Ration Analysis Twitter

Ratio Analysis

As shown in exhibit ** the current ratio for Twitter in 2016 is 7.97%, which is higher than the industry average at 5.85%.  This means that Twitter can has the ability to pay back its short-term liabilities with its short-term assets. Facebook and Twitter were the only companies to have a current ratio higher than the industry average from 2014 and 2016. Yahoo has also a current ration higher than the industry average but just in 2015 and 2016.

The R&D percentage for Twitter in 2016 was 28.21% ranking over the industry average which was 19.91%. Twitter is the highest in the ratio a head from Facebook who has 21.42%. From this point, we can expect a return from this investment in the future. Specially because Twitter lead this percentage for the last three years always over the average and front of Facebook or Snap Inc.

The gross margin percentage for Twitter from 2016 came very close to the average. 63.15% for Twitter and 60.17% for the average competitors. Facebook has the highest gross margin percentage for 2016 at 86.29%. We can observe also that for the last three years we were around the average or below with 68.19% in 2014 and 67.12% in 2015 when the average was almost 70%, very far from our direct competitors, Snap Interactive and Facebook  who’s were at 85,84% for Snap and 84.01 for Facebook in 2015. Therefore, Facebook earned the largest gross margin from each dollar of revenue made, and Twitter earned the least in 2016.

 The operating margin for Twitter for 2016 was -14.52%, lower than the 22.77% industry average, and very lower that Facebook our main competitor who has 44,96 % meaning that Twitter does not have a competitive advantage based on the operating margin because its percentage is lower than the industry average. Furthermore, the operation margin could be one of the biggest problem according to our performance and the performances of the industry and our competitors for the last three years. When Facebook was between 35 and 45% Twitter was between -38 and -14%. Facebook has had a competitive advantage for the last 3 years based on the operating margin industry average.  

Twitter’s ROA for 2016 was -6.84%, and the industry average was 9.84 and when our principal concurrent, Facebook had 17.82%. Facebook had a competitive advantage for the past three years based on the ROA. When our ROA were between -9.38 and -8.14 in 2014 and 2015 Facebook were at 10.12 and 8.23 respectively for the same period.

The ROE for Twitter for 2016 was -10.16%, and the industry average was 19.05%.

Even if the Industry average could be high due to other companies who also perform in other sector of activities Twitter still lower that Facebook by 29.87% because Facebook has 19.71%. Therefor Facebook has a big competitive advantage in the industry during 2016 based on the ROE (Mergent).