total cash flow provided by operating activities of $1,880.2 million and $1,918.9 in 2007. This was a decrease in cash flow of 2% over 2007 (Seyboldonline 2009). As with Google, cash used for Yahoo! 's investing activities continue to negatively increase. In 2007 and 2008 investing activities for Yahoo! totaled ($1,311,783) million and ($572.5) million respectively (Yahoo! Inc., 2009) causing Yahoo! 's cash flow to decrease twice as much over 2007. Based on Yahoo! 's past financial history, this could be an indication that Yahoo! incurred losses from investments made in an effort to generate more cash flow to compete with