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Forecasting Financial Statements for Google
QUESTION
Google, and explain why financial planning is important?
| Subject | Business | Pages | 4 | Style | APA |
|---|
Answer
Google Forecasts
Table 1 and 2 summarizes Google financial forecasts based on its income statement and balance sheet items. From table 1, Google has had a revenue growth of 21% for the last 5 years between 2015 and 2019. Using this prediction, Google revenues are estimated to grow to $196,212.40 million. The company has maintained a gross profit of 18% in the last five years and is estimated that 2020 will have a net margin of $105,915.24 million. Total operating expenses have growth at 18% between 2015 and 2019. Operating expenses are estimated to increase to $63,198.59 million, compared to $53,479 million in the previous year.
While operating income has grown at 17%, the net, profit margin has a growth of 35%. Hence Google is expected to close its 2020 financial year with a high net profit of $46,245.45 million compared to $34,343 in the prior year. Google’s current assets have grown at 14.13% for the last five years. The company’s current asset value is forecasted to increase from $152,578 million to $174,131.48, indicating a strong liquidity position for the business. Conversely, total assets have grown at average rate of 16.97% increasing its asset position to $322,738.36 million in 2020. Current obligations of Google have grown at 26.22% between 2015 and 2019. Similarly, the firm’s current liabilities are expected to increase to $57,077.67 million in 2020 from $45,221 million in 2019.
Long-term debt has grown at 24.46% and total liabilities at 30.11%. Hence, Google’s short-term and long-term financial obligations are expected to increase to $96,888.08 million in 2020. The company’s net equity position has grown at 13.78%, hence its total equity is estimated at $229,196.88 million in 2020. The financial projections are vital for Google as it can plan its budget to meet its financial goals and objectives in 2020.
Table 1: Google Income Statement Forecasts
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|
Google Income Statements 2015 -2016 |
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|
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|
Year |
2015 |
2016 |
2017 |
2018 |
2019 |
Growth Rates |
2020 Forecasted |
|
|
Millions USD |
Millions USD |
Millions USD |
Millions USD |
Millions USD |
|
|
|
Revenues |
74,989.00 |
90,272.00 |
110,855.00 |
136,819.00 |
161,857.00 |
21% |
196,212.40 |
|
Other Revenues |
- |
- |
- |
- |
- |
|
|
|
Total Revenues |
74,989.00 |
90,272.00 |
110,855.00 |
136,819.00 |
161,857.00 |
21% |
196,212.40 |
|
Cost Of Revenues |
28,164.00 |
35,138.00 |
45,583.00 |
59,549.00 |
71,896.00 |
26% |
90,923.38 |
|
Gross Profit |
46,825.00 |
55,134.00 |
65,272.00 |
77,270.00 |
89,961.00 |
18% |
105,915.24 |
|
Operating Expenses & Income |
|
|
|
|
|
|
- |
|
Selling General & Admin Expenses |
15,183.00 |
17,470.00 |
19,733.00 |
23,256.00 |
27,461.00 |
16% |
31,851.41 |
|
R&D Expenses |
12,282.00 |
13,948.00 |
16,625.00 |
21,419.00 |
26,018.00 |
21% |
31,420.96 |
|
Total Operating Expenses |
27,465.00 |
31,418.00 |
36,358.00 |
44,675.00 |
53,479.00 |
18% |
63,198.59 |
|
Operating Income |
19,360.00 |
23,716.00 |
28,914.00 |
32,595.00 |
36,482.00 |
17% |
42,781.87 |
|
Earnings from Continuing Operations |
|
|
|
|
|
|
- |
|
Interest Expense |
(104.00) |
(124.00) |
(109.00) |
(114.00) |
(100.00) |
0% |
(99.86) |
|
Interest and Investment Income |
999.00 |
1,220.00 |
1,312.00 |
1,878.00 |
2,427.00 |
26% |
3,046.11 |
|
Net Interest Expenses |
895.00 |
1,096.00 |
1,203.00 |
1,764.00 |
2,327.00 |
28% |
2,971.41 |
|
Currency Exchange Gains (Loss) |
(422.00) |
(475.00) |
(121.00) |
(80.00) |
103.00 |
-81% |
19.42 |
|
Other Non-Operating Income (Expenses) |
152.00 |
88.00 |
126.00 |
(825.00) |
(224.00) |
-207% |
238.86 |
|
EBT, Excl. Unusual Items |
19,985.00 |
24,425.00 |
30,122.00 |
33,454.00 |
38,688.00 |
18% |
45,675.84 |
|
EBT, Incl. Unusual Items |
19,651.00 |
24,150.00 |
27,193.00 |
34,913.00 |
39,625.00 |
19% |
47,290.55 |
|
Income Tax Expense |
3,303.00 |
4,672.00 |
14,531.00 |
4,177.00 |
5,282.00 |
52% |
8,024.28 |
|
Earnings from Continuing Operations |
16,348.00 |
19,478.00 |
12,662.00 |
30,736.00 |
34,343.00 |
35% |
46,245.45 |
Table 2: Google Balance Sheet Forecasts
|
Google Balance Sheet Statements |
|
|
|||||
|
Year |
2015 |
2016 |
2017 |
2018 |
2019 |
Growth Rate |
2020 |
|
Cash and Equivalents |
15,409.00 |
12,918.00 |
10,715.00 |
16,701.00 |
18,498.00 |
8.35% |
20,042.85 |
|
Short Term Investments |
56,517.00 |
73,415.00 |
91,156.00 |
92,439.00 |
101,177.00 |
16.23% |
117,599.17 |
|
Total Cash & ST Investments |
71,926.00 |
86,333.00 |
101,871.00 |
109,140.00 |
119,675.00 |
13.70% |
136,075.35 |
|
Receivables |
|
|
|
|
|
|
|
|
Accounts Receivable |
11,556.00 |
14,137.00 |
18,336.00 |
20,838.00 |
25,326.00 |
21.80% |
30,848.32 |
|
Other Receivables |
1,903.00 |
95.00 |
369.00 |
355.00 |
2,166.00 |
174.94% |
5,955.20 |
|
Total Receivables |
13,459.00 |
15,632.00 |
18,705.00 |
21,193.00 |
27,492.00 |
19.71% |
32,909.78 |
|
Current Assets |
|
|
|
|
|
|
|
|
Inventory |
491.00 |
268.00 |
749.00 |
1,107.00 |
999.00 |
43.03% |
1,428.82 |
|
Prepaid Expenses |
2,648.00 |
- |
- |
- |
- |
|
|
|
Deferred Tax Assets Current |
- |
- |
- |
- |
- |
|
|
|
Restricted Cash |
1,140.00 |
- |
15.00 |
327.00 |
252.00 |
|
252.00 |
|
Other Current Assets |
450.00 |
3,175.00 |
2,968.00 |
3,909.00 |
4,160.00 |
159.29% |
10,786.48 |
|
Total Current Assets |
90,114.00 |
105,408.00 |
124,308.00 |
135,676.00 |
152,578.00 |
14.13% |
174,131.48 |
|
Long-Term Assets |
|
|
|
|
|
|
|
|
Gross Property, Plant & Equipment |
40,146.00 |
47,527.00 |
59,647.00 |
82,507.00 |
115,148.00 |
30.44% |
150,202.98 |
|
Accumulated Depreciation |
(11,130.00) |
(13,293.00) |
(17,264.00) |
(22,788.00) |
(30,561.00) |
28.85% |
(39,378.93) |
|
Net Property, Plant & Equipment |
29,016.00 |
34,234.00 |
42,383.00 |
59,719.00 |
84,587.00 |
31.08% |
110,879.15 |
|
Long-Term Investments |
5,183.00 |
5,878.00 |
7,813.00 |
13,859.00 |
13,078.00 |
29.52% |
16,938.53 |
|
Goodwill |
15,869.00 |
16,468.00 |
16,747.00 |
17,888.00 |
20,624.00 |
6.89% |
22,045.88 |
|
Other Intangibles |
3,847.00 |
3,307.00 |
2,692.00 |
2,220.00 |
1,979.00 |
-15.26% |
1,677.09 |
|
Long-Term Loans Receivables |
1,336.00 |
- |
- |
- |
- |
|
|
|
Deferred Tax Assets |
251.00 |
383.00 |
680.00 |
737.00 |
721.00 |
34.09% |
966.76 |
|
Other Long-Term Assets |
1,845.00 |
1,819.00 |
2,672.00 |
2,693.00 |
2,342.00 |
8.31% |
2,536.60 |
|
Total Assets |
147,461.00 |
167,497.00 |
197,295.00 |
232,792.00 |
275,909.00 |
16.97% |
322,738.36 |
|
Current Liabilities |
|
|
|
|
|
|
- |
|
Accounts Payable |
1,931.00 |
2,041.00 |
3,137.00 |
4,378.00 |
5,561.00 |
31.49% |
7,312.40 |
|
Accrued Expenses |
7,399.00 |
8,864.00 |
10,395.00 |
12,630.00 |
16,302.00 |
21.91% |
19,874.03 |
|
Short-Term Borrowings |
4,428.00 |
- |
- |
- |
- |
|
|
|
Current Portion of LT Debt |
1,000.00 |
- |
- |
- |
- |
|
|
|
Current Income Taxes Payable |
302.00 |
554.00 |
881.00 |
69.00 |
274.00 |
86.85% |
511.97 |
|
Unearned Revenue, Current |
788.00 |
1,099.00 |
1,432.00 |
1,784.00 |
1,908.00 |
25.32% |
2,391.20 |
|
Other Current Liabilities |
3,237.00 |
4,198.00 |
8,338.00 |
15,759.00 |
19,977.00 |
61.02% |
32,166.68 |
|
Total Current Liabilities |
19,310.00 |
16,756.00 |
24,183.00 |
34,620.00 |
45,221.00 |
26.22% |
57,077.67 |
|
Long-Term Liabilities |
|
|
|
|
|
|
|
|
Long-Term Debt |
1,995.00 |
3,935.00 |
3,943.00 |
3,950.00 |
3,958.00 |
24.46% |
4,925.99 |
|
Unearned Revenue Non-Current |
151.00 |
202.00 |
340.00 |
396.00 |
358.00 |
27.24% |
455.52 |
|
Def. Tax Liability, Non-current liabilities |
189.00 |
226.00 |
430.00 |
1,264.00 |
1,701.00 |
84.59% |
3,139.91 |
|
Capital Leases |
- |
- |
26.00 |
62.00 |
10,810.00 |
|
|
|
Other Non-Current Liabilities |
5,485.00 |
7,342.00 |
15,871.00 |
14,872.00 |
12,419.00 |
31.81% |
16,369.32 |
|
Total Liabilities |
27,130.00 |
28,461.00 |
44,793.00 |
55,164.00 |
74,467.00 |
30.11% |
96,888.08 |
|
Common Equity |
|
|
|
|
|
|
|
|
Common Stock |
32,982.00 |
36,307.00 |
40,247.00 |
45,049.00 |
50,552.00 |
11.27% |
56,249.22 |
|
Retained Earnings |
89,223.00 |
105,131.00 |
113,247.00 |
134,885.00 |
152,122.00 |
14.36% |
173,964.94 |
|
Comprehensive Income and Other |
(1,874.00) |
(2,402.00) |
(992.00) |
(2,306.00) |
(1,232.00) |
13.84% |
(1,402.51) |
|
Total Common Equity |
120,331.00 |
139,036.00 |
152,502.00 |
177,628.00 |
201,442.00 |
13.78% |
229,196.88 |
|
Total Equity |
120,331.00 |
139,036.00 |
152,502.00 |
177,628.00 |
201,442.00 |
13.78% |
229,196.88 |
|
Liabilities & Equity |
|
|
|
|
|
|
|
|
Total Liabilities and Equity |
147,461.00 |
167,497.00 |
197,295.00 |
232,792.00 |
275,909.00 |
16.97% |
322,738.36 |
Why Financial Planning is Important
Financial planning is an important process of every business. The process of financial planning entails determining the current financial situation of a business, developing financial goals, determining alternative courses of action on where the business want to be in the next fiscal year. After these steps, the business evaluates alternatives available to the business and the management can now create and implement the financial action plan. The management can periodically reevaluate and revise the financial plan. Some of the essential components of a financial plan include the goals and objectives, income statement, balance sheet statement, and the cash flow statement. The three components allow the business to analyze its revenues, costs, and earnings in the subsequent financial year. Other components include income tax and investment planning for capital projects that will be undertaken in the next fiscal year. Thus, financial planning is important as it enables a business plan its financial goals and objectives.
Financial planning is also important as it enables an organization devise or develop its policies, objectives, budgets and programs regarding its financial activities. There are five main reasons why financial planning is important to an organization. First, financial planning ensures that there are adequate funds for running the business so that departments and divisions of a business can acquire the necessary resources to facilitate their operations. Second, financial planning ensures that there is a reasonable balance between the inflow and outflow of funds, which enhance the stability of the business. Additionally, shareholders have more confidence to organizations that practice financial planning as they believe there will be prudent utilization of funds in their operations. Furthermore, sustainability of an organization is enhanced through growth and expansion programmes that ensure the long-term survival of a company. Lastly, financial planning is vital as it minimizes uncertainties that might be caused by changing market dynamics.