GLOBAL TECHNOLOGY
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GOOGLE, INC.* |
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Year Ended December 31, |
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2006 |
2007 |
2008 |
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Operating activities |
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Net income |
$3,077,446 |
$4,203,720 |
4,226,858 |
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Adjustments: |
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Depreciation and amortization of property and equipment |
494,430 |
807,743 |
1,212,237 |
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Amortization of intangibles and other |
77,509 |
159,915 |
287,650 |
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Stock based compensation |
458,100 |
868,646 |
1,119,766 |
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Excess tax benefits from stock based award activity |
581,732 |
379,206 |
159,088 |
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Deferred income taxes |
98,468 |
164,212 |
224,645 |
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Impairment of equity investments |
— |
— |
1,094,757 |
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Other, net |
12,474 |
39,741 |
31,910 |
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Changes in assets and liabilities, net of effects |
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Accounts receivable |
624,012 |
837,247 |
334,464 |
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Income taxes, net |
496,882 |
744,802 |
626,027 |
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Prepaid revenue share, expenses, and other assets |
289,157 |
298,689 |
147,132 |
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Accounts payable |
95,402 |
70,135 |
211,539 |
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Accrued expenses and other liabilities |
291,533 |
418,905 |
338,907 |
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Accrued revenue share |
139,300 |
150,310 |
14,000 |
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Deferred revenue |
30,801 |
70,329 |
41,433 |
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Net cash provided by operating activities |
3,580,508 |
5,775,410 |
7,852,857 |
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Investing activities |
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Purchases of property and equipment |
1,902,798 |
2,402,840 |
2,358,461 |
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Purchases of marketable securities |
26,681,891 |
15,997,060 |
15,356,304 |
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Maturities and sales of marketable securities |
23,107,132 |
15,659,473 |
15,762,796 |
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Investments in nonmarketable equity securities |
1,019,147 |
34,511 |
47,154 |
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Acquisitions, net of cash acquired and proceeds received from divestiture, and purchases of intangible and other assets |
402,446 |
906,651 |
3,320,299 |
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Net cash used in investing activities |
6,899,150 |
3,681,589 |
5,319,422 |
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Financing activities |
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Net proceeds (payments) from stock based award activity |
321,117 |
23,861 |
71,521 |
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Excess tax benefits from stock based award activity |
581,732 |
379,206 |
159,088 |
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Net proceeds from a public offering |
2,063,549 |
— |
— |
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Net cash provided by financing activities |
2,966,398 |
403,067 |
87,567 |
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Effect of exchange rate changes on cash and cash equivalents |
19,741 |
40,034 |
45,923 |
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Net increase (decrease) in cash and cash equivalents |
332,503 |
2,536,922 |
2,575,079 |
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Cash and cash equivalents at beginning of year |
3,877,174 |
3,544,671 |
6,081,593 |
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Cash and cash equivalents at end of year |
$3,544,671 |
$6,081,593 |
$8,656,672 |
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Supplemental disclosures of cash flow information |
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Cash paid for interest |
$257 |
$1,336 |
$1,564 |
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Cash paid for taxes |
$537,702 |
$882,688 |
$1,223,985 |
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Acquisition related to activities: |
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Issuance of equity in connection with acquisitions, net |
$1,173,234 |
$ — |
$ — |
Required
a. 1. For net income and net cash provided by operating activities, perform a horizontal commonsize analysis. Use 2006 as the base.
2. Comment.
b. Why is depreciation and amortization of property and equipment added back to net income?
c. Investing activities—is there an indication of external growth?
d. Financing activities—speculate on why there was a public offering (2006), considering the net cash provided by operating activities.
e. Identify items that indicate that Google is a growth company.
f. Supplemental disclosures of cash flow information—why list the issuance of equity in connect with acquisitions, net?