INTRODUCTION 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
…show more content…
Throughout the period eBay has increased debt ratio from 23.5% to 30.5%, eBay has gradually realized they could benefit from taking on much more debt thereby increasing benefits of the tax shield to yield higher returns to their owners. Another ratio is the financial leverage. This ratio measures assets to equity. For every dollar of equity eBay has about $1.44 in assets, meaning they borrowed $0.44.
Amazon’s capital structure is heavy debt financing, with a more than twice debt ratio of eBay. Compared with Amazon.com, eBay has very little long-term financial risk and a higher borrowing capacity and financial flexibility.
Assert Utilization Analysis | eBay | Amazon | | 2007 | 2008 | 2009 | 2010 | 2009 | 2010 | Asset Utilization | .52 | .56 | .52 | .45 | 2.36 | 2.22 |
The asset utilization ratio calculates the total revenue earned for every dollar of assets the company owns. The ratio indicates a company’s efficiency in using its assets. A special feature of eBay is that according to its business model, eBay do not have any inventory, thus reduce the cost to management inventory. However, amazon.com has a much higher asset utilization ration than eBay, meaning eBay has to pay attention to how to manage more