Acc_Global_Environment__Facebook

Running head: GLOBAL ENVIRONMENT: FACEBOOK Global Environment: Facebook Regina Santilli, Anthony Thomas, & Jennifer McDowell ACC/300 July 8th, 2013 Professor P. Mack Facebook Introduction ​Facebook is a social networking website that allows users to interact with family, friends, and associates. Users can share pictures, games, music, give gifts, share apps, and use this network as a tell all or tell nothing forum for those they invite to their page. Facebook began at Harvard University in 2004. Its’ founder, Mark Zuckerberg, had previously developed several other social networking platforms. One month after the launch of Facebook, over half of the undergraduate students at Harvard had a profile registered on the site. That same year, Facebook opened its’ network to other Ivy League Universities in the Boston area, then to all universities and in September 2005 to all United States high schools. In 2006, Facebook offered a free registration to anyone with an email address. Facebook makes their profit through advertising revenue (Phillips, 2007). ​In 2012, Facebook became a highly anticipated publicly traded company. When Facebook opened on NASDAQ, “Monthly active users (MAUs) were 955 million as of June 30, 2012, an increase of 29% year-over-year. Daily active users (DAUs) were 552 million on average for June 2012, an increase of 32% year-over-year, and Mobile MAUs were 543 million as of June 30, 2012, an increase of 67% year-over-year. Facebook’s revenue for the second quarter totaled $1.18 billion, an increase of 32%, compared with $895 million in the second quarter of 2011” (Facebook Earnings, 2012). Facebook is a global social networking giant that is gaining not only in revenue, but also in popularity on a daily basis. First Quarter 2013 Financial Highlights for Facebook ​Facebook’s revenue for the first quarter totaled $1.46 billion, an increase of 38%, compared with $1.06 billion in the first quarter of 2012. Revenue from advertising was $1.25 billion, representing 85% of total revenue and a 43% increase from the same quarter last year. Mobile advertising revenue represented approximately 30% of advertising revenue for the first quarter of 2013. Payments and other fees revenue was $213 million for the first quarter of 2013 ​GAAP costs and expenses were $1.08 billion, an increase of 60% from the first quarter of 2012, driven primarily by infrastructure expense and increased headcount. Non-GAAP costs and expenses were $895 million in the first quarter, up 56% compared to $573 million for the first quarter of 2012. ​GAAP income from operations was $373 million, down 2% from $381 million in the first quarter of 2012. Excluding share-based compensation and related payroll tax expenses, non-GAAP income from operations for the first quarter was $563 million, up 16% compared to $485 million for the first quarter of 2012. ​GAAP operating margin was 26% for the first quarter of 2013, compared to 36% in the first quarter of 2012. Excluding share-based compensation and related payroll tax expenses, non-GAAP operating margin was 39% for the first quarter of 2013, compared to 46% for the first quarter of 2012. Debt Securities ​Debt securities are a type of financial platform in which an issuer, also known as a creditor, provides assets to a borrower with the intention of receiving a repayment of the funds. Debt securities can be traded much like goods, allowing them to represent potential economic value. In this way, a bank or private entity can issue some sort of credit, create a debt security document, and then sell it to another source for the right to collect the repayment value. Debt securities therefore essentially equate to the exchange of money. ​Facebook has current and long-term debt detailed on its balance sheet. The short-term debt includes money borrowed for its development work and latest technology. In addition, brand-marketing technologies used to advertise and keep up with social media trends. Its total current liabilities for debt due are $1,063 million. Facebook’s cash and marketable securities were 9.5 billion at the end of the first quarter of 2013. Stock Investments ​Facebook’s financial report has detailed information regarding investments throughout the statement. The balance sheet, named by Facebook as the Condensed Consolidated Statements of Income, is detailed and provides information on stock options for the company and a guide for investors who wish to invest for either short or long-term gains. Its stockholder equity however, highlights two sections of stockholder equity. Those include common stock and additional paid-in capital. Facebook’s common stock and additional paid-in capital increased from $9,961 million in 2012 to $10,094 million in 2013. While this increase in treasury stock places more stock ownership of Facebook internally, going public certainly increases the potential of outside investor interest in the now public traded company. At the end of an operating year, the corporation as a legal independent entity has the right to decide what to do with their profits. The corporation may divide those profits among shareholders, invest in expand the business, or save it as cash. Another viable option is to invest in stocks and debt securities. One good reason to invest in securities of other corporations is that those are short-term investments, the liquidation process can be done in one day through a broker, and funds can become available immediately. The rate return is higher than a savings account and the corporation has be obligation of maximize profits, which is an excellent option. In addition, it offers the possibility of gaining advantage on other corporations through the right to vote and even taking over that other corporation for strategic reasons. The corporation has different resources to raise cash when it comes to expand the business. The two primary options are Debt and Equity. Debt is borrowing money that will be repaid along with interest. Equity is selling interest or a portion of the company. Through debt, the owner keeps entire ownership of the company because lender does not gain entitlement or rights. The owner of the company knows ahead of time the amount to be repaid and the interest rate attached to the loan, allowing the proper planning. The interest paid is tax deductible, which is another advantage of debts. Equity does not have to be repaid which is important when the corporation is close to the insolvency point. Equity does not require assets as collateral or restrictions on certain activities, which may be the case with debts. During 2012, Facebook invested $4.87 billion on the purchase of marketable securities, which provide the corporation with an increased amount of cash when comparing with previous years. Facebook’s primary financial activities are equity issuances obtaining $6.8 billion in proceeds from their IPO but also they use in a smaller scale lease financing and debt financing. Equity Securities An equity security is a financial asset that entitles the owner to a claim on the profits of a particular company. The owner of the equity security receives a dividend check based on the number of equity shares he owns. He also has the right to sell his shares to either take profits or cut losses at any time. Owners of equity shares also usually have voting rights that give them a proportional vote in certain major corporate decisions. ​​Debt Securities Companies and government entities sometimes raise money to finance their operations by offering debt securities -- also known as bonds -- for sale. When you purchase a bond, you are lending money to that company or government entity. In return for the loan, the bond issuer provides you with a debt security in which it promises to repay the amount you have loaned it with interest on a specific future date. Bond owners have no ownership stake in the company or government entity. One of the reasons companies prefer to issue bonds instead of stock to the public is to avoid giving equity in the company to investors in exchange for the money it needs. Conclusion Facebook is a global social networking giant that is gaining not only in revenue, but also in popularity on a daily basis. The number of “likes” on Facebook has increased by 67%, the number of content items shared has increased by 94%, the number of daily active users has increased by 26% to 665MM, and revenue has increased by 38% to 1.46 billion dollars in the first quarter of 2013. Facebook has grown into a global social networking program to contend with and continues to be financially healthy. References Debt vs. Equity. (2013). Retrieved from http://smallbusiness.findlaw.com/business-finances/debt-vs-equity-advantages-and-disadvantages.html Reasons Why Corporations Invest in Securities. (1995). Retrieved from http://wiki.fool.com/Reasons_Why_Corporations_Invest_in_Securities Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2011). Financial accounting: Tools for business ​decision making (6th ed.). Hoboken, NJ: John Wiley & Sons. Phillips, S. (2007). A brief history of Facebook. Retrieved from http://www.guardian.co.uk ​/technology/2007/jul/25/media.newmedia Facebook earnings Q2 2012. Retrieved from http://investor.fb.com/results.cfm