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(Analyzing the cash flow​Statement) ​Google, Inc.​ (GOOG), is one of the most successful Internet​ firms, and it experienced very rapid growth in revenues from 2011 through 2014. The cash flow statements for​ Google, Inc. spanning the period are found​ here: .Answer the following questions using the information found in these​ statements:a. Is Google generating positive cash flow from its​operations?b. How much did Google invest in new capital expenditures over the​ period?c. Describe​ Google's sources of financing in the financial markets over the​ period?d. Based solely on the cash flow statements for 2011 through​2014, write a brief narrative that describes the major activities of​ Google's management team over the period.Is Google generating positive cash flow from its​ operations?​ (Select the best choice​ below.)a. Google has generated positive cash flow from its operations during the years​ 2012, 2013, and 2014.b. Google has generated positive cash flow from its operations during the years​ 2011, 2012, and 2014.c. Google has generated positive cash flow from its operations during the years​ 2011, 2013, and 2014.d. Google has generated positive cash flow from its operations during the years​ 2011, 2012,​ 2013, and 2014.(US$ millions) 12/31/2014 1 2/31/2013 12/31/2012 12/31/2011Net income $14,463 $12,898 $10,786 $9,720Depreciation 3,470 2,780 1,909 1,357Amortization 1,470 1,131 914 483Deferred taxes (179) (441) (298) 332Noncash items 2,664 2,234 2,310 2,024Changes in working capital 349 (29) 860 631Cash from operating activities $22,237 $18,573 $16,481 $14,547Capital expenditures $(10,937) $(7,345) $(3,201) $(3,437)Other investing cash flow items (10,086) (6,327) (9,821) (15,612)Cash from investing activities $(21,023) $(13,672) $(13,022) $(19,049)Interest and financing cash flow items $(1,449) $(282) $(98) $88Total cash dividends paid 0 0 0 0Issuance (retirement) of stock 4 0 50 0Issuance (retirement) of debt (15) (532) 1,341 793Cash from financing activities $(1,460) $(814) $1,293 $881Foreign exchange effects $(467) $(3) $2 $20Net change in cash $(713) $4,084 $4,754 $(3,601)

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Answer:

Analyzing the Cash Flow Statement (Google, Inc. (GOOGLE)

a. Is Google generating positive cash flow from its​ operations?

Google is generating positive cash flow from its operations.  Throughout the period under review it has generated a total of $71,738 million positive cash flow from its operations.  See the yearly breakdown below:

(US$ millions)                          12/31/2014 1 2/31/2013 12/31/2012 12/31/2011

Cash from operating activities $22,237      $18,573      $16,481    $14,547

b. How much did Google invest in new capital expenditures over the​ period?

It invested a total of $24,920 in new capital expenditures over the period.  See breakdown below:

(US$ millions)               12/31/2014   1 2/31/2013   12/31/2012   12/31/2011

Capital expenditures    $(10,937)      $(7,345)        $(3,201)        $(3,437)

c. Describe​ Google's sources of financing in the financial markets over the​ period?

Google's sources of financing in the financial markets over the period are from issuance of stock and debt.  It generated $50 million in 2012 from issuance of stock.  In 2011 and 2012, it generated $793 million and $1,341 million from issuance of debt respectively.

d. Based solely on the cash flow statements for 2011 through​2014, write a brief narrative that describes the major activities of​ Google's management team over the period.Is Google generating positive cash flow from its​ operations?​ (Select the best choice​ below.)

d. Google has generated positive cash flow from its operations during the years​ 2011, 2012,​ 2013, and 2014.

Explanation:

a) Data and Calculations:

(US$ millions)                          12/31/2014 1 2/31/2013 12/31/2012  12/31/2011

Net income                                   $14,463      $12,898     $10,786      $9,720

Depreciation                                    3,470          2,780          1,909         1,357

Amortization                                     1,470            1,131             914            483

Deferred taxes                                  (179)            (441)          (298)            332

Noncash items                               2,664          2,234          2,310         2,024

Changes in working capital              349             (29)            860             631

Cash from operating activities $22,237      $18,573       $16,481      $14,547

Capital expenditures                $(10,937)     $(7,345)       $(3,201)     $(3,437)

Other investing cash flow

    items                                     (10,086)         (6,327)        (9,821)      (15,612)

Cash from

 investing activities                $(21,023)     $(13,672)    $(13,022)   $(19,049)

Interest and financing

 cash flow items                      $(1,449)          $(282)          $(98)           $88

Total cash dividends paid                 0                   0                 0                0

Issuance (retirement) of stock          4                   0               50               0

Issuance (retirement) of debt         (15)            (532)           1,341           793

Cash from financing activities $(1,460)          $(814)        $1,293         $881

Foreign exchange effects         $(467)              $(3)               $2          $20

Net change in cash                    $(713)        $4,084         $4,754    $(3,601)

b) Google's statement of cash flows is one of the three fundamental financial statements which a company is required to prepare and present to its stockholders and the general public.  This statement shows the cash generated by the company's management from operating activities, financing activities, and investing activities.  From this statement, the management, stockholders, creditors, and investment analysts will gain invaluable data to assess management's performance in key financial variables.

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