Comparison between Facebook and Alibabas Performance - Example

The paper "Comparison between Facebook and Alibaba’s Performance" is a perfect example of a report on finance and accounting. A company can raise capital from the market either through equity capital or debt capital. Both of these methods have particular advantages and disadvantages. Normally debt has a lower cost of capital due to the tax benefits associated with it. Another advantage of going in for debt capital is the fact that ownership dilution does not occur. But the main factor that goes against the use of debt capital is the fact that debt capital comes with added risk.

If the company goes in for debt capital then it does not face ownership dilution. Another way the company can raise money is through equity capital. The advantage of raising money through equity capital is that the funds and the source are considered less risky. However, it does not mean that every company going in for an IPO will meet the same fate. How a particular company and its shares will fare post IPO depends to a lot of extent on what the investors feel about the company and its future prospects.

In view of this context, the fundamentals of the company deserve a good deal of attention. To understand the difference between IPOs of two different companies a case in point is the IPOs of Facebook and Alibaba. Facebook’s IPO Facebook IPO in numbers (Source: Raise, Das, and Letzing, 2012) At the time Facebook was launched into operation it was a small site that college students studying at Harvard and other prestigious colleges used to use in order to rate their friend’s pictures.

Facebook slowly expanded its operation to include all persons above the age of 13 to use its services. When Facebook started its operations it had many competitors in the block and the biggest competitor was Myspace but facebook overtook all its competitors through its simplicity. Facebook is expected to reach a user count of 1 billion by this year-end (Langworth, 2012). So what is the value of Facebook as a company? To understand the value of Facebook as a company we have to look at the no. of users it has and the no.

of likes and comments that it generates. Facebook can use these data to sell them to its advertisers and can be used to generate revenue. How much Facebook is worth can be understood not from its current usage statistics but what is in store in the future of the company? Most of the revenue that Facebook now generates is by giving data to the advertisers so that they can use targeted advertising.