1 Financial results
In 2012, Facebook generated over 5 billion, mostly from advertising. Facebook relies heavily on advertising to generate positive cash flows. From 2010 to 2011, and 2011 to 2012, revenue increased 74 % and 59%, respectively. This slowing of revenue growth is a concern for Facebook that much be accounted for and improved in order to continue to be a market leader in connecting advertisers to consumers. Net income from 2010 to 2011 increased 65 percent. However, from 2011 to 2012, net income decreased by a staggering 95 percent to only 53 million. This substantial reduction in income was due to a 133 percent increase in total costs and expenses. Cash flows from operations and financing have been increasing each year to support cash outflows used to purchase PPE and marketable securities(Exhibit 6). Facebook continues to emphasize R&D and, in 2012, the percentage spent on R&D increased by 261 percent, nearly 1.4 billion. Facebook hopes significant expenditures in 2012 will result in additional revenue opportunities in the future. Another financial move occurred in preparation for its IPO when Facebook tried to eliminate short and long term debt. (Exhibit 7)