Capital Budgeting is the process in which a business determines which long-term investments are worth taking on. Over the years, Facebook has taken on several capital budgeting opportunities, mergers and acquisitions being the most common. Between August 2005 and January 2018, Facebook has acquired a total of 67 companies worldwide. Among these companies are WhatsApp, one of the most popular mobile instant messaging apps, and Instagram, another popular app used for photo sharing. Most of these companies were based in the United States and others in Ireland, Scotland, Belarus, Israel, Finland, India, Canada, Netherlands, and Malaysia.
Capital Structure describes how a firm finances its overall operations …show more content…
Dividend policies can take on one of three forms: Residual Dividend Policy, Dividend Stability Policy, or Hybrid Dividend Policy. A Residual Dividend Policies state that dividend payments are made to investors out of the residual or left-over equity once all project capital requirements are met. A Dividend Stability Policy states that quarterly dividends are set at a fraction of yearly earnings. A Hybrid Dividend Policy is a combination of the residual and the stability dividend policy.
Now that we have an understanding of what dividend policy is and its three categories, we can conclude that Facebook has taken on the Residual Dividend Policy. Since its start up, Facebook has not made any dividend payments to its investors. Because Facebook is still a newer public traded company, it is not expected for them to make dividend payments so early in its existence. However, Facebook has been in the position to make dividend payments to its investors. In 2015, Facebook CFO David Wehner stated that Facebook was not interested in returning capital shareholders. He stated that the company still has many projects to take on to grow the company and that is where most of Facebook’s capital would be invested. While Facebook may have made many capital budgeting decisions, all of its capital has not been reinvested into the …show more content…
Facebook is the ideal company as it has excelled in every area of Corporate Finance. This is the kind of company that most investors are attracted to. Facebook has certainly shown where it is able to expand, replace, modernize, and diversify its brand. For a social media company, Facebook is one of the most profitable since the beginning of the Internet. Once the company maintains its main driving force which has slowly become the relevance in the lives of human beings, there is no reason for Facebook’s brand to plummet. The company must maintain profitability, and consistency and relevance are two ways that Facebook can maintain this demand. Although they have been faced with tons of competition over the years, Facebook maintains the ability to ‘buy-out’ the competition which makes it an even better company to invest in because of its capital budgeting strategies. The more revenue a company can generate, the more value will be added to the shareholders