Ebay Company Analysis

Topics: Financial ratio, EBay, Financial ratios Pages: 12 (4028 words) Published: February 19, 2013
eBay Incorporated, a US company headquartered in San Jose, California, provides online marketplaces for the sale of goods and services, online payments services, and online communication offerings to individuals and business in the United States and internationally. With more than 90 million active users globally, their collective impact on e-commerce is staggering: In 2009, the total worth of goods sold on eBay was $60 billion — $2,000 every second. The business strategy of eBay is exemplified in the company’s mission statement, “eBay’s mission is to provide a global trading platform where practically anyone can trade practically anything”. In the following report, I will analysis eBay’s business including their financial statement, trends in the company’s financial health over recent years and expected potential trends into the future. In addition, I will compare eBay with competitors and analysis the industry sector. Finally, I will make my recommendation and conclusion regarding investment in eBay’s stock or bonds. BUSINESS AND FINANCIALS

eBay is an auction marketplace based online company and a consumer-to-consumer (C2C) company. Buyers and sellers are brought together in a manner where sellers are permitted to list items for sale, buyers to bid on items of interest and all eBay users to browse through listed items in a fully automated way. The items are arranged by topics, where each type of auction has its own category. eBay notifies the buyer and seller via e-mail at the end of the auction if a bid exceeds the seller's minimum price, and the seller and buyer finish the transaction independently of eBay.  Since eBay went live their online auction services, their financial success has been witnessed with an increase from net income $9.5 million in 1999 to &2,389.0 million in 2009. eBay’s core business model for generating operating income is conceptually simple. eBay’s main source of revenues are from listing, feature, advertising, as well as paid fees on transactions which include both fees collected from the selling part and from the usage of PayPal. Financial Analysis

Short Term Liquidity Analysis
My analysis of financial state of eBay begins with the short term liquidity analysis. The ratios shows either eBay’s existing ability to meet their short term obligations with cash holdings or the speed at which eBay can transform current assets into cash. * Current and Quick Ratios

| eBay| Amazon|
| 2007| 2008| 2009| 2010| 2009| 2010|
Current Ratio| 2.30| 1.70| 2.32| 2.45| 1.33| 1.33|
Quick Ratio| 1.87| 1.57| 2.23| 2.34| 1.00| 1.00|
The ratios show that the eBay is having a relative steadily increasing holding of cash or cash and available-for-sale securities compared to the liabilities they face within one year. They have about twice the amount of short term assets, compared to short term liabilities. The current ratio is much higher than Amazon.com’s. Since a generally acceptable current ratio is 2 to 1, I think eBay is in a normal condition of liquidity. * Accounts receivable turnover and Days’ sales

| eBay| Amazon|
| 2007| 2008| 2009| 2010| 2009| 2010|
Days Sales| 20.78| 19.57| 17.62| 17.18| 13.51| 13.74| Receivables Turnover| 17.56| 18.65| 20.71| 21.25| 27.01| 26.57| The ratios show how effectively and efficiently eBay is at collecting the outstanding debt. The turnover ratio has virtually steadily increased over four years. This, in turn, implies that Days’ sales would be declined. This means that eBay is receiving cash faster than previously. Amazon.com is currently proving much more efficient when it comes to collecting receivables. Financial Leverage Analysis

| eBay| Amazon|
| 2007| 2008| 2009| 2010| 2009| 2010|
Total debt to equity| .312| .307| .335| .439| .162| .174| Total debt ratio| .238| .235| .251| .305| .619| .635| Financial leverage ratio| 1.31| 1.41| 1.34| 1.44| 2.63| 2.74|...
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