Alphabet Inc. (NASDAQ: GOOGL) is the Internet information service giant that owns the Internet search and advertising company Google, the popular mobile phone operating system Android, video streaming site YouTube and various other growth subsidiaries in technology, communication, health care and related industries. Alphabet carries very little debt relative to the scale of its equity capital, resulting in a capital structure with very little financial leverage. The company's enterprise value expanded rapidly over the three years ended April 2016, driven entirely by market cap expansion.

Equity Capital

Equity capital is comprised of cash generated by the issuance of common or preferred stock and the net profits produced that are attributable to shareholders. Common stock, preferred stock, retained earnings, Treasury stock and accumulated other comprehensive income are all common balance sheet items that reflect equity capitalization. As of December 2015, Alphabet's total shareholder equity was $120 billion, consisting of $33 billion of common and capital stock at par value and additional paid-in capital, $89 billion of retained earnings and $1.9 billion of accumulated other comprehensive loss.

Alphabet's total equity capital of $120 billion in December 2015 marked an increase from $104 billion in 2014 and $87 billion in 2013. Paid-in capital increased during both years due to a stock-based compensation expense of $5.2 billion in 2015 and $4.3 billion in 2014. Retained earnings were the most significant variable in equity capital, growing from $61.2 billion in 2013 to $75.7 billion in 2014 and $89.2 billion in 2015. Alphabet recorded profits of $14.1 billion in 2014 and $16.3 billion in 2015, while dividends and share repurchases were relatively small.

Debt Capital

Debt capital is the financing used by a business in the form of bonds, unsecured notes, term loans and other lines of credit. The formal definition of debt capitalization excludes operating liabilities, though some of the more liberal debt metrics include a broader range of liabilities and off-balance-sheet obligations under the umbrella of debt. A pure examination of capital structure requires a more narrowly focused definition of debt. Alphabet carried short-term debt of $3.2 billion and long-term debt of $2 billion as of December 2015. Total debt of $5.2 billion in 2015 was approximately equal to the values in 2014 and 2015, though the relative contributions of short- and long-term debt varied. Alphabet's long-term debt in 2015 consisted primarily of 3.625% notes due in May 2021 and 3.375% notes due in February 2024.

Financial Leverage

Financial leverage is the measurement of the extent to which a business is financed by debt capital. The total-debt-to-capital ratio is an important metric for leverage analysis, and it is calculated by dividing the sum of short- and long-term debt by the sum of total debt and shareholder equity. Alphabet's total-debt-to-capital was 0.04 as of December 2015, which was down from 0.05 in 2014 and 0.06 in 2013. All of these figures are exceptionally low, indicating a minimal role of debt in Alphabet's capital structure. Relatively low debt capital is common for Internet information providers, a group of companies that tend to be young and in growth phases, though some of Alphabet's industry peers have significantly higher total debt-to-capital ratios, such as Baidu Inc. (NASDAQ: BIDU) at 0.44 and Twitter Inc. (NYSE: TWTR) at 0.37.

Enterprise Value

Enterprise value (EV) is a measurement of the total economic value of a company, though it diverges from other capitalization statistics by using market values for equity and debt in its calculation. It is the sum of market value for common stock, preferred stock and debt less cash and equivalents. EV is commonly used in merger and acquisition analysis or to compare firms with dissimilar capital structures. Alphabet's enterprise value was $466 billion as of April 2016, with a market cap of $526 billion and net cash of roughly $60 billion. As of April 2013, Alphabet's EV was $220 billion, from which point it expanded rapidly before reaching as high as $478 billion during the three-year period ending April 2016.

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