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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:

  1. 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%.
  2. Disaggregate the ROA into profit margin (PM) and asset turnover (AT) components. Identify which factor drives the ROA for each company.
  3. Analyze the trend in SG&A expenses over the past five years. How does it affect each company’s operational efficiency?
  4. Evaluate the current ratio and quick ratio for Google LLC and Facebook, Inc. What does it reveal about their short-term liquidity?
  5. 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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