Ratio Analysis of Google Company
Zhiwei Wu
Ratio Analysis of Google Company
Ratio analysis is an important way to investigate a corporation’s financial statement. It provides the detailed data that indicate a company’s financial activity, performance and how well the managers operate their company. It is very useful for the investors, shareholders and even the company’s managers when they want to understand the financial situation of the company and helps them to make the right investment decisions. Now I am trying to use the ratio analysis to analyze the Google Corporation here.
There have five different types of ratio analysis: liquidity ratios, activity ratios, leverage ratios, profitability ratios and marker ratios. All of them have different kinds of specific ratios which indicate different information about the company. But at here, I pick Current Ratio, Average Collection Period and Return on Equity (ROE) to do this analysis. 1. Current Ratio.
Current Ratio = Current AssetsCurrent Liabilities
Current Ratio indicates a company’s ability to meet its short-term obligations. The Current Ratios of Google Corporation in 2008, 2009, and 2010 were 8.76, 10.62 and 4.16. As we know that high Current Ratio indicates more liquid for a company. From the result we calculated by Google Corporation’s financial data, in 2008, the current ratio was 8.76, which was much higher than 1. That means the company did not have problems in 2008 to meet their short-term obligations. The situation changed better in 2009, and the ratio increased to 10.62. The current assets were over ten times with current liabilities. The Current Ratio of 2008 and 2009 indicate that the company would not have problems in meeting their short-term obligations. However, it also means that the company didn 't use their assets efficiently. In my opinion, to keep the Current Ratio at 1:1 or 2:1 is much more proper than keep such high Current Ratio. Actually in 2010, the managers tried to reduce the ratio and the Current Ratio
Ratio Analysis of Google Company
Ratio analysis is an important way to investigate a corporation’s financial statement. It provides the detailed data that indicate a company’s financial activity, performance and how well the managers operate their company. It is very useful for the investors, shareholders and even the company’s managers when they want to understand the financial situation of the company and helps them to make the right investment decisions. Now I am trying to use the ratio analysis to analyze the Google Corporation here.
There have five different types of ratio analysis: liquidity ratios, activity ratios, leverage ratios, profitability ratios and marker ratios. All of them have different kinds of specific ratios which indicate different information about the company. But at here, I pick Current Ratio, Average Collection Period and Return on Equity (ROE) to do this analysis. 1. Current Ratio.
Current Ratio = Current AssetsCurrent Liabilities
Current Ratio indicates a company’s ability to meet its short-term obligations. The Current Ratios of Google Corporation in 2008, 2009, and 2010 were 8.76, 10.62 and 4.16. As we know that high Current Ratio indicates more liquid for a company. From the result we calculated by Google Corporation’s financial data, in 2008, the current ratio was 8.76, which was much higher than 1. That means the company did not have problems in 2008 to meet their short-term obligations. The situation changed better in 2009, and the ratio increased to 10.62. The current assets were over ten times with current liabilities. The Current Ratio of 2008 and 2009 indicate that the company would not have problems in meeting their short-term obligations. However, it also means that the company didn 't use their assets efficiently. In my opinion, to keep the Current Ratio at 1:1 or 2:1 is much more proper than keep such high Current Ratio. Actually in 2010, the managers tried to reduce the ratio and the Current Ratio
References: http://investor.google.com/proxy.html http://investor.google.com/proxy/2010/index.html