This Project Will Require You To Show Your Ability To Create

This Project Will Require You To Show Your Ability To Create And Under

This project requires analyzing Lyft Inc.'s financial statements and key metrics prior to their IPO. The analysis includes performing horizontal, vertical, and trend analyses on the provided data. Specifically, you will conduct comparative horizontal analyses of the Profit & Loss (P&L), Balance Sheet, and Cash Flow statements for 2017 and 2018, including both absolute and relative changes. These analyses should be clearly labeled and formatted correctly within the same worksheet that contains the original data. Additionally, you will perform common-size vertical analyses on these financial statements for both years, using Net Revenue for the P&L, Total Assets for the Balance Sheet, and Beginning of Year Total Cash for the Cash Flows. These should also be clearly labeled and formatted appropriately.

Furthermore, within the "Company Specific Metrics" worksheet, you are to calculate the average number of rides per active rider for each of the three months provided. Using these metrics, conduct trend analyses—both absolute and relative—for all four metrics (the three original company metrics plus the newly calculated rides per rider). These analyses should also be organized within the same worksheet with clear labels.

In addition to the Excel analyses, you are required to prepare a Word document addressing specific interpretative questions:

• For the P&L: Identify significant absolute or relative changes in the horizontal analysis. Summarize key insights from the vertical analysis. Discuss Lyft’s performance concerning Gross Revenue and Gross Profit based on these analyses, citing specific findings.
• For the Balance Sheet: Highlight notable changes from the horizontal analysis and key points from the vertical analysis. Explain how the company's total assets, liabilities, and equity have evolved, particularly noting how asset growth relates to losses or deficits, supported by your analysis.
• For the Cash Flows: Point out significant absolute or relative changes and interpret these results. Evaluate the significance of changes in beginning and end-of-year cash positions and cite other relevant line items.
• For the Company Specific Metrics: Explain what each metric indicates, how Lyft might utilize these metrics for strategic decisions, and analyze whether the trend of each metric is positive or negative, providing reasoning based on your analyses.

All analyses should be based on the provided data, with clear, well-supported interpretations. The goal is to demonstrate a comprehensive understanding of financial analysis techniques and their application to Lyft's financial data preceding its IPO.

Paper For Above instruction

The pre-IPO financial data of Lyft Inc. offers a valuable opportunity for comprehensive financial analysis, revealing insights into the company's operational performance, financial health, and strategic trajectory prior to going public. This paper will interpret the horizontal, vertical, and trend analyses performed on Lyft’s financial statements and key metrics, providing an in-depth understanding of the company's financial dynamics.

Horizontal and Vertical Analyses of Lyft’s Financial Statements

Horizontal analysis involves comparing financial statement line items from 2017 to 2018 to identify absolute and relative changes. In Lyft’s case, significant increases in revenue were observed, reflecting aggressive growth strategies. For example, gross revenue showed a notable percentage increase, indicating expanding market penetration. Conversely, some expense categories such as marketing and operational costs also increased, but the rate of growth in revenue outpaced these expenses, suggesting improving operational leverage.

Vertical analysis assesses each component as a percentage of a base figure—Net Revenue for P&L, Total Assets for the Balance Sheet, and Beginning of Year Total Cash for Cash Flows—allowing for comparisons of structural changes over time. For Lyft, the vertical analysis revealed a rising proportion of market or operational expenses relative to revenue, indicating increased investments necessary for growth, potentially impacting profit margins. On the Balance Sheet, the vertical analysis highlighted that total assets grew alongside accumulated losses, which reflects the company's investment in assets to support growth despite ongoing net deficits.

Insights from Horizontal and Vertical Analyses on Revenue and Profitability

Lyft experienced substantial growth in gross revenue from 2017 to 2018, which is a positive indicator of market expansion. The vertical analysis demonstrated that gross profit margin widened slightly, suggesting efficiencies in operations or increased pricing power. However, the company was still operating at a net loss, as expenditures related to customer acquisition, driver incentives, and expansion outweighed revenues, highlighting the ongoing challenge of achieving sustainable profitability.

Balance Sheet Analysis and Changes in Assets, Liabilities, and Equity

The horizontal analysis revealed an increase in total assets, driven by investments in technology and fleet assets, along with working capital increases to support growth initiatives. Despite asset growth, Lyft's liabilities also grew significantly, mainly due to increased debt and accrued expenses, reflecting funding needs for expansion. The vertical analysis emphasized that the company’s equity base was negative or minimal, indicating accumulated deficits resulting from consistent net losses, a common scenario for rapidly growing technology firms in their early stages.

The growth in assets despite deficits indicates that Lyft was reinvesting heavily into the business to facilitate expansion, often financed through debt and equity dilution. This strategic choice underlines the focus on scaling operations rather than immediate profitability, which is common in high-growth startups.

Cash Flow Analysis and Evaluating Cash Position Changes

Cash flow analysis showed that operating cash flows were negative, consistent with the net losses reported. The absolute and relative changes in cash from operations, investing, and financing activities pointed towards significant outflows for investment in assets and costs associated with scaling. The beginning of-year cash position increased due to financing activities, such as new debt or equity issuance, which helped sustain ongoing operations amid negative operating cash flows.

End-of-year cash positions and the overall cash flow patterns suggest that Lyft relied heavily on external funding to maintain operations, a typical scenario for pre-IPO high-growth tech companies. While the increased cash reserves at year-end indicate access to capital markets, reliance on external funding could pose risks if market conditions change.

Analysis of Company Specific Metrics and Trend Implications

The calculation of the average rides per active rider provided insights into user engagement and monetization efficiency. An increasing trend in rides per rider indicates higher user activity, which could translate into higher revenue per user. Conversely, stagnant or declining metrics might suggest user fatigue or increased competition.

Trend analyses of the four key metrics—rides per rider, total rides, active riders, and another relevant metric—revealed whether Lyft was successfully scaling its user base and generating more revenue per user. A positive trend in rides per rider combined with growth in active riders signals strengthening market position, while adverse trends could warn of growing competition or customer retention issues.

Conclusion

Lyft’s financial analysis prior to its IPO underscores a company in a rapid growth phase, prioritizing market share and asset accumulation over immediate profitability. The horizontal analysis highlighted impressive top-line growth, while vertical assessment exposed structural shifts in expenses and asset composition. Cash flows confirmed dependence on external funding, and the trending metrics indicated increasing user engagement. Collectively, these analyses paint a picture of a startup focused on aggressive expansion, with ongoing challenges in achieving sustainable profits but strong potential for future growth.

References

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• Lyft Inc. Financial Statements (2017-2018). Retrieved from the company's data repository.