Prepare A Business Memo In Word Addressed To Mark Zuckerberg

Prepare A Business Memo In Word Addressed To Mark Zuckerberg Discussin

Prepare a business memo in Word addressed to Mark Zuckerberg discussing the following: 1. AccountBook obtains a $500,000 loan and Mark Zuckerberg contributes $250,000 of his own assets in exchange for common stock in the new company. a. What is the new company’s total amount of liabilities plus equity? b. What is the new company’s total amount of assets? 2.

If the new company earns $80,000 in net income in the first year of operation, compute its return on asset (assume average assets equal $750,000). Assess its performance if competitors average a 10% return.

Paper For Above instruction

In this memo addressed to Mark Zuckerberg, the financial aspects of establishing a new company, AccountBook, are analyzed based on the provided scenarios. The memo discusses the company's financial position after initial funding and evaluates its performance based on projected profitability.

Firstly, it is essential to determine the total amount of liabilities plus equity and the total assets of the company post-financing activities. AccountBook raises a loan of $500,000 and Mark Zuckerberg contributes $250,000 of his own assets in exchange for common stock. The sum of liabilities and equity provides the total financing in the company, and the total assets reflect the sum of assets owned by the business.

The total liabilities will be equivalent to the amount of the loan, which is $500,000. Mark Zuckerberg's contribution is treated as equity; hence, his $250,000 contribution in exchange for stock increases the equity component. Therefore, the total liabilities plus equity amount to the sum of liabilities ($500,000) and equity ($250,000), totaling $750,000.

Simultaneously, the total assets of the company are the sum of the liabilities and equity, equating to $750,000, consistent with the basic accounting equation (Assets = Liabilities + Equity). This indicates that the company's assets are financed through a combination of debt and owner investment.

Next, considering the company's profitability, if AccountBook earns $80,000 in net income in its first year, its return on assets (ROA) can be calculated. ROA is a measure of how efficiently a company utilizes its assets to generate profit and is calculated as:

\[ \text{ROA} = \frac{\text{Net Income}}{\text{Average Total Assets}} \]

Given that the average assets are $750,000, the ROA for AccountBook is:

\[ \frac{\$80,000}{\$750,000} \approx 0.1067 \text{ or } 10.67\% \]

This returns an ROA of approximately 10.67%, which exceeds the industry average of 10%, suggesting that AccountBook is performing slightly better than its competitors in leveraging its assets to generate profit. A higher ROA often indicates effective management and operational efficiency.

Comparative assessment indicates that the company is on a positive trajectory. The higher-than-average return demonstrates competitive advantage and potential for future growth. However, ongoing analysis is necessary to ensure continued performance superiority and to identify areas for efficiency improvements.

In conclusion, the initial financial structure of AccountBook shows a balanced mix of debt and equity financing, with total assets aligning with the liabilities and owner investment. The profitability metrics indicate a healthy start, reflecting effective asset utilization compared to industry benchmarks. Continuous financial monitoring and strategic management will be crucial in maintaining and enhancing this performance.

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