Answer:
Analyzing the Cash Flow Statement (Google, Inc. (GOOGLE)
a. Is Google generating positive cash flow from its operations?
Google is generating positive cash flow from its operations. Throughout the period under review it has generated a total of $71,738 million positive cash flow from its operations. See the yearly breakdown below:
(US$ millions) 12/31/2014 1 2/31/2013 12/31/2012 12/31/2011
Cash from operating activities $22,237 $18,573 $16,481 $14,547
b. How much did Google invest in new capital expenditures over the period?
It invested a total of $24,920 in new capital expenditures over the period. See breakdown below:
(US$ millions) 12/31/2014 1 2/31/2013 12/31/2012 12/31/2011
Capital expenditures $(10,937) $(7,345) $(3,201) $(3,437)
c. Describe Google's sources of financing in the financial markets over the period?
Google's sources of financing in the financial markets over the period are from issuance of stock and debt. It generated $50 million in 2012 from issuance of stock. In 2011 and 2012, it generated $793 million and $1,341 million from issuance of debt respectively.
d. Based solely on the cash flow statements for 2011 through2014, write a brief narrative that describes the major activities of Google's management team over the period.Is Google generating positive cash flow from its operations? (Select the best choice below.)
d. Google has generated positive cash flow from its operations during the years 2011, 2012, 2013, and 2014.
Explanation:
a) Data and Calculations:
(US$ millions) 12/31/2014 1 2/31/2013 12/31/2012 12/31/2011
Net income $14,463 $12,898 $10,786 $9,720
Depreciation 3,470 2,780 1,909 1,357
Amortization 1,470 1,131 914 483
Deferred taxes (179) (441) (298) 332
Noncash items 2,664 2,234 2,310 2,024
Changes in working capital 349 (29) 860 631
Cash from operating activities $22,237 $18,573 $16,481 $14,547
Capital expenditures $(10,937) $(7,345) $(3,201) $(3,437)
Other investing cash flow
items (10,086) (6,327) (9,821) (15,612)
Cash from
investing activities $(21,023) $(13,672) $(13,022) $(19,049)
Interest and financing
cash flow items $(1,449) $(282) $(98) $88
Total cash dividends paid 0 0 0 0
Issuance (retirement) of stock 4 0 50 0
Issuance (retirement) of debt (15) (532) 1,341 793
Cash from financing activities $(1,460) $(814) $1,293 $881
Foreign exchange effects $(467) $(3) $2 $20
Net change in cash $(713) $4,084 $4,754 $(3,601)
b) Google's statement of cash flows is one of the three fundamental financial statements which a company is required to prepare and present to its stockholders and the general public. This statement shows the cash generated by the company's management from operating activities, financing activities, and investing activities. From this statement, the management, stockholders, creditors, and investment analysts will gain invaluable data to assess management's performance in key financial variables.
