The forecast of Income Statement of Facebook Inc.
Sales
The sale target for Facebook Inc. was achieved at 100% over the four financial years. However, the percentage change in 2014 was 58.4% while in 2015, it was 43.8%. The decrease in sales volume in 2015 was as a result of dramatic increase in expenditure. Consequently, this led to a projection of growth in sales during the first quarter of 2015. This reduced the market share of Facebook Inc. by a tenth. Let's assume that there is a hefty planning expenditure, and then there will be a rock solid of stress that will support the investors in according this social network organization in future years.
With the business of mobile advertising that will deliver the breakneck of growth in revenues, the company, however, experienced some challenges especially concerning the pricey of investors, the acquisition of a multi-billion dollar like WhatsApp and the Oculus (Sai: 6). In 2016, the shares of Facebook will be high at $ 82 in 2016 before the company reports its results for the third quarter. Sales revenue of Facebook increased as a result of the increase in sales from advertisements particularly in the ads that were delivered in 2012. Similarly, total revenue of the company also increased due to increase in average pricing strategy for every ad in U.S. Consequently, making the payment of certain fees from sales to increase in 2013 by about $ 253 million.
Cost of Goods Sold
The cost of goods sold in Facebook is relative to its total revenue in the sense that it increased steadily by 18.4% in 2015. That is in 2014; the percentage was 14.8% to 33.2% in 2015. The increase in the cost of goods sold in Facebook was due to its better pricing strategy especially in the product line of mobile applications such as WhatsApp and Oculus. However, in the future financial years, the company might be prevented from achieving the desired reduction of the expenses due to stiff competition from its arch rival, Twitter. However, if the percentage change remains constant throughout 2013 to 2015, the company will also maintain the percentage of its expenses.
Selling and Administrative Expenses
During FY 2014 and FY2015, the selling and administration expense were 49.2% and 51.5% respectively. The percentages indicate a slight increase of 2.3% in 2015. This implies that Facebook Inc. might experience some weak cost control measures particularly in 2015. According to the financial forecasts provided, the corporation is likely to face such a weaker cost control measures in future. If the selling and administration expenses would have remain at 49.2% just as it was in 2014, then the company would have at least some proper cost control over the FY2015.
Operating margin
The operating margin increased steadily over the three financial years. Therefore, there is a right idea concerning the earnings before interest and the taxes paid per dollar of every sale. Since the increase in the operating margin is high, it reflects that Facebook Inc. is in a better position financially because as this margin increases, the company continues to earn additional dollars per sales made. The available figure for forecasting indicates that this ratio might increase in future years due to proper strategies of pricing and the efficiency of operation in Facebook.
Gross margin- increases
The gross margin in Facebook Inc. increases steadily over the three years due to the rise in revenues and a decrease in cost of good available for sales. Therefore, gross profit margin will be a good indicator of profitability as both variable, and fixed costs will always fluctuate.
Forecasting on the Balance Sheet Assumptions
Accounts receivable
Facebook Inc. experienced a decrease in accounts receivables from FY 2013 TO 2015 because there was an increase in receivables and assets of the company more than twice during the financial years. Consequently, it has led to the growth of more revenues as well as the assets of the company. Since the growth rate of in account receivables is critical, the company should maintain its strategies of efficient utilization of the assets to maintain the maximization of the owners’ value in future.
Debt ratio
The debt ratio and the financial leverage of the company were stable particularly during FYs 2013 and 2015. On the other hand, the time interest earned in the Facebook Inc. declined. This implies that the interest expense of the company is increasing at a higher rate as compared to its revenues. The profitability ratios that influences the net income have also decreased in Facebook during FYS 2012 and 2013. This is because the company recorded a lower expense in R&D of $ 1.5 billion and this was more than that of 2012. Consequently, the net income and the profitability ratios were lowered. If the debt ratio increases in future years, then Facebook will become more leveraged thus making it be at a greater financial risk. However, growth will be experienced in the company because the growth of any company depends on its leverage. Hence, become more sustainable in debt utilization.
Bibliography
Kodali, Sai. "Financial Analysis Facebook". Slideshare.net. N.p., 2014. Web. 15 Feb. 2016. <http://www.slideshare.net/krishnakrss/financial-analysis-facebook>.
