Managing & Financing Innovations: A Financial Report on FIFA

This report provides a financial analysis of FIFA, a flagship video game series by EA Sports, focusing on managing and financing innovations. It explains the game's background, cost analysis based on EA Sports' 2018 cash flow statement, and future prospects according to profit/loss statements. The analysis reveals increasing gross profit and net income, driven by digital platforms and mobile versions. Recommendations are made for reducing expenses by focusing on new feature packages each year. The report also evaluates profitability, liquidity, and financial leverage ratios, concluding that FIFA maintains a steady financial position despite competition and attracts investors due to improved market valuation ratios. Desklib provides similar solved assignments and resources for students.

Running head: MANAGING AND FINANCING INNOVATIONS
Managing and Financing Innovations
Name of the Student
Name of the University
Author’s Note

1MANAGING AND FINANCING INNOVATIONS
Table of Contents
Introduction..........................................................................................................................2
Explanation of Game, and background Information...........................................................2
Explanation of Cost analysis...............................................................................................3
Future of the game according to Profit/ Loss statement......................................................3
Recommendations to the company......................................................................................4
Analytical evaluation of FIFA.............................................................................................4
Conclusion...........................................................................................................................5
References............................................................................................................................6

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Introduction
The innovation in video games over the last decade has been phenomenal in terms of
financial growth in the software industry. Increasing number of gaming engines/ studios are
partnering with software developers, music composers and technology giants to execute one of a
kind gaming title. This has not only led to newer opportunities for gamers/non-gamers but also
increased the competition for developers working on a common concept. FIFA can be considered
as one such title. Despite of its unique gameplay, graphics and official team/player license, it
faces tough competition from other big titles such as Pro Evolution Soccer (Konami) which are
available on Play Station platform. The discourse of the essay has enumerated on the explanation
of Cost analysis of FIFA, prospects and recommendations (Metuarau and Tuakana 58).
Explanation of Game, and background Information
FIFA is a flagship video game series released annually under the label of Electronic Arts
(EA Sports). The release of the first series started in 1993 which consisted of all the official
license from FIFA. In the latest installments (FIFA 18 and FIFA 19) it has included exclusive
licensed leagues such as German Bundesliga, EPL, Italian Serie A, Serie B, Spanish La Liga and
French Ligue. The game allows the players to have a life like experience of football through
video game. The latest installment of the game not only supports 4K resolution, official leagues
and character replication but also allows the gamers to experience gameplay online with FIFA
Ultimate Team (FUT). The gamers are able to use different types of skill moves ranging from
ball juggle (standing), body feint, step over, ball roll, flick up, drag, roulette, fake shots, hop,
rainbow flick and many other moves (Beacco et al. 265).

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Explanation of Cost analysis
The cost analysis has been performed by evaluating the consolidated statement of cash
flows published by EA Sports in 2018. It needs to be discerned that the overall cost for the
operating activities of the company is depicted as $ 1,692 in 2018 and $ 1,578 in 2017. The
investing activities of the company has increased considerably over the last three years. This is
evident with increase of net cash from the investing by $ (484) in 2016, to $ (759) in 2017 and $
622 in 2018. The main concern for EA Sports due to FIFA needs to be identified in the section of
financial activities. These are mainly inferred due to cash paid to taxing authorities for shares
withheld from employees for developing the game and repurchasing of common stock
(Davidovici-Nora 62).
Future of the game according to Profit/ Loss statement
The game has shown promising increase in the gross profit over the last three years. This
is evident with increase in the gross profit from 3042 in 2016 to 3547 in 2017 and 3873 in 2018.
The net income can be depicted with an increasing trend in compared to the previous year. This
needs to be identified with increase in the net profit of the company from $ 967 in 2017 to 1043
in 2018 (EA, Electronic Arts Inc. 56). The results of the second quarter has been seen to surpass
all expectation with basic revenue of $959 million which is seen to be $ 4m higher than the
previous year. Despite of lower cost of revenue, the operating expenses of the company is
significantly lower than expectations which has been able to serve the company in a better
manner. FIFA is depicted to be having a major share in this success mainly due to its presence in
all digital forms. Moreover, one of the leading factors for the success of the company needs to be
depicted as per launching of the mobile version of the game. Moving to digital platform alone
has allowed FIFA to increase its revenue by 19%. This is evident in form of EA call Live
services which has been able to generate $ 350 to $ 579 m as digital revenue.

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Recommendations to the company
The main interpretation for positive future prospect of the game and its impact on the P/L
statement can be seen mainly due to following a subscription model. Moreover, in the recent
times the users are able to download the game online and the title is committed to release a new
game each year (Zahermanesh and Arian 41). However, the company has greater scope of
reducing the expenses by creating a new package of features every year rather than working
around the clock for making improvement in the existing game. This policy will allow the
company to increase the profit margin. Therefore, despite of even more success waiting for
FIFA, it has substantial scope of reducing expenses (Metuarau and Tuakana 25).
Analytical evaluation of FIFA
The analytical evaluation of the profitability ratios shows that the net profit margin of the
company has increased from 36.63% in 2017 to 40.33% in 2018. However, the performance in
terms of ROE and ROA has not been favorable. The assets used by FIFA are mainly depicted in
terms of Frostbite engine which runs on a lower operating cost in compared to other engines used
by EA such as Unreal engine (Year and Fiscal 21). The analysis of the liquidity ratio of the
company shows that it has been able to improve its current ratio and quick ratio in terms of the
previous year which is a positive sign. The financial leverage ratio has depicted that there has
been lower reliance of the company on the long-term borrowings over time. This is evident with
debt equity ratio going down from 0.90 in 2017 to 0.87 in 2018 (Tan, Chek Tien, et al. 89).
Conclusion
It needs to be seen that despite of fierce competition from the rival companies EA Sports
FIFA has been able to maintain a steady position in terms of the financial performance. The
company has shown a considerable improvement in terms of gaining it reliance from the

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investors. The evaluation of the market valuation ratios shows that there will be more number of
investors interested in the shares of EA.

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References
Beacco, Alejandro, Nuria Pelechano, and Carlos Andújar. "A Survey of Real‐Time Crowd
Rendering." Computer Graphics Forum. Vol. 35. No. 8. 2016.
Cao, Bokai, et al. "Collective Fraud Detection Capturing Inter-Transaction Dependency." KDD
2017 Workshop on Anomaly Detection in Finance. 2018.
Davidovici-Nora, Myriam. "Paid and free digital business models innovations in the video game
industry." (2014).
EA, Electronic Arts Inc. "Electronic Arts Inc." Target (2018).
Metuarau, Tuakana. "A History of Video Games." (2017).
Tan, Chek Tien, et al. "Tool design jam: Designing tools for games user research." Proceedings
of the 2015 Annual Symposium on Computer-Human Interaction in Play. ACM, 2015.
Year, Fiscal. "ELECTRONIC ARTS INC." (2018).
Zahermanesh, Arian. "Strategic analysis of Electronic Arts™." (2018).