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Microsoft Excel LibreOffice Calc

Alphabet Inc. (GOOG)


Analysis of Investments

Difficulty: Advanced


Investment Accounting Policy

Alphabet invests all excess cash primarily in government bonds, corporate debt securities, mortgage-backed and asset-backed securities, time deposits, and money market funds.

Alphabet classifies all investments that are readily convertible to known amounts of cash and have stated maturities of three months or less from the date of purchase as cash equivalents and those with stated maturities of greater than three months as marketable securities.

Alphabet determines the appropriate classification of the investments in marketable securities at the time of purchase and reevaluates such designation at each balance sheet date. Alphabet has classified and accounted for the marketable debt securities as available-for-sale. After consideration of the risk versus reward objectives, as well as the liquidity requirements, Alphabet may sell these debt securities prior to their stated maturities. As Alphabet views these securities as available to support current operations, Alphabet classifies highly liquid securities with maturities beyond 12 months as current assets under the caption marketable securities on the Consolidated Balance Sheets. Alphabet carries these securities at fair value, and reports the unrealized gains and losses, net of taxes, as a component of stockholders’ equity, except for unrealized losses determined to be other-than-temporary, which Alphabet records within other income (expense), net. Alphabet determines any realized gains or losses on the sale of marketable debt securities on a specific identification method, and Alphabet records such gains and losses as a component of other income (expense), net.

Source: 10-K (filing date: 2019-02-05).


Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities

Alphabet Inc., adjustment to Net Income

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Net income (as reported) hidden hidden hidden hidden hidden
Add: Net change in available-for-sale investments, net of tax effect hidden hidden hidden hidden hidden
Net income (adjusted) hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-05), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-09).


Adjusted Ratios: Mark to Market Available-for-sale Securities (Summary)

Alphabet Inc., adjusted ratios

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Net Profit Margin
Reported net profit margin hidden hidden hidden hidden hidden
Adjusted net profit margin hidden hidden hidden hidden hidden
Return on Equity (ROE)
Reported ROE hidden hidden hidden hidden hidden
Adjusted ROE hidden hidden hidden hidden hidden
Return on Assets (ROA)
Reported ROA hidden hidden hidden hidden hidden
Adjusted ROA hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-05), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-09).

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Alphabet Inc.’s adjusted net profit margin deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by shareholders’ equity. Alphabet Inc.’s adjusted ROE deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by total assets. Alphabet Inc.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

Alphabet Inc., Ratios: Reported vs. Adjusted


Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Net income hidden hidden hidden hidden hidden
Revenues hidden hidden hidden hidden hidden
Ratio
Net profit margin1 hidden hidden hidden hidden hidden
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (USD $ in millions)
Adjusted net income hidden hidden hidden hidden hidden
Revenues hidden hidden hidden hidden hidden
Ratio
Adjusted net profit margin2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-05), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-09).

2018 Calculations

1 Net profit margin = 100 × Net income ÷ Revenues
= 100 × hidden ÷ hidden = hidden

2 Adjusted net profit margin = 100 × Adjusted net income ÷ Revenues
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Alphabet Inc.’s adjusted net profit margin deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Net income hidden hidden hidden hidden hidden
Stockholders’ equity hidden hidden hidden hidden hidden
Ratio
ROE1 hidden hidden hidden hidden hidden
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (USD $ in millions)
Adjusted net income hidden hidden hidden hidden hidden
Stockholders’ equity hidden hidden hidden hidden hidden
Ratio
Adjusted ROE2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-05), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-09).

2018 Calculations

1 ROE = 100 × Net income ÷ Stockholders’ equity
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROE = 100 × Adjusted net income ÷ Stockholders’ equity
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by shareholders’ equity. Alphabet Inc.’s adjusted ROE deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Net income hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden
Ratio
ROA1 hidden hidden hidden hidden hidden
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (USD $ in millions)
Adjusted net income hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden
Ratio
Adjusted ROA2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-05), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-09).

2018 Calculations

1 ROA = 100 × Net income ÷ Total assets
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROA = 100 × Adjusted net income ÷ Total assets
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by total assets. Alphabet Inc.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.