Evaluation of a Business Performacne of a Company

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Gleb Ditrikh
Ground Floor
Wallstreet Journal
02.05.2013

On Wendensday morning, Amazon has published financial results regarding second online-coupon company LivingSocial. These results revealed a financial condition of LivingSocial which evidents that this coupon company’s long term future still looks very unpromising. In the past few years LivingSocial had nothing but losses. It spent 600 million of investors’ cash which helped to generate 536 million of 2012 sales; however, the company was short on profits. In addition, this online coupon company reported substantial losses equaling 1.3 billion dollards for the past two years. LivingSocial’s situation with losses is not very optimizing neither are in good shape its assets or liabilities. Figures show that their assets have shrunk nearly by 2.5 times from 2011 to 2012, and the amount of money that is owed to merchants that have previously run deals has raised from 210 to 338 million dollars. LivingSocial obviously has credit facility and could raise new equity; however, if the situation with liabilities owed to merchants will not shift dramatically towards the better, then there is a good chance that the company could get in trouble paying merchants that later become customers. LivingSocial is currently trying to turn the situation around by cutting costs. It is no longer functioning internationally. In addition to International job cuts, there have been domestic job firings that have led to LivingSocial having a significantly reduced pool of workers. Finally, LivingSocial financial future seems to be even more questionable since its main competitor in online coupon market Groupon is currently doing a lot better in terms of finances, then LivingSocial. The biggest advantage of Groupon over LivingSocial is that their balance sheet is a lot more attractive to merchants. When merchants are deciding with which company to work, there are good chances that Groupon’s...
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