Facebook uses Daily Active users (DAUs) Monthly Average Users (MAUs) & Average Revenue Per users (ARPs) in measuring the cost of inventory in a financial year. This is a measure of user’s engagement. Twitter uses Monthly Active Users (MAUs) Changes in Daily Active Users/Daily Active Usage (DAU) Changes in engagements and Cost per Ad engagement. Twitter’s Inventory turnover ratio year 2016=cost of goods sold/Average inventory Cost of goods sold= $933 240m Cost of inventory= (153619+61605)/2 107 612 =933240/107612 8.67 =9 times Facebook’s Inventory turnover ratio year 2016=cost of sales/Average income Cost of sales = $3789m Cost of inventory = $(1312+796)/2 $ 1054 =3789/1054 =3.59 = 4 times Inventory turnover ratio is used to determine how many times a company’s inventory is sold and replaced over a period of time. It is always good to have a high turnover ratio. Facebook has a good turnover ratio compared to Twitter. For Adjustments to reconcile net income provided by operating activities Depreciation and Amortization : $2 342m Share-based compensation expense : $3 218m Deferred income taxes : $457 Twitter Inc. Cash from operating activities Net loss : $456 873 000 Adjustments to reconcile the net loss provided by the operating activities: Depreciation and Amortization : $402 172 000 Stock-based compensation expense : $615 233 000 Amortization of discount on convertible notes : $74 660 Both Twitter and Facebook Companies have paid cash dividends during the last three years because on the cash flow statements there are outflows for cash dividends payments for the last three years. Having discussed the above it is preferable for an investor to invest in Facebook Company. The profit margin in the income statement is more than in Twitter Company. The earning per share in Facebook Company is also relatively high compared to that in Twitter. : [...]
The task is to complete an analysis on these two companies: facebo0k and twiter, compare the results, and provide a recommendation as to which one is best to invest in. Use the two companies attached 10k forms to write 2– pages answering the following questions: 1. What method does each company use to determine the cost of inventory for the fiscal year? 2. Compute the inventory turnover ratio for the fiscal year. Also compute it for the previous two fiscal years. What conclusions can you make? 3. What method of depreciation does each company use? Does each company use the same method for all fixed assets, or are different classes of assets depreciated differently? 4. What is the amount of accumulated depreciation and amortization at the end of the most recent reporting year? 5. For depreciation purposes, what is the estimated useful life of furniture and fixtures? 6. What was the original cost of leasehold improvements owned by the company at the end of the most recent reporting year? 7. What amount of depreciation and amortization was reported as expense for the most recent reporting year? 8. How many shares of common stock are authorized at the end of the current year? How many shares are issued and outstanding at the end of the current year? 9. Is there more than one class of common stock? If so, what is the name of each class of common stock? 10. Is there any preferred stock? If so, what is the dividend rate on the preferred stock, as a percentage of the par value of the preferred stock? 11. Did the company pay dividends on the common stock during the most recent reporting year? If so, what was the total amount of dividends paid and how much were they per share? 12. Does the company have any treasury stock? If so how much? 13. Has the company issued a stock dividend or a stock split over the past three reporting years? If so, what percentage and in what year or years? 14. Does the company's common stock have par value? If it does, what is the par value? 15. Did the common stockholders buy back a significant amount of shares in the current year? You can see this in the Statement of Stockholders' Equity as a reduction in shares. 16. Does the company have any marketable securities at the end of the year? How many dollars of marketable securities? How are they classified? Short-term, long-term, or both? 17. How much cash did the company use to purchase marketable securities during the current year, if any? Where did you look to find this information? 18. Is the total amount of cash flows from operations the exact same amount regardless of whether the direct or the indirect method is used? Explain. 19. How about the Financing and Investing Cash Flow sections? Are they the exact same regardless of whether the direct or the indirect method is used? 20. Which method, the direct or indirect method, was used to report cash flows from operating activities? How can you be sure about this? Include in your answer the first three items in the Cash From Operations section. 21. What is the major use of cash in the Cash From Investing Activities section? 22. What is the major source of cash in the Cash From Investing Activities section? 23. Are there any sources of cash in the Cash From Financing Activities section? What are they? 24. Has the company paid cash dividends during the last three years? How do you know? 25. Summarize your analysis and comparison of both companies and provide a recommendation on investing in one of the companies. Make sure you have answered all of the provided questions and computations in your analysis. If a question or computation does not apply, there should be a statement within your memo stating that the aspect does not apply and why. For example: "Based on the review of the XYZ Company, there were no dividends paid for the year ending 20XX." Include support for your conclusions and investment recommendation using 2 APA format references.