Prepare A Business Memo In Word For Mark Zuckerberg

Prepare a business memo in Word addressed to Mark Zuckerberg discussing

Prepare a business memo in Word addressed to Mark Zuckerberg discussing

Assume that Mark Zuckerberg decides to open a new Website devoted to social networking for accountants and those studying accounting. This new company will be called AccountBook.

Required: 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

To: Mark Zuckerberg

From: [Your Name]

Date: [Today’s Date]

Subject: Financial Evaluation and Performance Assessment of New Venture, AccountBook

This memorandum provides a comprehensive analysis of the initial financial structure and the first-year performance assessment of your proposed social networking platform dedicated to accountants, named AccountBook. The assessment focuses on understanding the accounting fundamentals involved in establishing the company, as well as evaluating its potential profitability relative to industry benchmarks.

Initial Financial Structure of AccountBook

AccountBook's initial capital structure involves a combination of debt financing and equity investment. It has secured a $500,000 loan (liability) and your personal contribution of $250,000 in exchange for common stock (equity). The total assets of the company at inception correspond to the sum of liabilities and equity, based on the accounting equation (Assets = Liabilities + Equity).

Part A: Total Liabilities plus Equity

Given the loan of $500,000 and your equity investment of $250,000, the total liabilities plus equity amount to:

  • Liabilities (Loan): $500,000
  • Equity (Your contribution): $250,000

Therefore, the total amount of liabilities plus equity equals $500,000 + $250,000 = $750,000.

Part B: Total Assets

According to the fundamental accounting principle, total assets are equal to the sum of liabilities and equity. Hence, the total assets of AccountBook at inception are $750,000.

This initial asset base is allocated to various needs such as technology infrastructure, website development, marketing, and operational expenses, aligning with the company’s strategic objectives.

First-Year Performance Analysis and Industry Benchmark

In its first year, AccountBook earns a net income of $80,000. To assess its efficiency and profitability, the return on assets (ROA) is calculated using the formula:

ROA = (Net Income / Average Total Assets) × 100%

Given the average assets are estimated at $750,000, the ROA is:

ROA = ($80,000 / $750,000) × 100% ≈ 10.67%

This indicates that the company generated a return of approximately 10.67% on its assets during its first year of operations.

Assessment Relative to Industry Performance

Comparing this return to the industry benchmark of 10%, AccountBook’s performance slightly exceeds the average. This suggests effective asset utilization and profitable operations, which are promising indicators for future growth. The ability to generate an above-average return demonstrates strong management and strategic alignment with market demands.

Furthermore, a return of 10.67% signifies that the company has begun establishing a sustainable profit-generating foundation, which is crucial for attracting additional investments or expanding operations.

Conclusions and Recommendations

AccountBook’s initial financial structure demonstrates sound leverage, with liabilities and equity totaling $750,000. The first-year profit margin reflected in a ROA of 10.67% surpasses industry averages, indicating a competitive edge and positive market reception.

It is recommended to continually monitor financial metrics, optimize operational efficiencies, and reinvest profits to scale the platform’s features. Additionally, pursuing strategic partnerships and targeted marketing efforts will further enhance revenue streams and user engagement.

In summary, with careful financial management and strategic growth initiatives, AccountBook is positioned to achieve long-term success comparable to or exceeding industry standards.

References

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  • Khan, M. Y., & Jain, P. K. (2014). Financial Management (7th ed.). McGraw-Hill Education.
  • Gibson, C. H. (2013). Financial Reporting & Analysis (11th ed.). Cengage Learning.
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  • Ross, S. A., Westerfield, R. W., & Jaffe, J. (2016). Corporate Finance (11th ed.). McGraw-Hill Education.
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  • Ohlson, J. A. (1995). Earnings, Book Values, and Dividends in Equity Valuation. Contemporary Accounting Research, 11(2), 661–687.

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