Essay About Cash Flow And Significant Increase

Corporate Finance – José Maria De Sottomayor Barbosa 2308
Corporate Finance – Masters in FinanceProblem Set 1 – Google IncJosé Maria de Sottomayor Barbosa 2308A) At the end of 2013 the value of assets, total liabilities and equity is $110920000000, $23611000000 and $87309000000 respectively. The $15594000000 change in equity has as its main source the net income which provoked a $12920000000 positive change in retained earnings.B) The values of operating income in 2011, 2012 and 2013 were $11742000000, $12760000000 and $13966000000 respectively. Cash flow from operating activities was $14565000000, $16619000000 and $18659000000 for the same period time. One example of what might explain the difference between cash flows and operating income is depreciation which is a non-cash item that is deducted from the total revenue but where there’s no actual money loss. When Google’s computers lose value over the years, that depreciation is accounted for in the income statement making the operating income lower when there’s no actual money coming out of the firm. Consequently, it is needed to add the value of that depreciation to the net income when calculating the net cash flow.C) At the end of 2013 the cash available amounted to $18898000000. Cash and equivalents increased in a similar way on both years with the value from 2011 almost being doubled at the end of 2013. From 2011 to 2012 it increased $479500000 and from 2012 to 2013 it increased $4120000000. The significant increase in cash and equivalents might be explained either by a decrease on other assets, an increment of liabilities/equity or a combination between them. Retained earnings’ big increase is one probable explanation and possibly a consequence of the increase of the increment of the net cash flow from operating activities. Other causes can be the increase of accounts payable that allows Google to hold on to more money before it has to pay it and the decrease in intangible assets from 2012 to 2013. D) Google’s annual revenue from 2011 to 2013 was $37905000000, $50175000000 and $59825000000. Cash collections for the same period were $36749000000, $49388000000 and $58518000000.E) CAPX was $7358000000 for 2013.F) Google’s LT-Debt in 2011 amounted to $2986000000 and to $2236000000 in 2013.G) Google’s capital structure for 2011 was 19.9% debt 80.1% equity. In 2012 23.5% debt 76.5% equity and finally, in 2013 the capital structure was 21.3% debt 78.7% equity. From 2011 to 2012 both liabilities and equity increased. The first through mainly accounts payable and deferred liability charges. The second through common stocks and retained earnings. Liabilities increased, in percentage, more than equity making the capital structure change a little in favor of debt.