Finance and Accounting Assignment: Questions and Answers

This document provides a comprehensive solution to a finance and accounting assignment, addressing a range of questions. The assignment delves into topics such as comparing business revenues and EBITDA margins, identifying key expenses like depreciation and fuel, and analyzing the accounting treatment of video content capitalization. It also covers the impact of income taxes on net income, the nature of share repurchases, and the characteristics of aggressive and conservative corporate capitalization. Furthermore, the assignment explores corporate governance, the valuation of companies based on factors like business models and competitive advantages, and the implications of dual-class stock structures, alongside a case study involving a company acquisition. This assignment is contributed by a student and published on Desklib, a platform providing AI-based study tools.

Running Head: FINANCE AND ACCOUNTING
FINANCE AND ACCOUNTING
Name of the Student
Name of the University
Author Note

1FINANCE AND ACCOUNTING
Table of Contents
Answer to Question 1.................................................................................................................2
Answer to Question 2.................................................................................................................2
Answer to Question 3.................................................................................................................2
Answer to Question 4.................................................................................................................2
Answer to Question 5.................................................................................................................2
Answer to Question 6.................................................................................................................2
Answer to Question 7.................................................................................................................2
Answer to Question 8.................................................................................................................3
Answer to Question 9.................................................................................................................3
Answer to Question 10...............................................................................................................3
Answer to Question 11...............................................................................................................3
Answer to Question 12...............................................................................................................3

2FINANCE AND ACCOUNTING
Answer to Question 1
As showing in the below table that the return generating from both the business is
same. However, the first option is better because it has EBITDA margin, that is average and
the volume of revenue is also double as compare to the second option in which the EBITDA
margin is high, that may not be sustainable in long run and revenue is also less than first
option.
Revenue 2
EBITDA Margins 30%
EBITDA 60%
First Option
Figure 1: EBITDA
Revenue 1
EBITDA Margins 60%
EBITDA 60%
Second Option
Figure 2: EBITDA
Answer to Question 2
The other big expenses that the company should closely examine should be the
expenses of depreciation and expenses of the fuel and electricity. These two expenses are also
very important as increase in the expenses of business operations by depreciating the value of
the fixed assets. In addition, electricity and fuel is also important as it also adds the major
expenses of the company.
Answer to Question 3
a)

3FINANCE AND ACCOUNTING
While GAAP complaint, the accounting treatment of capitalizing the cost of the video
content, whether created or acquired is considered as conservative.
b)
The content spending flow through the income statement, as the expenses that is
based on expected value of every airing of content in the income statement.
c)
The company determines the number of years expenses related to the certain piece of
content that should flow through the income statement by amortization.
Answer to Question 4
The statement“net income includes the effect of income taxes” is true.
Answer to Question 5
a)
The precise amount that a company spent on share repurchases in the previous period
is shown in income statements.
b)
Share repurchases are considered as a “return of capital” to the shareholdersbecause it
is considered as integral part of the overall capital management. It is the way for returning
funds to the investors. Hence, it is the means for returning total value to the investors.

4FINANCE AND ACCOUNTING
Answer to Question 6
The statement “Gross margin captures a company’s general and administrative
expenses” is False.
Answer to Question 7
An aggressive corporate capitalization corporate capitalization utilizes excessive
short-term financing and a conservative capitalization consists of mostly long-term financing.
Answer to Question 8
In the US, public companies adhere to a regulatory regime enforced by Securities and
Exchange Commission, board of directors have fiduciary duty to corporation and among a
board’s most important responsibility is providing guidance to and oversight of risk
management.
Answer to Question 9
The total values of such deposits are found in the balance sheet of the company.
Answer to Question 10
The dual class stock has attracted major attention, especially in light of recent IPO.
The structure of it is popular for those companies who try for responding to the short term
public market that includes Technology and Media. It is because of its focus on the
movements of the issues that is other than the value of stockholders and it is done for
considering dual-class stock as an substitute to one share model.
Answer to Question 11
The four fundamental characteristics of the company that receives a higher valuation
than that of the company which lacks it are business model of the company, competitive
advantage, management of the company and corporate governance.

5FINANCE AND ACCOUNTING
Answer to Question 12
a)
The more valuable company from the buyer and seller is the buyer Spark.
b)
Spark considers the Zoosk transaction, the most transformative in the history because
the company will gain in increased scale from the combination that will result into
improvements in profitability as well as greater opportunity for investing in the growth
initiatives and innovations which drives the value of shareholders.
c)
Spark claiming for the combined business more valuable than the two stand-alone
entities; it is because of their expectation for adjusting EBITDA for exceeding $50 million. In
addition, two-third of the revenue of the combined company will generate from the North
America.