Question

Select the financial statement of a publicly traded company. Analyze the various financing options the company employed. What other options might you recommend? Why would you recommend them?

Answer 1

Facebook Inc.- Facebook was incorporated on July, 2004. It is an American social media company, established and owned by 'Mark Zuckerberg'. Facebook enables people to share their personal and professional activities through internet. It is a publicly traded company and its stocks are traded on NASDAQ

Facebook financing options- Facebook has these financing options:

• Common stocks: Ordinary shares, that are issued to raise the capital.
• Retained earnings: Portion of net earnings, that is retained by the company and used for growth and expansion purpose.
• Capital surplus: It is the excess on par. When company issues shares and receives the proceeds, more than the par value, it is also called premium.

We can very well see that Facebook does not have long term debt. It is a debt free company so I recommend that for raising funds, Facebook can use long term debt, Long term debt is long term or non current liability.

Benefit of long term debt-

1. Long term loans are secured and cost of borrowing is lower.
2. Interest on loan is a deductible expenses under Income tax, so it provides tax benefits also.