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F. Consider Google’s statements of income and the detailed revenue table in note 1
i.
Google’s revenue composition growth in the percentage change has decreased since 2011. In 2011, the percentage of google in the total revenues is 100 percent, but in 2012, the percentage decreased from 100 percent to 92 percent with the introduction of Motorola mobile’s increase in revenue. ii.
The answer changed depending on the inclusion of Motorola mobile, because as shown in
the chart below, the percentage of Google’s revenue growth changed. In 2012, the percentage including Motorola Mobile was significantly higher than the percentage excluding Motorola Mobile in the analysis. This is because of the change from 2011 of 0 to 4,136 in 2012 for Motorola Mobile. In the analysis excluding the Motorola Mobile, the
percentage is more balanced and even. iii.
Google Websites is driving growth, because the growth percentage is increasing more for Google websites than it is for Google Network Members’ websites. For Google Websites,
the growth percentage goes from 19.41% to 19.86%, which is a stable increase of 0.45%. For Google Network Members’ websites, the percentage starts high at 20.02% but decreases drastically to 5.29%. This means the growth rate is greater for google websites, since it is increasing by 0.45% from 2012 to 2013; however, for Google Network Members’ the growth rate is decreasing by 14.72% from 2012 to 2013. G. Consider Google’s income from operations for fiscal 2013 and 2012. i.
Expenses have grown at a slower pace than revenue. There was a 0.78% increase in the rate from 2012 to 2013. This increase is less than the percentage of increase from revenue.
ii.
The two expenses that explain the differences in growth rates between revenues and income from continuing operations are the Cost of revenues from Motorola Mobile and the Charge related to the resolution of Department of Justice investigation. H. Read the excerpts of the press release titled “Google Announces Fourth Quarter and Fiscal Year 2013 Results” and review Google’s operating performance reported in the statements of income accompanying the press release. i.
I would characterize Google’s financial performance, especially revenues and income from operations, for the fourth quarter of fiscal 2013 as strong. This is due to the $16.86 billion in total revenue, which was a significant increase compared to the other quarter. There was $3.92 billion in income from operations, which concludes a healthy operating margin. Google’s financial performance for the full fiscal year of 2013 is also a very strong performance because they had total revenues of approximately $59.83 billion and income from operations of more than $13 billion. This is a very robust financial performance. The growth rate for revenue was around 19.23%, and the growth rate for income from operations growth was 9.45%. These growth rates indicate a strong growth. It is also necessary to include that the profit margin for the full fiscal year of 2013 for Google was approximately 23.3%, which shows that Google was able to retain around 21.60% of its total revenue as profit after covering its operating expenses. [Profit margin = (income from operations / total revenue) * 100 = 23.3%] Income from operations = $13.97 billion
Total Revenue = $59.83 billion
ii.
Apple defines non-GAAP net income as net income excluding expenses related to SBC and other special items less the related tax effects and the net income from discontinued operations. This is what explains the difference between GAAP net income and the non-
GAAP equivalent. I agree with each of Google’s adjustments in computing non-GAAP
earnings, because they are considering the elements that GAAP does not consider like the
expenses related to the SBC and other special items.
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