Google Competitive Strategy: Financial Analsis
5. Have Google’s business model and strategy proven to be successful? Should investors be impressed with the company’s financial performance? How does the company’s financial performance compare to that of Microsoft and Yahoo? Please conduct a financial analysis to support your position—you may wish to use the financial ratios presented in the Table 4.1 of the text as a guide in doing your financial analysis of the company.
Throughout the course of its life thus far as an entity, Google has enjoyed great success as one of the world’s leading search engine giants. Although the company’s operations are extremely diversified, Google has taken strides since its initial offering in 2004 to
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Compare this to Microsoft’s 6.5%, Yahoo’s -57.22%, and the S&P 500 index’s -0.86%. This shows that not only did Google significantly outperform its two major competitors; it left the entire S&P index in the dust as well. Some other financial measures to consider are return on equity (ROE), earnings per share (EPS), and the current ratio. Return on equity is a measure of the return shareholders are earning on their investment in the company. In 2010 Google reported ROE of 20.68%, meaning that for every dollar of equity capital, they are earning over 20%. Compare this to Yahoo’s 9.83% and Microsoft’s 43.76%. Generally the higher the ROE, the happier the investors are. EPS on the other hand measures the company’s earnings for each share of common stock outstanding. In 2010 Google boasted an EPS of $26.69, whereas Yahoo and Microsoft reported per-share earnings of $0.91 and $2.13 respectively. This large gap can be attributed to the fact that Google has significantly less shares of common stock outstanding than the two competitors. Finally, the current ratio is a measure of the company’s ability to pay short-term obligations with readily available assets. In 2010 Google’s current ratio of 4.16 nearly doubled that of Yahoo and Microsoft who reported 2.67 and 2.13 respectively. This ratio demonstrates Google’s superior liquidity in comparison with its competitors Not only has Google dominated market share in the industry, in 2010