HEBEI UNIVERSITY OF ECONOMICS AND

BUSINESS

NAME:SHEPHERD JUNIOR MASASI

COURSE:FINANCIAL STATEMENTS ANALYSIS
STUDENT NUMBER:201442310026

FINANCIAL STATEMENTS OF E-BAY INC

INTRODUCTION

eBay is The World's Online Marketplace. Founded in 1995, eBay created a powerful
platform for the sale of goods and services by a passionate community of individuals
and businesses. On any given day, there are millions of items across thousands of
categories for sale on eBay. eBay enables trade on a local, national and international
basis with customized sites in markets around the world. Through an array of
services, such as its payment solution provider PayPal, eBay is enabling global e-
commerce for an ever-growing online community.

Millions of buyers and sellers have made eBay Inc. the world's largest and most
popular Internet site for individuals and businesses to exchange goods. By 1999 eBay
had 5.6 million registered users and listed over 3.1 million items for sale; by 2004
there were an estimated 65 million registered users from 150 countries, 971 million
items for sale, and gross merchandise sales hit $15 billion. eBay owns local sites in 19
countries, has stakes in another eight foreign nations, and provides users with its own
online pay service, PayPal Inc. As eBay's revenues continue to grow, the sky seems
the limit despite competition from Yahoo!, Amazon.com, and an ever increasing
number of imitators.

FINANCIAL STATEMENTS FROM 2013 TO 2016

Annual Income Statement (values in 000's)Get Quarterly Data
Period Ending: Trend 12/31/2016 12/31/201 12/31/201 12/31/2013
5 4

Total Revenue $8,979,000 $8,592,000 $8,790,000 $8,257,000

Cost of Revenue $2,007,000 $1,771,000 $1,663,000 $1,492,000

Gross Profit $6,972,000 $6,821,000 $7,127,000 $6,765,000

Operating Expenses

Research and Development $1,114,000 $923,000 $983,000 $915,000

Sales, General and Admin. $3,499,000 $3,660,000 $3,593,000 $3,260,000

Non-Recurring Items $0 $0 $0 $0

Other Operating Items $34,000 $41,000 $75,000 $136,000

Operating Income $2,325,000 $2,197,000 $2,476,000 $2,454,000

Add'l income/expense items $0 $0 $0 $0

Earnings Before Interest $3,651,000 $2,406,000 $2,515,000 $2,571,000

and Tax

Interest Expense $0 $0 $0 $0

Earnings Before Tax $3,651,000 $2,406,000 $2,515,000 $2,571,000

Income Tax ($3,634,000) $459,000 $3,380,000 $504,000

Minority Interest $0 $0 $0 $0

Equity Earnings/Loss $0 $0 $0 $0
Unconsolidated Subsidiary

Net Income-Cont. $7,285,000 $1,947,000 ($865,000) $2,067,000

Operations

Net Income $7,266,000 $1,725,000 $46,000 $2,856,000

Net Income Applicable to $7,266,000 $1,725,000 $46,000 $2,856,000

Common Shareholders

AnnuaL BALANCE SHEETS

Period Ending: Trend 12/31/2016 12/31/2015 12/31/2014 12/31/2013

Current Assets

Cash and Cash $1,816,000 $1,832,000 $4,105,000 $4,494,000

Equivalents

Short-Term Investments $5,333,000 $4,299,000 $3,730,000 $4,531,000

Net Receivables $592,000 $619,000 $600,000 $12,948,000

Inventory $0 $0 $0 $0

Other Current Assets $1,134,000 $1,154,000 $18,096,000 $1,310,000

Total Current Assets $8,875,000 $7,904,000 $26,531,000 $23,283,000

Long-Term Assets

Long-Term Investments $3,969,000 $3,391,000 $5,736,000 $4,971,000

Fixed Assets $1,516,000 $1,554,000 $1,486,000 $2,760,000

Goodwill $4,501,000 $4,451,000 $4,671,000 $9,267,000

Intangible Assets $102,000 $90,000 $133,000 $941,000

Other Assets $276,000 $365,000 $6,575,000 $266,000

Deferred Asset Charges $4,608,000 $0 $0 $0

Total Assets $23,847,000 $17,755,000 $45,132,000 $41,488,000

Current Liabilities

Accounts Payable $2,286,000 $2,157,000 $4,062,000 $3,215,000

Short-Term Debt / $1,451,000 $0 $850,000 $9,266,000

Current Portion of Long-
Term Debt

Other Current Liabilities $110,000 $106,000 $12,619,000 $158,000

Total Current Liabilities $3,847,000 $2,263,000 $17,531,000 $12,639,000

Long-Term Debt $7,509,000 $6,749,000 $6,777,000 $4,117,000

Other Liabilities $64,000 $75,000 $396,000 $244,000

Deferred Liability $1,888,000 $2,092,000 $522,000 $841,000

Charges
 Period Ending: Trend 12/31/2016 12/31/2015 12/31/2014 12/31/2013

Misc. Stocks $0 $0 $0 $0

Minority Interest $0 $0 $0 $0

Total Liabilities $13,308,000 $11,179,000 $25,226,000 $17,841,000

Annual Income Statement (values in 000's)Get Quarterly Data

Period Ending: Trend 12/31/2016 12/31/2015 12/31/2014 12/31/2013

Net Income $7,266,000 $1,725,000 $46,000 $2,856,000

Cash Flows-Operating Activities

Depreciation $682,000 $687,000 $682,000 $660,000

Net Income ($5,141,000 $571,000 $2,352,000 ($475,000)

Adjustments )

Changes in Operating Activities

Accounts Receivable ($48,000) ($105,000) $51,000 ($89,000)

Changes in Inventories $0 $0 $0 $0

Other Operating $117,000 $0 ($39,000) ($472,000)

Activities

Liabilities ($49,000) ($1,000) $136,000 $452,000

Net Cash Flow- $2,826,000 $4,033,000 $5,677,000 $4,995,000

Operating

Cash Flows-Investing Activities

Capital Expenditures ($626,000) ($668,000) ($622,000) ($678,000)

 Period Ending: Trend 12/31/2016 12/31/2015 12/31/2014 12/31/2013

Investments ($1,149,000 $37,000 ($637,000) ($2,782,000)

)

Other Investing ($233,000) ($2,980,000) ($1,414,000) ($2,552,000)

Activities

Net Cash Flows- ($2,008,000 ($3,611,000) ($2,673,000) ($6,012,000)

Investing )

Cash Flows-Financing Activities

Sale and Purchase of ($2,841,000 ($1,928,000) ($4,358,000) ($906,000)

Stock )

Net Borrowings $2,196,000 ($850,000) $3,482,000 ($400,000)

Other Financing ($114,000) ($1,850,000) ($221,000) ($160,000)

Activities

Net Cash Flows- ($744,000) ($4,554,000) ($1,022,000) ($1,354,000)

Financing

Effect of Exchange ($90,000) ($364,000) ($148,000) $48,000

Rate

Net Cash Flow ($16,000) ($4,496,000) $1,834,000 ($2,323,000)

Annual Income Statement (values in 000's)

Period Ending: Trend 12/31/2016 12/31/2015 12/31/2014 12/31/2013

Liquidity Ratios

Current Ratio 231% 349% 151% 184%

Quick Ratio 231% 349% 151% 184%

 Period Ending: Trend 12/31/2016 12/31/2015 12/31/2014 12/31/2013

Cash Ratio 186% 271% 45% 71%

Profitability Ratios

Gross Margin 78% 79% 81% 82%

Operating Margin 26% 26% 28% 30%

Pre-Tax Margin 41% 28% 29% 31%

Profit Margin 81% 20% 1% 35%

Pre-Tax ROE 35% 37% 13% 11%

After Tax ROE 69% 26% 0% 12%

EVALUATION OF E-BAY FINANCIAL

RATIOS

CURRENT RATIO
The current ratio is mainly used to give an idea of a company's ability to pay back its
liabilities (debts) As such, current ratio can be used to make a rough estimate of a
company’s financial health. E-bay’s current ratios from 2013 to 2016 are all above
1(100%)which means the company is capable of meeting its financial obligations or
paying its short term debts .However the high current ratio of (349%) in 2015 may be
an indication that E-bay is leaving its current assets such as cash and inventories in
excess or idle and that is a sign of inefficiency.

Quick ratio
The quick ratio is an indicator of a company’s short-term liquidity, and measures a
company’s ability to meet its short-term obligations with its most liquid assets. E-
bay’s quick ratios are all above 1(100%)with the highest record of 349%in 2015. The
higher the quick ratio, the better the company's liquidity position. However, too high a
quick ratio may indicate that the company has too much cash sitting in its reserves. It
may also mean that the company has a high accounts receivables, indicating that the
company may be having problems collecting on its account receivables.

CASH RATIO
The cash ratio calculates a company's ability to pay current liabilities using only cash
and cash equivalents on hand. If a company's cash ratio is equal to 1, the company has
exactly the same amount of current liabilities as it does cash and cash equivalents to
pay off those debts. The cash ratios of E-bay are below 1(100%) i.e 71% in 2013 and
45% in 2014. This means there is insufficient cash on hand to pay off short term debt.
The cash ratios are above 1(100%) in 2015 they recorded 271% which is the highest
of the four years and 186% in 2016 may indicate that a company is inefficient in the
utilization of cash or not maximizing the potential benefit of low-cost loans.

GROSS MARGIN.
Gross margin is a calculation of a gross profit percentage after deducting cost of
sales from the revenue .To get gross margin we divide gross profit by the sales
revenue .Amazon has made a gross profit margin of 82% in 2013,81% in 2014,79% in
2015 and 78% in 2016.

Operating Margin
Operating income is revenue less operating expenses for a given period of time . E-
bay’s revenue was able to cover its operating expenses with the highest of 30% in
2013.

Pre-tax Margin
Pretax profit margin is a company's earnings before tax as a percentage of total sales
or revenues. The higher the pretax profit margin, the more profitable the company .In
2013,the pre- tax profit margin was 31% then it decreased to 29% in 2014 and 28%
in 2015 .It then increased to 41% in 2016.

Profit Margin
Profit margin is part of a category of profitability ratios calculated as net income
divided by revenue, or net profits divided by sales.E-bay has recorded 31% profit
margins in 2013 and decreased sharply to 1% in 2014 because of the low profit of
$46000.In 2015,the profit margin was 20% and it skyrocketed to 81% in 2016 which
is the highest of the four years.

Pre-tax ROE
The rate of return on an investment that does not take the taxes the investor must pay
on this return. The pretax rate of return is the measure most commonly cited for
investments in the financial world. E-bay recorded pre-tax ROE of 11% in 2013, and
13% in 2014, 37% in 2015 and 35% in 2016 .

After -tax ROE

These are the returns of profits which are attributable to the shareholders for the
investment they have made in the business after deducting all other expenses and
taxation. E-bay has recorded after-tax ROE of 12% in 2013,0% in 2014,26% in 2015
and 69% in 2016.The lowest record in 2014 is probably because of a lower profit or
the loss recorded. The After-tax Roe increased sharply from 2015 to 2016 because of
increase in profits which were available for distribution to the shareholders .

CONCLUSSION
Comparing E-bay and Amazon,i would suggest that if a potential investor wants to
invest,he or she should invest in E-bay because its has got a lot of return on equity
percentage is higher than that of Amazon.E-bay is also considered financially healthy
than Amazon because it has got more short term assets to meet its short term
obligations than that of Amazon but however E-bay is keeping a lot of its short term
financial assets idle that is its being inefficient.As an advice it should rather invest the
idle capital somewhere else.