Financial Ratios

Formula: Inventory Turnover Ratio = COGS / Average Inventory

Alphabet's inventory turnover ratio in 2022 was 5.9 times. This is a high inventory turnover ratio, indicating that Alphabet is selling its inventory quickly.

Financing Ratio: Debt-to-Equity Ratio (D/E)

The debt-to-equity ratio measures how much debt a company uses to finance its assets. It is calculated by dividing total debt by total equity.

Formula: D/E Ratio = Total Debt / Total Equity

Alphabet's D/E ratio in 2022 was 0.06. This is a very low D/E ratio, indicating that Alphabet is using very little debt to finance its assets.

Liquidity Ratio: Current Ratio

The current ratio measures a company's ability to meet its short-term obligations. It is calculated by dividing current assets by current liabilities.

Formula: Current Ratio = Current Assets / Current Liabilities

Alphabet's current ratio in 2022 was 1.58. This is a good current ratio, indicating that Alphabet has enough current assets to cover its current liabilities.

Evaluation of Strengths and Weaknesses

Alphabet is a strong company with a good track record of profitability and growth. It has a low D/E ratio, indicating that it is well-capitalized. It also has a good current ratio, indicating that it is liquid.

One weakness of Alphabet is that it is a cyclical company, meaning that its earnings are affected by the overall economy. Additionally, Alphabet faces increasing competition from other technology companies, such as Amazon and Microsoft.

Overall Performance

Based on the ratios selected, Alphabet is a well-performing company. It has a good ROE, a high inventory turnover ratio, a low D/E ratio, and a good current ratio. These ratios indicate that Alphabet is generating a good return on its shareholders' investment, selling its inventory quickly, using very little debt to finance its assets, and is liquid.

However, it is important to note that these ratios are just a snapshot of a company's financial performance. Other factors, such as the company's management team, industry trends, and competitive landscape, should also be considered when evaluating a company's financial performance.

Publicly Traded Firm: Alphabet Inc. (Ticker: GOOGL)

Performance Ratio: Return on Equity (ROE)

ROE measures the profitability of a company relative to its shareholders' equity. It is calculated by dividing net income by shareholders' equity.

Formula: ROE = Net Income / Shareholders' Equity

Alphabet's ROE in 2022 was 20.3%. This is a good ROE, indicating that Alphabet is generating a good return on its shareholders' investment.

Activity Ratio: Inventory Turnover Ratio

The inventory turnover ratio measures how quickly a company sells its inventory. It is calculated by dividing the cost of goods sold (COGS) by the average inventory.