Balance Sheet (Part 2)

Now look at the 18th line from the top under the heading Total Assets. For the year 2008 total assets were approximately $31 billion which is more than the prior years of 2007 and 2006. At first glance these numbers show an improvement too, but without looking at individual numbers under this heading we cannot say for sure. Note that the amounts for "Property Plant and Equipment" and "Goodwill" have increased from prior years. If we needed to raise cash in a short period of time then we may not be able to get even half of the amounts shown.    Now let us go to the 24th line from the top under the heading Total Liabilities. Total liabilities are close to $2 billion or less for all the three years. In comparison to total current assets of $20 billion for the year 2008, the total current liability of $2 billion is negligible. That shows the company is in a solid footing to overcome any difficulties.    Now let us turn to the 30th line from the top under the heading of Total Liabilities. Here the total liabilities are approximately $3 billion or less for all the three years, so there is nothing to worry.   Now let us look at the 41st line from the top under the heading Total Stockholder Equity. Corresponding numbers in these columns are arrived at by subtracting the total liabilities from the total assets. What this means is that the total assets are equal to the sum of total liabilities and the total stockholder equity.   If we look at "key statistics" in "yahoo Finance" we find that Google has 315.29 million "outstanding shares". Dividing the total stock holder equity in the year 2008 by the outstanding shares, we arrive at share holder equity to be $89.56/share. Closing price of one share of Google on April 16 2009 was $388.74/share. Now if we divide closing price of $388.74 by $89.56 per share holder equity we get a value of 4.34. This indicates that people are willing to pay more than 4 times the equity in the company for a share of Google. At the end of 2007 this number was close to 8, almost double the value of 4.34. Even if the economy is not in any worst shape compared to the end of 2007, people’s perception is that the economy is in a very bad shape, so they are willing to pay only half the value.    Now let us look at the last line in the balance sheet under the heading Net Tangible Assets. For the year 2008 this number was $22 billion. Net tangible assets is calculated as the total assets of a company, minus any intangible assets such as goodwill, patents and trademarks, less all liabilities and the par value of preferred stock. Net asset value is also known as Book Value. Posted by Nick M. Shah at 9:37 PM 0 comments