Quick Overview of Google's Financial Performance
Quick Overview of Google's Financial Performance
In looking at some of Google's asset management ratios we can see some more positive news. Over the past three years Google's total asset turnover has been decreasing. From .96 in '04, .60 in'05, to its current rate of .57. Compare this to the industry average of .55 we can see that this indicates that Google is using its fixed assets at least as intensively as other firms in the industry. Therefore, they seem to have about the right amount of total assets relative to sales/revenue. Because of this low asset turnover we can infer that Google is experiencing healthy growth in proportion to sales. The asset managemnet ratio is useful to determine the amount of sales that are generated from each dollar of assets. Companies with low profit margins tend to have high asset turnover, those with high profit margins have low asset turnover. This brings us to the metrics related to net profit margins. Google's net profit margin has been increasing from 12.51% in 2004 to its 2006 margin of 29.02%. Google is substantially outperforming the industry average of 6.9%. This higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors. To put this in simpler terms, Google is making nearly 13 cents more per dollar than the average company in the industry.
The next metric that is closely related to net profit margin is gross margin on sales. Since Google is not a true product based company there is essentially no cost of goods sold figure. To substitute we took the operating income and devided it by the revenue. Based on this ratio we see that the trend for gross margin is also positive increasing from 20.07% in 2004 to 33.48% in 2006. This trend is good news for Google because companies with higher gross margins will have more money left over to spend on other business operations, such as research and development or marketing which is essential for
In looking at some of Google's asset management ratios we can see some more positive news. Over the past three years Google's total asset turnover has been decreasing. From .96 in '04, .60 in'05, to its current rate of .57. Compare this to the industry average of .55 we can see that this indicates that Google is using its fixed assets at least as intensively as other firms in the industry. Therefore, they seem to have about the right amount of total assets relative to sales/revenue. Because of this low asset turnover we can infer that Google is experiencing healthy growth in proportion to sales. The asset managemnet ratio is useful to determine the amount of sales that are generated from each dollar of assets. Companies with low profit margins tend to have high asset turnover, those with high profit margins have low asset turnover. This brings us to the metrics related to net profit margins. Google's net profit margin has been increasing from 12.51% in 2004 to its 2006 margin of 29.02%. Google is substantially outperforming the industry average of 6.9%. This higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors. To put this in simpler terms, Google is making nearly 13 cents more per dollar than the average company in the industry.
The next metric that is closely related to net profit margin is gross margin on sales. Since Google is not a true product based company there is essentially no cost of goods sold figure. To substitute we took the operating income and devided it by the revenue. Based on this ratio we see that the trend for gross margin is also positive increasing from 20.07% in 2004 to 33.48% in 2006. This trend is good news for Google because companies with higher gross margins will have more money left over to spend on other business operations, such as research and development or marketing which is essential for