Stock Analysis on Net

Alphabet Inc. (NASDAQ:GOOG)

Analysis of Goodwill and Intangible Assets

Microsoft Excel LibreOffice Calc

Goodwill and Intangible Asset Disclosure

Alphabet Inc., balance sheet: goodwill and intangible assets

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Patents and developed technology 4,639  4,972  5,125  5,260  5,542 
Customer relationships 266  254  349  359  352 
Trade names and other 699  703  703  544  463 
Purchased intangible assets, gross carrying amount 5,604  5,929  6,177  6,163  6,357 
Accumulated amortization (4,159) (3,950) (3,957) (3,471) (3,050)
Purchased intangible assets, net carrying value 1,445  1,979  2,220  2,692  3,307 
Goodwill 21,175  20,624  17,888  16,747  16,468 
Goodwill and other intangible assets 22,620  22,603  20,108  19,439  19,775 

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

Item Description The company
Purchased intangible assets, net carrying value Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. Alphabet Inc. purchased intangible assets, net carrying value decreased from 2018 to 2019 and from 2019 to 2020.
Goodwill Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Alphabet Inc. goodwill increased from 2018 to 2019 and from 2019 to 2020.
Goodwill and other intangible assets Sum of the carrying amounts of all intangible assets, including goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. Alphabet Inc. goodwill and other intangible assets increased from 2018 to 2019 and from 2019 to 2020.

Adjustments to Financial Statements: Removal of Goodwill

Alphabet Inc., adjustments to financial statements

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Adjustment to Total Assets
Total assets (as reported) 319,616  275,909  232,792  197,295  167,497 
Less: Goodwill 21,175  20,624  17,888  16,747  16,468 
Total assets (adjusted) 298,441  255,285  214,904  180,548  151,029 
Adjustment to Stockholders’ Equity
Stockholders’ equity (as reported) 222,544  201,442  177,628  152,502  139,036 
Less: Goodwill 21,175  20,624  17,888  16,747  16,468 
Stockholders’ equity (adjusted) 201,369  180,818  159,740  135,755  122,568 

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).


Alphabet Inc., Financial Data: Reported vs. Adjusted


Adjusted Financial Ratios: Removal of Goodwill (Summary)

Alphabet Inc., adjusted financial ratios

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Total Asset Turnover
Reported total asset turnover 0.57 0.59 0.59 0.56 0.54
Adjusted total asset turnover 0.61 0.63 0.64 0.61 0.60
Financial Leverage
Reported financial leverage 1.44 1.37 1.31 1.29 1.20
Adjusted financial leverage 1.48 1.41 1.35 1.33 1.23
Return on Equity (ROE)
Reported ROE 18.09% 17.05% 17.30% 8.30% 14.01%
Adjusted ROE 20.00% 18.99% 19.24% 9.33% 15.89%
Return on Assets (ROA)
Reported ROA 12.60% 12.45% 13.20% 6.42% 11.63%
Adjusted ROA 13.49% 13.45% 14.30% 7.01% 12.90%

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

Financial ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Alphabet Inc. adjusted total asset turnover ratio deteriorated from 2018 to 2019 and from 2019 to 2020.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Alphabet Inc. adjusted financial leverage ratio increased from 2018 to 2019 and from 2019 to 2020.
Adjusted ROE A profitability ratio calculated as net income divided by adjusted shareholders’ equity. Alphabet Inc. adjusted ROE deteriorated from 2018 to 2019 but then improved from 2019 to 2020 exceeding 2018 level.
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Alphabet Inc. adjusted ROA deteriorated from 2018 to 2019 but then slightly improved from 2019 to 2020.

Alphabet Inc., Financial Ratios: Reported vs. Adjusted


Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
As Reported
Selected Financial Data (US$ in millions)
Revenues 182,527  161,857  136,819  110,855  90,272 
Total assets 319,616  275,909  232,792  197,295  167,497 
Activity Ratio
Total asset turnover1 0.57 0.59 0.59 0.56 0.54
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Revenues 182,527  161,857  136,819  110,855  90,272 
Adjusted total assets 298,441  255,285  214,904  180,548  151,029 
Activity Ratio
Adjusted total asset turnover2 0.61 0.63 0.64 0.61 0.60

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

2020 Calculations

1 Total asset turnover = Revenues ÷ Total assets
= 182,527 ÷ 319,616 = 0.57

2 Adjusted total asset turnover = Revenues ÷ Adjusted total assets
= 182,527 ÷ 298,441 = 0.61

Activity ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Alphabet Inc. adjusted total asset turnover ratio deteriorated from 2018 to 2019 and from 2019 to 2020.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
As Reported
Selected Financial Data (US$ in millions)
Total assets 319,616  275,909  232,792  197,295  167,497 
Stockholders’ equity 222,544  201,442  177,628  152,502  139,036 
Solvency Ratio
Financial leverage1 1.44 1.37 1.31 1.29 1.20
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted total assets 298,441  255,285  214,904  180,548  151,029 
Adjusted stockholders’ equity 201,369  180,818  159,740  135,755  122,568 
Solvency Ratio
Adjusted financial leverage2 1.48 1.41 1.35 1.33 1.23

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

2020 Calculations

1 Financial leverage = Total assets ÷ Stockholders’ equity
= 319,616 ÷ 222,544 = 1.44

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ equity
= 298,441 ÷ 201,369 = 1.48

Solvency ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Alphabet Inc. adjusted financial leverage ratio increased from 2018 to 2019 and from 2019 to 2020.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
As Reported
Selected Financial Data (US$ in millions)
Net income 40,269  34,343  30,736  12,662  19,478 
Stockholders’ equity 222,544  201,442  177,628  152,502  139,036 
Profitability Ratio
ROE1 18.09% 17.05% 17.30% 8.30% 14.01%
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Net income 40,269  34,343  30,736  12,662  19,478 
Adjusted stockholders’ equity 201,369  180,818  159,740  135,755  122,568 
Profitability Ratio
Adjusted ROE2 20.00% 18.99% 19.24% 9.33% 15.89%

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

2020 Calculations

1 ROE = 100 × Net income ÷ Stockholders’ equity
= 100 × 40,269 ÷ 222,544 = 18.09%

2 Adjusted ROE = 100 × Net income ÷ Adjusted stockholders’ equity
= 100 × 40,269 ÷ 201,369 = 20.00%

Profitability ratio Description The company
Adjusted ROE A profitability ratio calculated as net income divided by adjusted shareholders’ equity. Alphabet Inc. adjusted ROE deteriorated from 2018 to 2019 but then improved from 2019 to 2020 exceeding 2018 level.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
As Reported
Selected Financial Data (US$ in millions)
Net income 40,269  34,343  30,736  12,662  19,478 
Total assets 319,616  275,909  232,792  197,295  167,497 
Profitability Ratio
ROA1 12.60% 12.45% 13.20% 6.42% 11.63%
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Net income 40,269  34,343  30,736  12,662  19,478 
Adjusted total assets 298,441  255,285  214,904  180,548  151,029 
Profitability Ratio
Adjusted ROA2 13.49% 13.45% 14.30% 7.01% 12.90%

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

2020 Calculations

1 ROA = 100 × Net income ÷ Total assets
= 100 × 40,269 ÷ 319,616 = 12.60%

2 Adjusted ROA = 100 × Net income ÷ Adjusted total assets
= 100 × 40,269 ÷ 298,441 = 13.49%

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Alphabet Inc. adjusted ROA deteriorated from 2018 to 2019 but then slightly improved from 2019 to 2020.