⦁ Executive Summary:

An executive summary provides a condensed version of the main report in three paragraphs that discuss (1) the aim of the report, methods used to analyze financial data (e.g., trend analysis based on historical financial ratios); (2) findings; conclusion and recommendation; and (3) limitation of the report.

⦁ Table of Content

⦁ Brief company and industry overview:
Analyse Airbnb’s strategy, market position, and industry overlook. Useful information can be obtained from Airbnb’s most recent 10K Annual Report (provided) and other sources such as business press and news articles.

⦁ Data Analysis

⦁ Operating and Financial Leverages

Required:

⦁ For each year from 2020 to 2022,
Calculate the breakeven point in Dollars for Airbnb. Comment on the Results.

Notes: Please use financial data from ANNUAL REPORTS. Clearly show the workings, not just the final answers. Marks will be deducted for answers shown without any workings. Use the consolidated financial statements. Also, use the relevant year’s annual reports to extract financial information for that particular financial year. For example, to get the sales revenue of Airbnb in 2021, use the figures in the 2021 annual report. Do not use the 2021 figures listed in the 2022 annual report.

Hint: Use the following assumptions when answering the above question.
Cost of Sales (COS) = Total variable cost
All other operating expenses = Fixed costs

⦁ Explain the three types of leverage. What do higher values of each type of leverage mean in terms of profitability potential and risk?

⦁ Using the Two Years Percentage Change method, calculate Airbnb’s DOL, DFL, and DTL results for each year from 2020 to 2022. (Note: you can get data for 2019 from the 2020 annual report).

⦁ Explain how Airbnb has been able to reduce its costs using one structural cost driver and one executional cost driver.

⦁ Analysis of the company’s capital structure policies
Describe the capital structure of Airbnb considering the following criteria:
⦁ Why is capital structure analysis useful for a company? (Discuss the optimal capital structure, firm value, and why higher EPS does not always support the optimal capital structure).

⦁ How does a firm’s chosen capital structure affect the firm value?