Financial Analysis of the company Twitter

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Since the beginning of social networks has seen a rapid increase in the numbers of these organizations because today is the main means of communication and entertainment that have most people in a high age range, in this way , companies like Twitter report very complete and versatile financial statements, which I will analyze then taking into account the results reported by this company in 2017 and finally concluding, Is Twitter a company that Is worth Invest?

Background

«On March 21, 2006, Jack Dorsey launched the first tweet to the world, a first and simple invitation to enter what was then a budding project. In its beginnings, the idea of Twitter emerged as a research project within Obvious, a small company located in San Francisco. Inspired at first moment in the boom of Flickr; Twitter was initially called Twttr within the company and internally for later becoming the company it is today, Twitter Inc., and whose Board of Directors is made up of Dorsey, Evan Williams and Biz Stone. » 1

FINANCIAL ANALYSIS

According to the Financial Situation (Balance Sheet) of the company, in 2017 Twitter INC. It Had a Total of Assets of $7,412,000 of dollars, a Total of Liabilities for $2,365,000 of dollars and of Capital had a total of $5.047; They are positive results because when a company has a greater number of assets than liabilities means that it has the possibility or facility to cover its debts and meet its obligations quickly, so it is said that the company has liquidity, because in case Of an unforeseen have the ability to make payments to their lenders.

An indicator that is useful in this aspect is the Current Ratio, which we can calculate by dividing the total of Circulating Assets between the total Circulating Liabilities (5, 321.88)/(583.28) = 9.12 and this relationship indicates the number of times in which the Short-Term Asset is Able to cover the Liabilities in the Short Term. In the case of Twitter, they have the ability to cover more than nine times their debts and obligations. It Is important to emphasize that depending on the company the indicator is used because it is often more feasible to use the Quick Ratio (Known as the acidity of the company), because it gives us a more precise value of the immediate liquidity because this indicator is only taken in C Uenta the Cash and Accounts Receivable divided by the Liabilities; Therefore, if a company has a slowly flowing inventory might not be so exact the degree of liquidity, in the case of Twitter the indicator is the same since this company, being a service company, does not have Inventory.

The long-term debt to capitalization Ratio of Twitter is 4.11%, which indicates the company’s financial leverage by dividing the long-term debt between the amount of capital available.

In the income Statement we can see that the company had revenue, in the same year, of $2,443,000 dollars and yet, due to the interest, the company ended the year having a loss of $108 million dollars.

If we analyze the Profitability of this company, we can find different factors that will indicate the ability of Twitter to use their Capital or Assets to generate profits.

Twitter’s Gross Margin is 64.8% and indicates the percentage of total sales Revenue that the company retains after incurring the direct costs associated with its services; If we compared this percentage with Facebook that is 86.6% (data extracted from Investing.com) we can realize that Facebook actually has more Profitability because for every dollar of sale is 0.86 as profit and on Twitter, for every dollar of Sale 0.64 is what contributes to the profits.

On the other hand, the Cash Flow Statement shows us precisely, the inputs and outputs of the money that was for a given period, in this case we are talking about the 2017. Twitter had Cash for Operational Activities an entry of $831 million dollars, and for Research Activities and Financing Activities had outputs of $112 and $78 million dollars respectively.

There Are Certain indices that help us measure how well the Cash Flow of a company covers its short-term financial obligations because it shows us the solvency of the company. For example, the Cash Flow to Current Maturities of long-term Debt, (which is calculated By dividing the sum of income and depreciation between long-term debt), tells us how well the cash flow covers existing debts and the greater The indicator is better.

Conclusion

As a result of the analysis presented and taking into account the liquidity, solvency, profitability and financial leverage, we can say that Twitter is a company that has a good financial situation because it has the capacity to solve its debts and Obligations and at the same time to generate enough income to stay as one of the main entertainment companies, however, in the last year this company has shown a considerable decrease in its income and this is due to the moose that has had its Main competition that is Facebook. For my part, I consider that Twitter is a company in which if it is worth investing because it is in the main market that is Streaming and can continue to impulsándose and innovating to be more attractive to the public because it has the Cash destined to Inve Stigación and Development necessary, besides that, considering the price of the shares and comparing it with the benefits that it brings to the shareholders I consider that Twitter is certainly worth it.

 

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