Probability of Financial Distress (%) measures the probability that a company will go bankrupt in the upcoming year given its current financial position. A higher ratio indicates a larger probability of bankruptcy for the company, while a lower ratio indicates a healthier fundamental. As of today, Alphabet(Google)'s Probability of Financial Distress (%) is 0.02%.
Like the Altman Z-Score, the PFD measures a company's bankruptcy risk. However, the main drawback of the Z-score is it does not apply to banks and insurance companies. According to Investopedia, the concept of "working capital" does not apply to banks and insurance companies, as financial institutions do not have typical current assets or current liabilities like inventories or accounts payable.
Competitive Comparison
For the Internet Content & Information subindustry, Alphabet(Google)'s Probability of Financial Distress (%), along with its competitors' market caps and Probability of Financial Distress (%) data, can be viewed below:
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.
Alphabet(Google) Probability of Financial Distress (%) Distribution
For the Interactive Media industry and Communication Services sector, Alphabet(Google)'s Probability of Financial Distress (%) distribution charts can be found below:
* The bar in red indicates where Alphabet(Google)'s Probability of Financial Distress (%) falls into.
Alphabet(Google) Probability of Financial Distress (%) Calculation
Probability of Financial Distress (%) (PFD) was developed by John Campbell, Jens Hilscher and Jan Szilagyi in their Search of Distress Risk. It measures the probability that a company will go bankrupt within the next 12 months given its current financial position.
The Probability of Financial Distress (%) was obtained by a logit probability model based on eight explanatory variables. The logit formula to compute the probability of financial distress (LPFD) is given below:
| LPFD | = | -20.12 * NIMTAAVG | + | 1.60 * TLMTA | - | 7.88 * EXRETAVG | + | 1.55 * SIGMA | - | 0.005 * RSIZE | - | 2.27 * CASHMTA | + | 0.070 * MB | - | 0.09 * PRICE | - | 8.87 |
| = | -8.77 |
The Probability of Financial Distress (%) (PFD) was then obtianed by:
| PFD | = | 1 | / | (1 + e^(-LPFD)) | * | 100% |
| = | 0.02% |
The eight explanatory variables are:
1. NIMTAAVG = Net Income to Market Total Assets
*Note that for companies reported quarterly, geometrically declining weighted quarterly Net Income data in latest four quarters are used.
2. TLMTA = Total liabilities to Market Total Assets
3. CASHMTA = Cash to Market Total Assets
For non-financial companies, CASHMTA is measured as:
4. EXRETAVG = Excess Return compared to the S&P 500
EXRETAVG is the weighted excess return compared to the S&P 500 in past 12 month. Geometrically declining weights are imposed on the monthly excess return to reflect lagged information. The weight is halved each quarter.
5. SIGMA = Standard Deviation of Daily Returns
For sigma, we use the annualized standard deviation of a company's returns over the past 92 days (or 63 trading days).
6. RSIZE = Relative Size
| RSIZE | = | log (Market Cap | / | Total Market Cap of S&P 500 companies) |
7. MB = Market to Adjusted Book Equity Ratio
8. PRICE
PRICE is measured as the log of the stock price, capped at log(15).
Alphabet(Google) (GOOGL) Business Description
Traded in Other Exchanges
Address
1600 Amphitheatre Parkway, Mountain View, CA, USA, 94043
Alphabet is a holding company. Internet media giant Google is a wholly owned subsidiary. Google generates 99% of Alphabet revenue, of which more than 85% is from online ads. Google's other revenue is from sales of apps and content on Google Play and YouTube, as well as cloud service fees and other licensing revenue. Sales of hardware such as Chromebooks, the Pixel smartphone, and smart home products, which include Nest and Google Home, also contribute to other revenue. Alphabet's moonshot investments are in its other bets segment, where it bets on technology to enhance health (Verily), provide faster internet access (Google Fiber), enable self-driving cars (Waymo), and more.
Executives
| R. Martin Chavez |
director |
C/O GOLDMAN SACHS & CO. LLC, 200 WEST STREET, NEW YORK NY 10282 |
| Prabhakar Raghavan |
officer: Senior Vice President |
C/O ALPHABET INC.,, 1600 AMPHITHEATRE PKWY, MOUNTAIN VIEW CA 94043 |
| Philipp Schindler |
officer: SVP, Chief Business Officer |
C/O ALPHABET INC., 1600 AMPHITHEATRE PKWY, MOUNTAIN VIEW CA 94568 |
| John Kent Walker |
officer: SVP, Global Affairs and CLO |
1600 AMPHITHEATRE PRKW, MOUNTAIN VIEW CA 94043 |
| Frances Arnold |
director |
5200 ILLUMINA WAY, SAN DIEGO CA 92122 |
| Robin L Washington |
director |
333 LAKESIDE DRIVE, FOSTER CITY CA 94404 |
| Amie Thuener O'toole |
officer: VP, Chief Accounting Officer |
C/O ALPHABET INC., 1600 AMPHITHEATRE PKWY, MOUNTAIN VIEW CA 94043 |
| Antonio Lee |
10 percent owner, other: Investor/Large Shareholder |
4009 216TH STREET, MATTESON IL 60443 |
| Ferguson Roger W. Jr. |
director |
CORNING INCORPORATED, ONE RIVERFRONT PLAZA, CORNING NY 14831 |
| James Grier Campbell |
officer: VP, Alphabet Corp. Controller |
1600 AMPHITHEATRE PKWY, MOUNTAIN VIEW CA 94043 |
| John L Hennessy |
director |
|
| Kavitark Ram Shriram |
director |
1600 AMPHITHEATRE PARKWAY, MOUNTAIN VIEW CA 94043 |
| Alan R Mulally |
director |
P.O. BOX 995, MERCER ISLAND WA 98040 |
| Ann Mather |
director |
|
| Shirley M Tilghman |
director |
GOOGLE INC., 1600 AMPHITHEATRE PARKWAY, MOUNTAIN VIEW CA 94043 |
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