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For the fiscal year 2022, the income statements for Google LLC and Facebook, Inc. are provided: ($ millions) Google LLC Facebook, Inc. Net sales $257,637
For the fiscal year 2022, the income statements for Google LLC and Facebook, Inc. are provided:
($ millions) | Google LLC | Facebook, Inc. |
Net sales | $257,637 | $117,927 |
Cost of sales | 125,674 | 45,372 |
Gross profit | 131,963 | 72,555 |
Operating expenses: | ||
Selling, general, and administrative (SG&A) | 70,831 | 29,184 |
Research and development (R&D) | 26,982 | 21,605 |
Operating income | 34,150 | 21,766 |
Interest and other (income) expense | 4,305 | 1,804 |
Interest and investment income | (1,606) | (792) |
Earnings before provision for income taxes | 31,451 | 20,754 |
Provision for income taxes | 9,435 | 5,188 |
Net earnings | $22,016 | $15,566 |
Required:
- Calculate the return on equity (ROE), return on assets (ROA), and return on financial leverage (ROFL) for each company in fiscal year 2022. Assume a tax rate of 28%.
- Disaggregate the ROA into profit margin (PM) and asset turnover (AT) components. Identify which factor drives the ROA for each company.
- Analyze the trend in SG&A expenses over the past five years. How does it affect each company’s operational efficiency?
- Evaluate the current ratio and quick ratio for Google LLC and Facebook, Inc. What does it reveal about their short-term liquidity?
- Compare the operating profit margins of Google LLC and Facebook, Inc. What insights can be drawn about their cost control and profitability?
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