Question on Aggregate Data Trends

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You can access the balance sheet of Facebook LLC last 5 years (2015-2019) in Wall Street Journal – Markets. Why did Facebook issue more debt recently? Specifically, they did not issue any debt in 2016-2017 or very low level before, but suddenly issued a large amount of debt. Could you explain Facebook’s financial decision? We learned tax shield benefit, revised MM theory, and optimal capital structure in this chapter. Try to explain their behavior based on what we have learned. You could choose another company that presents a similar (or the opposite) pattern if you want.

(If you want to check a firm’s historical D/E ratio, you can use the following website:

The original document of the firm’s financial statement and balance sheet has been posted at, but it is painful to search all of them manually. So just for practice, we assume their information is true.)

We need a theory (or insightful guess) to explain the aggregate data trends. At a firm level, it’s more important to “hack” their behavior not only because we hard to know why they choose it, but also they could influence other firm’s choices or industrial equilibrium. Thus, use all the knowledge in this chapter, and attempt to analyze the firm’s behavior. It would be your short financial report. If you totally disagree with anything in the chapter, it’s okay, then please suggest an alternative theory or hypothesis. For instance, you could dig up their internal factors not compatible with the theory, or so. Either way, you need to present theoretical reasons, illustrations, and your final concluding remark on Facebook’s (or another company’s) financial choices.

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