FB vs TWITTER : financial analysis

               Financial statement analysis: FB vs TWITTER

                                                                              INCOME STATEMENT: 

   It’s almost impossible to tell which is growing faster by just looking at the numbers. So we have to do some calculations. We can perform horizontal and vertical analysis on the income statement by simply taking the percentage change for each line item year-over-year.

TOTAL COSTS AND EXPENSES: increased because of the high investment in RD:

Facebook is also investing billions of dollars in fixing content issues, but it’s continuing to struggle with issues of privacy and the release of users’ data. those expenses were largely the result of a $3 billion expense related to legal fees that are a by-product of drama with the U.S

 Twitter is removing fake accounts and making other efforts to safeguard its platform and bring back users’ confidence. Twitter continues to increase its operating expenses, as it plans to boost its investments in health, conversations, and products as well as in its platform as a whol; to fight the fake news menace and suspended many doubtful accounts for violating its anti-spam rules.

 net income or net loss equals your total revenues minus your total expenses for an accounting period. If revenues are less than expenses, you have a net loss.

Income from operations will always result if revenues exceed cost of goods sold.

Revenue:

  Facebook breaks down its revenue into two separate segments: Advertising and Payments and other fees. The company does not do a separate breakdown for net income. The brand continued to focus on its three main priorities – increasing the use of its mobile products, developing innovative ad products to increase the efficiency of ad campaigns and making its advertisements more effective through the use of targeting capabilities.  When it comes to advertising; Twitter earns at least 86% of its revenue from it and 14 per cent of Twitter's revenue in fiscal year 2018 was from data licensing and other sources.

                                                                                   BALANCE SHEET

    I have emphasized the 3 lines we need for our analysis; Total Assets, Total Liabilities and Total Equity. FB had a huge increase in cash and cash equivalents and therefore a large increase in current assets as well. This must be a good thing. Take a look further down into the liabilities part of the balance sheet and notice that total liabilities has increased. FB’s company is generating sufficient cash from its business to grow as it wants to, so it is not forced to take out loans; not like Twitter; to pay for its growth. This type of growth tells investors a couple of things:

   First; that FB will be able to continue to grow  comfortablly. Because its core business is so strong, it does not require debt, like TWITTER  is dependent on.

   FB is using its savings to finance new assets that lead to additional sales in the future. A company that is able to finance its own growth is a much stronger, more successful company with a much higher chance for a long term positive return for investors. Using this type of analysis, you will be able to determine where a company is getting its money to purchase additional assets.

     The positive working capital for both companies  means they can cover what it must pay, obligations or accounts owed. The larger the working capital, the less delinquent or doubtful it will honor payment to the sellers.

Cash And Cash Equivalents Explanation

A high number means either:

1. The company has competitive advantage generating lots of cash. superior business position.

accounts receivable twitter that will be turning to cash, since some customers may not pay the full amount owed to the company.

Accrued liabilities are liabilities that reflect expenses that have not yet been paid 

main source of stockholders' equity is accumulated retained earnings. paid-in capital

A large other comprehensive loss might signal a poor investment strategy or trouble managing currency hedges.  Currency Hedging is the act of entering into a financial contract in order to protect against unexpected, expected or anticipated changes in currency exchange rates

The amount of net income will cause an increase in the stockholders' equity account Retained Earnings, while a loss will cause a decrease.

Companies report negative retained earnings as accumulated deficit .companies cannot pay out any dividends to shareholders. One way to eliminate the accumulated deficit is for companies to earn enough profits, but it can take a long time and may require additional funds