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© 2014 Pacific Crest
397
Step
Explanation
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1.
Describe the company
Identify the characteristics of
the company; what type of
company is it?
Google is an online service provider
2.
How is the data
measured?
Is the data presented in the
statement scaled in any
way?
The dollar figures in the income
statement are in thousands of US
dollars.
3.
Compare income
streams (revenue) for
years provided
Determine the growth in
revenues over a period of
time to predict the trend for
the next year.
Google’s revenues have increased
from 38.9 Billion in 2011 to 59.8 Billion
in 2013 Their revenues have steadily
increased over the past 3 years
4.
Analyze expenditures
What are the major areas
of expenditure for the
company?
The major expenditures are in SG & A
and Research and development, both
areas have steadily increased in the past
3 years.
5.
Determine trend in
profit or loss
What is the ratio of
expenditures to income?
Google’s gross profit has increased
nearly 10 billion over the past 3 years,
however, net income has only increased
3 billion. This is due to the steady
increase in Google’s R&D and SG&A.
8.5 Corporate Finance