Financial Management in Media: Statement Analysis and Key Metrics

This assignment focuses on finance for media managers, covering key concepts and financial statement analysis. It addresses topics such as corporate governance oversight, the significance of gross margin, and the accounting treatment of tangible asset depletion. The assignment includes true/false questions, balance sheet analysis, and the computation of EBITDA and net income. It also explores the nature of prepaid expenses, inventory recognition, and the implications of goodwill in acquisitions. Further, it discusses the limitations of EBITDA under GAAP accounting and the differences between the income statement and balance sheet. The document provides detailed answers and explanations, making it a valuable resource for students studying media finance. Desklib offers a platform to access similar solved assignments and study materials.

Running head: FINANCE FOR MEDIA MANAGERS
Finance for media managers
Name of the student
Name of the university
Student ID
Author note

1FINANCE FOR MEDIA MANAGERS
Table of Contents
Answer 1....................................................................................................................................2
Answer 2....................................................................................................................................2
Answer 3....................................................................................................................................2
Answer 4....................................................................................................................................2
Answer 5....................................................................................................................................2
Answer 6....................................................................................................................................3
Answer 7....................................................................................................................................3
Answer 8....................................................................................................................................3
Answer 9....................................................................................................................................3
Answer 10..................................................................................................................................3
Answer 11..................................................................................................................................4
Answer 12..................................................................................................................................4
Answer 13..................................................................................................................................4
Answer 14..................................................................................................................................5
Answer 15..................................................................................................................................5
Answer 16..................................................................................................................................5
Answer 17..................................................................................................................................5
Answer 18..................................................................................................................................5

2FINANCE FOR MEDIA MANAGERS
Answer 19..................................................................................................................................5
Answer 20..................................................................................................................................6

3FINANCE FOR MEDIA MANAGERS
Answer 1
Media related entities has oversight of the company’s management from the perspective of
corporate governance.
Answer 2
Gross margin –
Gross margin is the required entry in the income statement that represents amount of total
revenue reduced by amount of COGS (cost of goods sold). Gross margin represents the profit
of the entity before charging operating expenses, taxes and interest expenses. The gross
margin is also known as the gross profit.
Importance of gross margin –
Gross margin is crucial as it represents core profitability of the entity before charging the
overhead costs and it indicates financial success of the service or product. Further, it analyses
the competitive edge of the entity over the competitors and the gross profit represents
whether the company charges higher prices for its services or products or it is able to save its
direct costs.
Answer 3
Tangible asset depletion is captured as an expense on the income statement as depreciation.
Answer 4
Under accrual accounting, companies recognize revenue when the cash is received – False
Answer 5
On the balance sheet accrued but unpaid employee salaries are found under current liability.

4FINANCE FOR MEDIA MANAGERS
Answer 6
Computation of EBITDA and Net income –
Items Amount
Revenue $ 13,36,559.00
Less: COGS $ 9,58,005.00
Gross profit $ 3,78,554.00
Less: SG & A expenses $ 3,11,332.00
EBITDA $ 67,222.00
Less: other expenses
Depreciation ($ 185886/5) $ 37,177.20
EBIT $ 30,044.80
Less: Interest expense $ 12,500.00
EBT $ 17,544.80
Less: Taxes $ 22,711.00
Net income/loss $ -5,166.20
Answer 7
Precise amount of D & A expenses can be found under –
The cash flow statement, cash flow from operating activities
Answer 8
Expense it
Answer 9
True
Answer 10
(a) Statement of cash flows
(b) Cash flow from investing activities

5FINANCE FOR MEDIA MANAGERS
Answer 11
Prepaid expense is an asset as the prepaid expenses are the future expenses those are paid in
advance. In other words, the prepaid expenses are the costs those have already been paid but
have not been used yet or expired yet. Hence, the amount involved with prepaid expenses
those are not yet been expired are recorded on the balance sheet of the entity as an asset.
However, as amount of the expenses are expired the amount of assets is reduced and the
expenses are reported for the reduction amount. Therefore, balance sheet records unexpired
costs and the expired costs are reported under the income statement. However, the amount
recorded in the income statement shall be the amount that is pertained to time interval
represented in the heading of the statement.
Answer 12
Computation of gross margin –
Items Amount
Revenue from popcorn and candy $ 2,06,540.00
Cost of goods sold $ 81,800.00
Gross margin $ 1,24,740.00
Gross margin percentage 60.40%
Balance sheet entries
Inventories amounting to $ 18,200 will be recognised as inventories under current assets of
the balance sheet and the journal entry will be –
Particulars Debit Credit
Cost of goods sold a/c………..Dr $ 18,200.00
Merchandise inventory………..Cr $ 18,200.00
Answer 13
Balance sheet

6FINANCE FOR MEDIA MANAGERS
Answer 14
In the income statement $ 100,000 will be recorded as revenue and in the balance sheet $
100,000 will be recorded as account receivable under current assets.
Answer 15
EBITDA represents the earnings before interest, tax, depreciation and amortisation. It is not
considered to be compliant with the GAAP accounting as it presents the entity as if the entity
never paid any taxes or interest and it represents the assets as it has not lost its natural value
ever over the time. Hence, EBITDA is not reported by GAAP.
Answer 16
The income statement reveals a company’s financial performance and the balance sheet
reveals a company’s financial position.
Answer 17
False
Answer 18
False
Answer 19
(a) No
(b) In an acquisition of approximately $ 19 billion, $ 18 billion was applied to the
goodwill under the balance sheet of Facebook as Facebook received only ($19 - $18)
= $1 billion of asset from Watsapp on the acquisition.
(c) Five years later the goodwill still on balance sheet of Facebook as the company did
not amortize it and it will sit in the balance sheet of Facebook till Whatsapp meets
unavoidable fate of all the social media things.

7FINANCE FOR MEDIA MANAGERS
Answer 20
(a) Expenses accounted for nearly $200 million difference in net income and adjust
EBITDA figures were for adjustments of net interest expenses and income tax benefit
or expenses.
(b) Irrespective of losing so much money Snapchat will still stay in business as most of
the expenses were onetime expenses associated with payment of stock bonuses after
the successful IPO.