projections

According to Brewer, Garrison, and Noreen (2019), it is easy to see how challenging it is to “accurately predict future financial performance by reviewing the annual report of any publicly traded company” (p. 391).

During this week’s discussion, you will have the opportunity to investigate why actual results may be different from projections. Go to the EDGAR Search Tools for Company Filings (Links to an external site.). Select the most recent annual report of a publicly traded company (make sure to choose one that is different from your peers). Under the Table of Contents on the report, look for Item 1A. Risk Factors and identify reasons that may hinder a company from predicting future financial performance. Share your thoughts on your findings.

ANSWER

Alphabet Inc.

Alphabet Inc. functions as a holding industry with several subsidiaries. The organization, through these subsidiaries, provides various services, including web-based research, software applications, commerce, customer content, and hardware items. Under the company’s 10-Q: Quarterly report for the quarter ending June 30, 2021, its operations and financial outcomes are subject to various worries and risks (Carr & Hesse, 2020). As outlined within the report, one of the reasons that are likely to affect the business from predicting future financial performance is that it cannot confirm that any share repurchase action will be entirely consummated. The company is linked with share purchases of its class C and A stock occasionally as needed by the board of directors. Its repurchase process fails to incorporate an expiration date and does not require the organization to repurchase any precise dollar amount or get any specific degree of shares. Share repurchases within the business are likely to hinder the share trading values, escalate the volatility, and lower the cash reserves.

Another reason, as stated within the report, is that the company’s stock ownership concentration limits its stockholders’ efforts to influence corporate matters. Alphabet Inc. has different classes ranging from A to C. Class B is the common stock which allows ten votes per share, class A has one voter per share, while class C stock has no voting rights (Cong, Du & Vasarhelyi, 2018). Since class C does not have voting rights, there is complete control of limits and restricts other workers from speaking out and influencing corporate issues. In summary, the named reasons contribute immensely towards the instability and unpredictability of Alphabet Inc.’s future financial performance. It should also be noted that other factors such as the economy, external shocks to the market, and risk centered on competition might also contribute to the same issue.

References

Carr, C., & Hesse, M. (2020). When Alphabet Inc. plans Toronto’s Waterfront: New post-political modes of urban governance. Urban Planning, 5(1), 69-83.

Cong, Y., Du, H., & Vasarhelyi, M. A. (2018). Are XBRL files being accessed? Evidence from the SEC EDGAR log file dataset. Journal of Information Systems, 32(3), 23-29.