Financial Analysis of Facebook - Assignment

Added on - 28 May 2020

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Running head: FINANCIAL ANALYSIS OF FACEBOOKFINANCIAL ANALYSIS OF FACEBOOKName of the Student:Name of the University:Author’s Note:
1FINANCIAL ANALYSIS OF FACEBOOKTable of ContentsQuestion 1..................................................................................................................................2Question 2..................................................................................................................................2Question 3..................................................................................................................................3Question 4..................................................................................................................................3Question 5..................................................................................................................................4Question 6..................................................................................................................................4Question 7..................................................................................................................................4Question 8..................................................................................................................................5Question 9..................................................................................................................................5Question 10................................................................................................................................5Question 11................................................................................................................................6Question 12................................................................................................................................7Question 13................................................................................................................................7Question 14................................................................................................................................7Question 14................................................................................................................................8Reference....................................................................................................................................9
2FINANCIAL ANALYSIS OF FACEBOOKQuestion 1The company which is chosen for this assignment is Facebook. Facebook is a socialnetworking site and a social media service based company which has its headquarter inMenlo Park, California in United States. The company is engaged in providing popular socialnetworking services to the people and the company was founded in 2004 and was founded byMark Zuckerberg(Investor.fb.com,2018). Thus the company is engaged in social networkservices industry.Question 2Operating risk are those risks which affect the business and the profitability of the businessdue to market changes, technological obsolescence, increased level of prices and other suchfactors (Domokos, 2012). The operating risk factors which affect the business of Facebookare given below in brief:1.The size of the user base of facebook is very large and in order to keep such user basesatisfied the business needs to add continuously new features or introduce a newproduct or there is a risk of losing such customer base. In any social networkproviding business the number of the users of the company is very crucial for thebusiness. In such a service industry the level of satisfaction of the users is verycrucial.2.A major part of the revenue of the company is generated through advertisements andthere is a risk of losing such revenues due to advancement of digital market whichprovides advertisers with a range of options.3.Another risk which the business constantly faces is the threat of competitors whichare also providing more or less same services to the users. Some of the majorcompetitors of the company are Orkut, Snapchat and others as well.
3FINANCIAL ANALYSIS OF FACEBOOK4.Facebook faces governmental regulations and even restriction in certain countrieswhich hamper the financial status of facebook in such countries.5.Introduction of new products in the market by facebook may be not be preferred bythe users due to lack of quality standards as compared to previous products of thecompany. This is a risk as the user’s preferences are of main concern for thecompany.6.In recent times facebook has faced security breaches where hackers have hacked thewebsites of the company and made away with information of the users. The companyis responsible for such breaches and will have to compensate for any losses of thecompany.7.The cost of the business is increasing continuously which is a risk as the companywill lose its growth and profitability if such a situation continues.Question 3Financial risks refers to the risks which are associated with financial condition of thebusiness which can be risks related to loan taken by the company. Facebook faces risks ofinformation loss (Turner, 2014). In recent times the facebook has been hacked which resultsin loss of information of the users as well as the company. In such a case the companysometimes need to compensate for such losses. The financial risks of the company relate tothe various lawsuits, contingencies and claims for damage. The company has terminated thelong term debt services of the unsecured credit facility in 2016.Question 4A preferred stock is a class of stock which is much different from common stock andmay be possess both the qualities of shares and debentures. In other words a preferred stockhas more claim over the assets of the company in comparison to the common stock of the
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