I need help analyzing these two businesses. I need 4 reasons why one business mi
ID: 2460205 • Letter: I
Question
I need help analyzing these two businesses. I need 4 reasons why one business might be better than the other
Business 1 Common-Size Consolidated Income Statement
12 months ended
Dec 31, 2014
Dec 31, 2013
Dec 31, 2012
Revenues
100.00%
100.00%
100.00%
Cost of revenues
-68.17%
-70.48%
-72.75%
Gross profit
31.83%
29.52%
27.25%
Marketing
-11.03%
-11.52%
-13.43%
Technology and development
-8.58%
-8.66%
-9.12%
General and administrative
-4.90%
-4.12%
-3.32%
Operating income
7.31%
5.22%
1.39%
Interest expense
-0.91%
-0.67%
-0.55%
Interest and other income (expense)
-0.06%
-0.07%
0.01%
Loss on extinguishment of debt
–
-0.57%
–
Other income (expense)
-0.97%
-1.31%
-0.54%
Income before income taxes
6.35%
3.91%
0.84%
Provision for income taxes
-1.50%
-1.34%
-0.37%
Net income
4.85%
2.57%
0.48%
Business 1
Common-Size Consolidated Statement of Financial Position, Assets
Dec 31, 2014
Dec 31, 2013
Dec 31, 2012
Cash and cash equivalents
15.78%
11.18%
7.32%
Short-term investments
7.01%
11.00%
11.54%
Accounts receivable
–
–
–
Current content library, net
30.12%
31.53%
34.48%
Other current assets
2.92%
2.81%
3.14%
Current assets
55.84%
56.51%
56.47%
Non-current content library, net
39.30%
38.63%
37.95%
Property and equipment, net
2.12%
2.47%
3.32%
Other non-current assets
2.73%
2.39%
2.25%
Non-current assets
44.16%
43.49%
43.53%
Total assets
100.00%
100.00%
100.00%
Business 1., Common-Size Consolidated Statement of Financial Position, Liabilities and Stockholders' Equity
Dec 31, 2014
Dec 31, 2013
Dec 31, 2012
Current content liabilities
30.00%
32.81%
34.45%
Accounts payable
2.86%
2.00%
2.18%
Accrued expenses
0.99%
1.00%
1.34%
Deferred revenue
3.89%
3.99%
4.27%
Current liabilities
37.74%
39.80%
42.24%
Non-current content liabilities
22.33%
24.86%
27.13%
Long-term debt
12.75%
9.24%
5.04%
Long-term debt due to related party
–
–
5.04%
Other non-current liabilities
0.85%
1.46%
1.78%
Non-current liabilities
35.93%
35.56%
39.00%
Total liabilities
73.67%
75.36%
81.23%
Preferred stock, $0.001 par value; no shares issued and outstanding
–
–
–
Common stock, $0.001 par value
0.00%
0.00%
0.00%
Additional paid-in capital
14.78%
14.36%
7.60%
Accumulated other comprehensive income (loss)
-0.06%
0.07%
0.07%
Retained earnings
11.61%
10.21%
11.09%
Stockholders' equity
26.33%
24.64%
18.77%
Total liabilities and stockholders' equity
100.00%
100.00%
100.00%
Business 2
Common-Size Consolidated Income Statement
12 months ended
Dec 31, 2014
Dec 31, 2013
Dec 31, 2012
Revenue
100.00%
100.00%
100.00%
Programming and content
-23.21%
-22.38%
-21.99%
Gross profit
76.79%
77.62%
78.01%
Sales and marketing
-9.61%
-9.26%
-8.49%
Technical operations
-6.71%
-6.78%
-6.71%
Customer care
-3.68%
-3.46%
-3.46%
Other operating
-20.73%
-22.04%
-22.76%
Depreciation
-14.19%
-14.26%
-14.75%
Amortization
-0.59%
-0.57%
-0.51%
Merger-related and restructuring costs
-0.99%
-0.54%
-0.54%
Asset impairments
–
–
–
Operating income
20.31%
20.71%
20.78%
Interest expense
-6.22%
-7.03%
-7.55%
Interest income
–
0.01%
0.04%
Interest expense, net
-6.22%
-7.02%
-7.51%
Income from equity-method investments, net
0.14%
0.09%
2.12%
Gain (loss) on equity award reimbursement obligation to Time Warner
0.00%
-0.05%
-0.04%
Gain on sale of investment in Clearwire
–
–
0.30%
Other investment losses
–
–
-0.06%
Other
0.00%
0.01%
–
Other income, net
0.15%
0.05%
2.32%
Income before income taxes
14.24%
13.74%
15.60%
Income tax provision
-5.33%
-4.91%
-5.50%
Net income
8.90%
8.83%
10.10%
Net income attributable to noncontrolling interests
–
–
-0.02%
Net income attributable to TWC shareholders
8.90%
8.83%
10.08%
Business 2, Common-Size Consolidated Statement of Financial Position, Assets
Dec 31, 2014
Dec 31, 2013
Dec 31, 2012
Cash and cash equivalents
1.46%
1.09%
6.63%
Short-term investments
0.00%
0.00%
0.30%
Accounts receivable
1.96%
1.98%
1.77%
Other Current Assets
1.36%
1.38%
1.08%
Current assets
4.78%
4.43%
9.80%
Property and equipment, net
32.97%
31.20%
29.59%
Long-term Investments
0.13%
0.12%
0.17%
Intangible Assets
61.18%
61.65%
59.31%
Other non-current assets
0.95%
2.61%
1.13%
Non-current assets
95.22%
95.58%
90.20%
Total assets
100.00%
100.00%
100.00%
Business 2, Common-Size Consolidated Statement of Financial Position, Liabilities and Stockholders' Equity
Dec 31, 2014
Dec 31, 2013
Dec 31, 2012
ST Debt & Current Portion LT Debt
2.10%
3.67%
3.65%
Accounts payable
1.17%
1.17%
1.31%
Other Current liabilities
6.00%
5.99%
5.72%
Current liabilities
9.28%
10.83%
10.70%
Long-term debt
46.80%
48.46%
50.53%
Deffered Taxes
25.90%
25.07%
22.65%
Other non-current liabilities
1.50%
1.49%
1.51%
Non-current liabilities
74.20%
75.00%
74.68%
Total liabilities
83.46%
87.69%
85.38%
Common Equity (Total)
16.70%
14.38%
14.62%
Total Stockholders' equity
16.70%
14.38%
14.62%
Accumulated Minority Interest
0.01%
0.01%
0.01%
Total Equity
16.54%
14.40%
14.62%
Total liabilities and stockholders' equity
100.00%
100.00%
100.00%
I need help analyzing these two businesses. I need 4 reasons why one business might be better than the other
Business 1 Common-Size Consolidated Income Statement
12 months ended
Dec 31, 2014
Dec 31, 2013
Dec 31, 2012
Revenues
100.00%
100.00%
100.00%
Cost of revenues
-68.17%
-70.48%
-72.75%
Gross profit
31.83%
29.52%
27.25%
Marketing
-11.03%
-11.52%
-13.43%
Technology and development
-8.58%
-8.66%
-9.12%
General and administrative
-4.90%
-4.12%
-3.32%
Operating income
7.31%
5.22%
1.39%
Interest expense
-0.91%
-0.67%
-0.55%
Interest and other income (expense)
-0.06%
-0.07%
0.01%
Loss on extinguishment of debt
–
-0.57%
–
Other income (expense)
-0.97%
-1.31%
-0.54%
Income before income taxes
6.35%
3.91%
0.84%
Provision for income taxes
-1.50%
-1.34%
-0.37%
Net income
4.85%
2.57%
0.48%
Explanation / Answer
Business 1 appears to be better because
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