# Analyze and compare AT&amp;T and Facebook AT&amp;T Inc. (T) is a leading global provider of telecommunication services. Facebook, Inc. (FB) is a major worldwide social media company. AT&amp;T has a lengthy history and was founded by Alexander Graham Bell. Facebook has a short history and was founded by Mark Zuckerberg. Facebook uses telecommunication networks, like those of AT&amp;T, to deliver social content to its users. Free cash flow and revenue information for both companies for three recent years is as follows (in millions): AT&amp;T Information from the statement of cash flows: Information from the income statement: Facebook Information from the statement of cash flows: Information from the income statement: a. Using total revenue, which company appears to be the larger at the end of Year 3? b. Using total revenue, which company appears to be growing faster across the three years? c. Compute the cash used to purchase property, plant, and equipment (PP&amp;E) as a percent of the cash flows from operating activities for all three years for each company. Round to the nearest whole percent. d. Using the computations in (c), which company appears to require more cash to purchase PP&amp;E, and what impact does this have on free cash flow? e. Compute the ratio of free cash flow to revenue for all three years for each company, and plot the data on a line chart with the years on the horizontal axis. f. Interpret the chart.

### Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663

Chapter
Section

### Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663
Textbook Problem
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## Analyze and compare AT&T and FacebookAT&T Inc. (T) is a leading global provider of telecommunication services. Facebook, Inc. (FB) is a major worldwide social media company. AT&T has a lengthy history and was founded by Alexander Graham Bell. Facebook has a short history and was founded by Mark Zuckerberg. Facebook uses telecommunication networks, like those of AT&T, to deliver social content to its users. Free cash flow and revenue information for both companies for three recent years is as follows (in millions):AT&TInformation from the statement of cash flows:Information from the income statement:FacebookInformation from the statement of cash flows:Information from the income statement: a. Using total revenue, which company appears to be the larger at the end of Year 3? b. Using total revenue, which company appears to be growing faster across the three years? c. Compute the cash used to purchase property, plant, and equipment (PP&E) as a percent of the cash flows from operating activities for all three years for each company. Round to the nearest whole percent. d. Using the computations in (c), which company appears to require more cash to purchase PP&E, and what impact does this have on free cash flow? e. Compute the ratio of free cash flow to revenue for all three years for each company, and plot the data on a line chart with the years on the horizontal axis. f. Interpret the chart.

a.

To determine

Identify the company which appears to be the largest at the end of Year 3, based on revenue.

### Explanation of Solution

Statement of cash flows:

Statement of cash flow is a financial statement that shows the cash and cash equivalents of a company for a particular period of time. It shows the net changes in cash, by reporting the sources and uses of cash as a result of ...

b.

To determine

Identify the company which appears to be growing faster across the three years.

c.

To determine

Compute the cash used to purchase property, plant, and equipment as a percent of the cash flows from operating activities for all three years for each company.

d.

To determine

Identify the company which appears to require more cash to purchase property, plant, and equipment and explain its impact on free cash flow, based on findings of part (c).

e.

To determine

Compute the ratio of free cash flow to revenue for all three years for each company, and plot the data on a line chart.

f.

To determine

Interpret the chart.

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