Google and Yahoo are close competitors in the Internet search engine business. O

Question

Google and Yahoo are close competitors in the Internet search engine business. One of Google’s top executives, Marissa Mayer, left Google in 2012 to become Yahoo’s CEO. Selected financial data for Google and Yahoo are as follows: (Enter your answers in millions rounded to 1 decimal place.)

Calculate the return on assets for both companies.

2.

Calculate the cash return on assets for both companies.

3.

Calculate the cash flow to sales ratio and the asset turnover ratio for both companies.

  ($ in millions) Google Yahoo   Net sales $ 49,905    $ 9,184      Net income 12,975    1,929      Operating cash flows 16,365    2,150      Total assets, beginning 68,905    18,684      Total assets, ending 70,905    18,384   

Explanation / Answer

12975 /69905

= .1856 or 18.56%

1929 /18534

= .1041 or 10.41%

16365 / 69905

=.2341 or 23.41%

2150 / 18534

=.1160 or 11.60%

Formula Google Yahoo Average asset (68905+70905)/2 = 139810/2 (18684+18384)/2 =37068/2 = 69905 =18534 Return on assset Net income /Average asset

12975 /69905

= .1856 or 18.56%

1929 /18534

= .1041 or 10.41%

cash return on asset operating cash flow /average asset

16365 / 69905

=.2341 or 23.41%

2150 / 18534

=.1160 or 11.60%

cash flow to sales ratio operating cash flow /sales 16365/49905   =.33 2150/9184 = .23 Asset turnover Sales /average asset 49905/69905 = .71 9184/18534 = .50

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