Bus 411
Assignment 3
Due Feb. 28 at the beginning of class (2PM)
CHAPTER 4
EXPERIENTIAL EXERCISE 4A: PERFORMING A FINANCIAL RATIO
ANALYSIS FOR GOOGLE (GOOG)
PURPOSE:
Potential investors and current shareholders look closely at firms’ financial ratios, making
detailed comparisons to industry averages and to previous periods of time.
INSTRUCTIONS:
1. On a separate sheet of paper, number from 1 to 20. Referring to Google’s income
statement and balance sheet in the text, calculate 20 financial ratios for the
company.
2. Go to http://finance.yahoo.com and find (or calculate) the financial ratios for
Yahoo! for the 2004 fiscal year. Record these in the next column. Calculate any
you cannot find by hand.
3. In a third column, indicate whether you consider each ratio to be a strength, a
weakness, or a neutral factor for Google.
Example Chart
Ratio
Current
Quick
Fixed assets turnover
Total assets turnover
Inventory turnover
Accounts receivable turnover
Debt to total assets
Debt to equity
Long-term debt to equity
Times-interest-earned ratio
Return on assets
Return on equity
Gross profit margin
Operating profit margin
Net profit margin
Revenue per share
Price-earnings ratio
EPS
Net Income Growth
Google
Yahoo!
Evaluation
EXPERIENTIAL EXERCISE 4B: CONSTRUCTING AN IFE MATRIX FOR
GOOGLE (GOOG)
PURPOSE:
This exercise will give you experience developing an IFE Matrix. Identifying and prioritizing
factors to include in an IFE Matrix fosters communication among functional and divisional
managers. Preparing an IFE Matrix allows human resources, marketing,
production/operations, finance/accounting, R&D, and computer information systems
managers to vocalize their concerns and thoughts regarding the business condition of the firm.
This results in an improved collective understanding of the business.
INSTRUCTIONS:
1. Develop a IFE Matrix for GOOG
2. What strategies do you think would allow GOOG to capitalize on its major
strengths? What strategies would allow GOOG to improve upon its major
weaknesses?
Refer to the information contained in Table 4-7 when completing this exercise. The steps for
completing an IFE Matrix are as follows:
1. List key internal factors as identified in the internal-audit process. Use a total of ten to
twenty internal factors, including both strengths and weaknesses. List strengths first and
then weaknesses.
2. Assign a weight that ranges from .0 (not important) to 1.0 (all important) to each factor.
The weight assigned to a given factor indicates the relative importance of the factor to
being successful in the firm’s industry. The sum of all weights must equal 1.0.
3. Assign a 1-4 rating to each factor to indicate whether that factor represents a major
weakness (1), a minor weakness (2), minor strength (3), or major strength (4). Strengths
must receive a 3 or 4 and weaknesses must receive a 1 or 2.
4. Multiply each factor’s weight by its rating to determine its weighted score for each
variable.
5. Sum the weighted scores for each variable to determine the total weighted score for the
organization.