10K Analysis -Nike final assignment

SampleCourseProjectforFacebook.xlsx

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Common-size Income Statement

FACEBOOK, INC.
Common-size
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
Year Ended December 31,

	2017	% of net sales	2016	% of net sales	2015	% of net sales
Revenue	$ 40,653	100.00%	$ 27,638	100.0%	$ 17,928	100.0%
Costs and expenses:
Cost of revenue	5,454	13.42%	3,789	13.7%	2,867	16.0%
Research and development	7,754	19.07%	5,919	21.4%	4,816	26.9%
Marketing and sales	4,725	11.62%	3,772	13.6%	2,725	15.2%
General and administrative	2,517	6.19%	1,731	6.3%	1,295	7.2%
Total costs and expenses	20,450	50.30%	15,211	55.0%	11,703	65.3%
Income from operations	20,203	49.70%	12,427	45.0%	6,225	34.7%
Interest and other income (expense), net	391	0.96%	91	0.3%	(31)	-0.2%
Income before provision for income taxes	20,594	50.66%	12,518	45.3%	6,194	34.5%
Provision for income taxes	4,660	11.46%	2,301	8.3%	2,506	14.0%
Net income	$ 15,934	39.20%	$ 10,217	37.0%	$ 3,688	20.6%
Less: Net income attributable to participating
securities	14	0.03%	29	0.1%	19	0.1%
Net income attributable to Class A and Class B
common stockholders	$ 15,920	39.16%	$ 10,188	36.9%	$ 3,669	20.5%
Earnings per share attributable to Class A and
Class B common stockholders:
Basic	$ 5.49		$ 3.56		$ 1.31
Diluted	$ 5.39		$ 3.49		$ 1.29
Weighted average shares used to compute earnings
per share attributable to Class A and Class B			`
common stockholders:
Basic	2,901		2,863		2,803
Diluted	2,956		2,925		2,853

Conmmon-size Balance Sheet

FACEBOOK, INC.
Common-size
CONSOLIDATED BALANCE SHEETS
(In millions, except for number of shares and par value)
	December 31,	% of	December 31,
	2017	total assets	2016
Assets
Current assets:
Cash and cash equivalents	$ 8,079	9.56%	$ 8,903	13.71%
Marketable securities	33,632	39.79%	20,546	31.63%
Accounts receivable, net of allowances of $189 and $94 as
of December 31, 2017 and 2016, respectively	5,832	6.90%	3,993	6.15%
Prepaid expenses and other current assets	1,020	1.21%	959	1.48%
Total current assets	48,563	57.45%	34,401	52.96%
Property and equipment, net	13,721	16.23%	8,591	13.22%
Intangible assets, net	1,884	2.23%	2,535	3.90%
Goodwill	18,221	21.56%	18,122	27.90%
Other assets	2,135	2.53%	1,312	2.02%
Total assets	$ 84,524	100.00%	$ 64,961	100.00%
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$ 380	0.45%	$ 302	0.46%
Partners payable	390	0.46%	280	0.43%
Accrued expenses and other current liabilities	2,892	3.42%	2,203	3.39%
Deferred revenue and deposits	98	0.12%	90	0.14%
Total current liabilities	3,760	4.45%	2,875	4.43%
Other liabilities	6,417	7.59%	2,892	4.45%
Total liabilities	10,177	12.04%	5,767	8.88%
Commitments and contingencies
Stockholders' equity:
Common stock, $0.000006 par value; 5,000 million Class A
shares authorized, 2,397 million and 2,354 million shares
issued and outstanding, as of December 31, 2017 and
December 31, 2016, respectively; 4,141 million Class B
shares authorized, 509 million and 538 million shares
issued and outstanding, as of December 31, 2017 and
December 31, 2016, respectively.	- 0		- 0
Additional paid-in capital	40,584	48.01%	38,227	58.85%
Accumulated other comprehensive loss	(227)	-0.27%	(703)	-1.08%
Retained earnings	33,990	40.21%	21,670	33.36%
Total stockholders' equity	74,347	87.96%	59,194	91.12%
Total liabilities and stockholders' equity	$ 84,524	100.00%	$ 64,961	100.00%

Required Calculations

	FACEBOOK, INC.
	CONSOLIDATED STATEMENTS OF INCOME
	(In millions, except per share amounts)
	Year Ended December 31,

		2017	2016	2015
	Revenue	$ 40,653	$ 27,638	$ 17,928
Sales growth % - 2017 over 2016		47.1%
Sales growth % - 2016 over 2015		54.2%
	Note 5 contains gross property plant and equipment before accumulated depreciation
		2017	2016
Property, plant, and equipment (gross)		$ 18,337	$ 11,803
PP&E (Gross) Growth %		55.4%
		2017	2016
Sales		$ 40,653
Accounts receivable		5,832	3,993
Average accounts receivable		4,913
AR turnover		8.28
		2017	2016
Cost of sales		$ 5,454	$ 3,789
Inventory		0	0
Average inventory		0
Inventory turnover	NA	ERROR:#DIV/0!
		2017	2016
Cost of sales		$ 5,454	$ 3,789
Accounts payable		$ 380	$ 302
Average accounts payable		$ 341
Accounts payable turnover		15.99
	Note 5 contains the depreciation expense
		2017	2016
Depreciation expense		$ 2,330	$ 1,590
Gross PP&E		$ 18,337	$ 11,803
Depreciation expense as a % of Gross PP&E		12.7%	13.5%
Items from the footnotes
Effective interest rate on Long-Term Debt		Per Note 8, Facebook does not have any long-term debt.
Plans to pay down Long-Term Debt		Since Facebook has no long-term debt, they have no plans to pay it down.
Effective tax rate (as a % of Pretax income)		Per Note 12, the effective tax rate is 22.6% for 2017.

Assumptions

Please note I included cell formulas in column D for each of the items.
Value Drivers for 2018
Sales Growth %	40.0%	The growth rate dropped by 13% from 2016 to 2017 so I assumed that the growth rate would drop 15% for 2018 which would make the sales growth rate 40%.
COGS as a % of Sales Revenue	20.1%	Cost of sales fell to 13% of revenue in 2017 from 16% in 2016. Based on increased privacy and security costs, I predict cost of sales will jump by 50%.
S, G, & A as a % of Sales Revenue	24.9%	S, G, & A was almost 20% of sales revenue for 2016 but then it dropped to about 18% in 2017. Due to increased legal costs, I predict this cost will jump by 40% over the 2017 figure.
Interest rate as a % of Long-Term Debt	N/A	Facebook does not have any long-term debt
Tax rate as a % of Pre-tax Income	8.6%	Since the Trump corporate tax cut is being phased in, I belive the tax rate will drop by 25% versus the 2017 number.
PP&E (Gross) Growth	60.9%	With Facebook growing significantly as they have been, I project that P, P, & E will grow by 10%.
Pay Down of Long-Term Debt	N/A
Other Assumptions for 2018
Depreciation Expense as a % of Gross PP&E	13.1%	The average of the 2017 and 2016 depreciation expense as a % of Gross PP&E was used.
AR turnover	8.28	The AR turnover for 2017 was used for this figure.
Inventory turnover	N/A	Facebook does not carry inventory as shown on the Balance Sheet.
AP turnover	15.99	The AP turnover for 2017 was used for this figure.

Forecasted Income Statement

	FACEBOOK, INC.
	Projected Income Statemen
	Year Ended December 31,2018
	in millions except per share amounts
		2018	Assumptions
Revenue		$56,925	40% increase over 2017 (linked to Assumptions worksheet(
Costs and expenses:
Cost of revenue		11,456	20.1% of revenue (linked to Assumptions worksheet)
Research and development		7,754	kept at same level as 2017
Selling, general, and admiinistrative		14,197	24.9% of revenue (linked to Assumptions worksheet)
Total costs and expenses		33,407	formula
Income from operations		23,519	formula
Interest and other income (expense), net		391	no change
Income before provision for income taxes		23,910	formula
Provision for income taxes		4,894	8.6% of revenue
Net income		19,016	formula
Less: Net income attributable to participating
securities		14	no change
Net income attributable to Class A and Class B		$19,002	formula
common stockholders
Earnings per share attributable to Class A and
Class B common stockholders:
Basic		$6.55
Diluted		$6.43
Weighted average shares used to compute earnings
per share attributable to Class A and Class B
common stockholders:
Basic		2,901	no change
Diluted		2,956	no change

Forecasted Balance Sheet

	FACEBOOK, INC.
	Projected Balance Sheet
	as of December 31, 2018
	in millions except per share amounts
Assets
Current assets:			Assumptions
Cash and cash equivalents		$18,014	plug
Marketable securities		33,632	no change
Accounts receivable, net of allowances of $189 and $94 as		6,879	divide net sales by 8.28
of December 31, 2017 and 2016, respectively
Prepaid expenses and other current assets		1,020	no change
Total current assets		59,545
Property and equipment, net		22,077	grow by 60.9% over 2017
Intangible assets, net		1,884	no change
Goodwill		18,221	no change
Other assets		2,135	no change
Total assets		$103,862	formula
Liabilities and stockholders' equity
Current liabilities:
Accounts payable		$716	divide cost of revenue by 15.99
Partners payable		390	no change
Accrued expenses and other current liabilities		2,892	no change
Deferred revenue and deposits		98	no change
Total current liabilities		4,096	formula
Other liabilities		6,417	no change
Total liabilities		10,513	formula
Commitments and contingencies
Stockholders' equity:
Common stock, $0.000006 par value; 5,000 million Class A
shares authorized, 2,397 million and 2,354 million shares
issued and outstanding, as of December 31, 2017 and
December 31, 2016, respectively; 4,141 million Class B
shares authorized, 509 million and 538 million shares
issued and outstanding, as of December 31, 2017 and
December 31, 2016, respectively.
Additional paid-in capital		40,584	no change
Accumulated other comprehensive loss		(227)	no change
Retained earnings		52,992	add net income and subtract dividends which is zero for Facebook
Total stockholders' equity		93,349
Total liabilities and stockholders' equity		$103,862