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Analyze and compare AT&T and Facebook AT&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&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&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.

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Financial And Managerial Accounting

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

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Chapter
Section
BuyFindarrow_forward

Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663
Chapter 13, Problem 4MAD
Textbook Problem
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Analyze and compare AT&T and Facebook

AT&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&T

Information from the statement of cash flows:

Chapter 13, Problem 4MAD, Analyze and compare ATT and Facebook ATT Inc. (T) is a leading global provider of telecommunication , example  1

Information from the income statement:

Chapter 13, Problem 4MAD, Analyze and compare ATT and Facebook ATT Inc. (T) is a leading global provider of telecommunication , example  2

Facebook

Information from the statement of cash flows:

Chapter 13, Problem 4MAD, Analyze and compare ATT and Facebook ATT Inc. (T) is a leading global provider of telecommunication , example  3

Information from the income statement:

Chapter 13, Problem 4MAD, Analyze and compare ATT and Facebook ATT Inc. (T) is a leading global provider of telecommunication , example  4

  1. a. Using total revenue, which company appears to be the larger at the end of Year 3?
  2. b. Using total revenue, which company appears to be growing faster across the three years?
  3. 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.
  4. 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?
  5. 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.
  6. 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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Chapter 13 Solutions

Financial And Managerial Accounting
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Ch. 13 - Classifying cash flows Identify whether each of...Ch. 13 - Adjustments to net incomeindirect method Ripley...Ch. 13 - Changes in current operating assets and...Ch. 13 - Cash flows from operating activitiesindirect...Ch. 13 - Land transactions on the statement of cash flows...Ch. 13 - Common stock transactions on the statement of cash...Ch. 13 - Free cash flow Dillin Inc. reported the following...Ch. 13 - Appendix 2 Cash received from customersdirect...Ch. 13 - Appendix 2 Cash payments for merchandisedirect...Ch. 13 - Cash flows from operating activitiesnet loss In a...Ch. 13 - Effect of transactions on cash flows State the...Ch. 13 - Classifying cash flows Identify the type of cash...Ch. 13 - Cash flows from operating activitiesindirect...Ch. 13 - Cash flows from operating activitiesindirect...Ch. 13 - Cash flows from operating activitiesindirect...Ch. 13 - Cash flows from operating activitiesindirect...Ch. 13 - Reporting changes in equipment on statement of...Ch. 13 - Reporting changes in equipment on statement of...Ch. 13 - Reporting land transactions on statement of cash...Ch. 13 - Determining cash payments to stockholders The...Ch. 13 - Reporting stockholders equity items on statement...Ch. 13 - Reporting land acquisition for cash and mortgage...Ch. 13 - Reporting issuance and retirement of long-term...Ch. 13 - Determining net income from net cash flow from...Ch. 13 - Cash flows from operating activitiesindirect...Ch. 13 - Statement of cash flowsindirect method The...Ch. 13 - Statement of cash flowsindirect method List the...Ch. 13 - Cash flows from operating activitiesdirect method...Ch. 13 - Determining selected amounts for cash flows from...Ch. 13 - Cash flows from operating activitiesdirect method...Ch. 13 - Cash flows from operating activitiesdirect method...Ch. 13 - Statement of cash flowsindirect method The...Ch. 13 - Statement of cash flowsindirect method The...Ch. 13 - Statement of cash flowsindirect method The...Ch. 13 - Statement of cash flowsdirect method The...Ch. 13 - Statement of cash flowsdirect method applied to PR...Ch. 13 - Statement of cash flowsindirect method The...Ch. 13 - Statement of cash flowsindirect method The...Ch. 13 - Statement of cash flowsindirect method The...Ch. 13 - Statement of cash flowsdirect method The...Ch. 13 - Statement of cash flowsdirect method applied to PR...Ch. 13 - Analyze and compare Amazon.com, Best Buy, and...Ch. 13 - Analyze and compare Apple, Coca-Cola, and Verizon...Ch. 13 - Analyze Aeropostale Aeropostale, Inc. (AROPQ) is a...Ch. 13 - Analyze and compare ATT and Facebook ATT Inc. (T)...Ch. 13 - Analyze Priceline The Priceline Group Inc. (PCLN)...Ch. 13 - Ethics in Action Head Donuts Inc. is a retailer of...Ch. 13 - Financial condition Tidewater Inc., a retailer,...Ch. 13 - Using the statement of cash flows You are...

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