Financial Reporting Google – Accounting BY ni27anb Financial Reporting Google is a publicly traded company which means that customer and stakeholders have access to the company’s financial information. The balance sheet and income statements are the two financial statements which gives a brief summary of a company’s overall financial condition. The balance sheet focuses and report figures of assets, liabilities and owner’s equity of the business.
Assets are anything that a business has with a value such as furniture, liabilities are monies owe to others, and wner’s equity is the assets minus the liabilities.The income statement reports revenue and expenses for a period. Revenue is the money that a business earns by selling goods or services.
Expenses are the money used in the process to earn the revenue. Google’s revenue is generated primarily from advertising online. The excess of revenue over expenses is the net profit.
Generally on a company’s balance sheet assets are listed in the order in which they will be converted into cash. “First, start with items held primarily for conversion into cash and rank them in the order of their xpected conversion.Then, follow with items held primarily for use in operations but that could be converted into cash, and rank them in the order of liquidity. Finally, finish with items whose costs you will defer to future periods or that you cannot convert into cash” (TDBank). Based on the information obtained from TDBank on the order in which assets should appear on balance sheet, Google’s assets that are included under the company’s current assets may be slightly out of order since Google list their Deferred Charges before the Prepaid and Other Assets.Google’s alance sheet lists all of the different forms of accounts that have a balance.
The first two groups of assets are listed as current or short-term assets. These assets are Cash and cash equivalent; Marketable Securities; Accounts receivable(net allowance); Inventory; Receivable under reverse repurchase agreements; Deferred Income Taxes (net); and Prepaid revenue expenses (other assets). The total of cash and equivalents, short-term investments is added first. The current assets are typically used to pay for the daily operations of the company.Without short-term assets the company would ave a hard time providing the necessary fund needed to pay its expenses. The second group of assets are added on to the current assets and listed as long-term assets.
The long-term assets are things like property, equipment, and capital after the cost of depreciation. Long-term assets are looked at as assets that will be used throughout the year. Once the current assets total is calculated next the value of property, equipment, is added in minus the cost of accumulated depreciation. Next, goodwill, intangibles and long-term investments are added to come to the total mount of assets.The cash equivalents are types of asset that is typically considered liquid. Google uses their cash equivalents to hold and reserve cash for when certain instances come up and they need to cover expenses, purchases or even when the market goes down. It is important that Google keeps cash equivalents reserved because they are considered liquid and can be access and converted to cash without any loss of value.
Some of the types of cash equivalents that Google can utilize are treasury bills, commercial paper, certificates of deposit and mutual funds, which pool unds to invest in short-term securities.Google can also utilize cash equivalents to sell shares when the company is at a loss so they can change and convert the shares into cash. For the year end in 2012 Google reported the repurchase of common stock in connection with acquisitions as O.
It was also reported that the net proceeds from stock-based award activities was (287) and excess tax benefits from stock- based award activities was 188. Google also reported year end of 2012 that the cash and cash equivalents was 14,778 versus the beginning of the year which was reported as ,983.So, overall the cash equivalents did rise by the end of the year, which has an overall positive look on the overall financial health of the company. Total current liability is “the total obligations incurred as part of normal operations that are expected to be paid during the following twelve months or within one business cycle” (Paul Kimmel, 2010). The total current liabilities that Google reported at the end of year 2012 was $14,337 (the most recent annual reporting period) and the total current liabilities at the end of the previous annual reporting period year ended 2011 as $8,913.The horizontal common-size analysis reveals that Total Current Liabilities increased by 363. 89%–much more rapidly than Total Assets. There was general increase in every account.
Compared to other accounts, the liabilities account did not increase that much. The most changed one is the asset account. Asset increased by $21 ,224 (in thousands) that shows company’s growth. Because liabilities did not increase as much as asset did, Google seems to be operating a profitable business without increasing liabilities (Gramlich & Wright,2011) Google Inc. is a great leader in echnological innovations, providing quality products and services to both consumers and other business entities. A review of the corporation’s 2010 Annual Report, as well as analyses of financial data from prior years, reveals that Google has continued to prosper and expand immensely as a result of its successes. Examinations of the company’s current financial position using ratios and comparisons to competitors suggest that Google is currently in a secure financial position in many respects and is likely to maintain this position in the immediate future” (Chalmers, 2012).
Google’s financial statements provide creditors, investors, and analysts with information on company’s resources (assets) and its sources of capital (its equity and liabilities). Google financial reports from the balance sheet and income statement help employees and managers to get a better understanding of the overall financial situation of the company and a better understanding if there is growth or loss. The financial reports also help Google employees to be able to estimate the forecast and see if there will be an increase or decrease in approaching specific financial trends nd or goals.
Investors, stockholders and lenders utilize financial reports to review the overall health and status of Google’s financial outlook. Both potential investors and lenders need to view and analyze financial statements in order to make a final decision and assessment in regards to the financial status and performance of Google. The investors must be able to review and evaluate the statements to get a better understanding if Google is profitable so that they know if the company can repay a loan and meet other financial obligations.Overall, financial reporting is very important for Google. It is a broad overall concept of data within financial statements and disclosures over specific time periods. It is overall a primary source of information that is needed internally and externally by various people who are eeded to make important economic decisions about business enterprises.
References Chalmers, W. (2012). Google Inc. Announces Fourth Quarter and Fiscal Year 2012 Results. California: google. com. Gramlich.
N & Wright, A. (2011). Google Inc.
Financial Analysis For 2010