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Baidus Business Model And Its Evolution Case Solution
| Solution Id | Length | Case Author | Case Publisher |
|---|---|---|---|
| 2280 | 713 Words (5 Pages) | Syeda Maseeha Qumer, Debapratim Purkayastha | IBS Center For Management Research : 317-0412-1 |
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The balance sheet items are taken from actual audited financial since the forecasted numbers are not available. The return on asset is declining on account of accumulation of investments and assets however still is satisfactory. The return on equity or common equity is also healthy indicating that the company may be able to give exceptional shareholders returns. The operating margins are expected to decrease which may be attributable to the increase in overheads resulting from new investments.
Following questions are answered in this case study solution:
-
Using the information in the case, project the financial data given in Exhibit V: Baidu, Inc. Consolidated Statement of Income for three (3) years (2017, 2018 and 2019 - - annually, not quarterly)
-
Explain your annual estimated for the following values: (a) Total revenue, (b) Total operating costs and expenses, (c) Operating profit, (d) Income before income taxes, (d) Net income and (e) Net income attributable to Baidu
-
Calculate and explain the appropriate Profitability Ratios from Table A-1 in Appendix II from "Preparing an Effective Case Analysis." This section is also in the back of the textbook after the chapters
Case Study Questions Answers
1. Using the information in the case, project the financial data given in Exhibit V: Baidu, Inc. Consolidated Statement of Income for three (3) years (2017, 2018 and 2019 - - annually, not quarterly)
The revenue forecast for FY16 includes the fourth qtr projections and the subsequent projections have been made annually.
|
000 RMB |
FY15 |
FY16 |
FY17 |
FY18 |
FY19 |
|
Revenues |
|
|
|
|
|
|
search services |
55,667,478 |
55,110,803 |
57,866,343 |
60,759,661 |
63,797,644 |
|
Transaction services |
7,005,941 |
8,757,426 |
10,946,783 |
13,683,479 |
17,104,348 |
|
iQiyi |
5,295,760 |
5,560,548 |
5,838,575 |
6,130,504 |
6,437,029 |
|
Inter Segment |
(1,587,450) |
|
|
|
|
|
Total revenues |
66,381,729 |
69,428,777 |
74,651,702 |
80,573,643 |
87,339,021 |
|
|
|
|
|
|
|
|
Operating cost & expenses |
|
|
|
|
|
|
Search services |
27,549,641 |
27,274,145 |
28,637,852 |
30,069,744 |
31,573,232 |
|
Transaction services |
20,151,386 |
25,189,233 |
31,486,541 |
39,358,176 |
49,197,720 |
|
Iqiyi |
7,679,198 |
8,063,158 |
8,466,316 |
8,889,632 |
9,334,113 |
|
Total operating cost & expenses |
54,710,175 |
60,526,535 |
68,590,708 |
78,317,552 |
90,105,065 |
|
|
|
|
|
|
|
|
Operating profit |
11,671,554 |
8,902,242 |
6,060,993 |
2,256,091 |
(2,766,043) |
|
Interest income |
2,362,632 |
2,471,081 |
2,656,974 |
2,867,745 |
3,108,536 |
|
interest expense |
(1,041,394) |
(1,089,196) |
(1,171,133) |
(1,264,036) |
(1,370,171) |
|
Income (loss) from equity method investments |
3,867 |
4,045 |
4,349 |
4,694 |
5,088 |
|
|
|
|
|
|
|
|
Other income, net, including |
24,909,964 |
26,053,379 |
28,013,299 |
30,235,527 |
32,774,257 |
|
Income before income taxes |
37,906,623 |
36,341,551 |
35,564,481 |
34,100,021 |
31,751,666 |
|
Income taxes |
(5,474,377) |
(5,248,353) |
(5,136,131) |
(4,924,637) |
(4,585,494) |
|
Net income |
32,432,246 |
31,093,198 |
30,428,350 |
29,175,384 |
27,166,172 |
|
Less: Net loss attributable to |
(1,231,927) |
(1,181,064) |
(1,155,810) |
(1,108,216) |
(1,031,897) |
|
non-controlling interests |
|
|
|
|
|
|
Net Income Attributable to Baidu, Inc. |
33,664,173 |
32,274,262 |
31,584,160 |
30,283,600 |
28,198,069 |
2. Explain your annual estimated for the following values: (a) Total revenue, (b) Total operating costs and expenses, (c) Operating profit, (d) Income before income taxes, (d) Net income and (e) Net income attributable to Baidu
The revenue projections across material segments of the company have been made keeping in view the business dynamics of Baidu. The search service which is dependent mainly on online advertising is affected by the death of a 21-years old student on account of a wrong cancer treatment advertisement on Baidu’s website.
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