Assignment: Facebook IPO
After reading the case, will need you to provide the answers to the following and clearly explain what each answer means to Facebook.
Show how you got your answers.
1. Comparative (Horizontal) Analysis
- Evaluate consecutive financial statements.
- Time-series performance of the firm (e.g., quarterly, semiannual, and annual).
2. Common Size (Vertical) Analysis
- Evaluate financial performance across firms (e.g., cross-sectional comparison with comparable firms, competitors, and industry averages).
3. Ratio Analysis
- Variables computed from mathematical (economic) relationships between financial variables
- Evaluate performance and understand future prospect, yet ratios only provide the basis for interpretation and analysis.
4. Cash Flow Analysis
- Valuation of the firm (FCF) - determine intrinsic (true) value of the firm.
5. Leverage Ratios: long-term/debt financing decision and risk of financial distress.
6. Liquidity Ratios: corporate liquidity, financial distress, and financing-investment interactions.
7. Efficiency Ratios: operating efficiency, operation decision, expansion, shut-down, etc.
8. Profitability Ratios: a firm's profitability and operating performance.
9. Market Valuation Measures: market valuation, risk, growth opportunities, etc.
Again, please provide clear explanations to what the answers indicate.
Article: FACEBOOK, INC: THE INITIAL PUBLIC OFFERING (A).