EBay - a Public Company Whose Stocks Are Traded in the NASDAQ - Assignment Example

What is the of your company? The of the company selected for analysis is eBay Inc. 2. What are the letters they use when trading in thestock market? eBay is a public company whose stocks are traded in the NASDAQ under the symbol EBAY. 3. What is their principal activity? eBay is an online auction house. The website sells a variety of consumer products that are sold by individual sellers from around the world. The company makes money by charging the sellers a commission on every item posted and sold on the website. 4. What is the name of their auditors? The Independent Auditors Report contained in the annual report of the company in 2012 was prepared by PricewaterhouseCoopers. PricewaterhouseCoopers is the auditor of the company. 5. Is the company on a calendar or fiscal year? The company’s accounting cycle is based on the calendar year which means they reflect economic activity from January 1, 2012 to December 31, 2012. 6. List the names of any 3 liability accounts from the Balance Sheet. Three liabilities accounts reflected in the balance sheet of the company are short term debt, accounts payables, and long-term debt. 7. List the names of any 3 Stockholder Equity accounts from the Balance Sheet. The names of three equity accounts reflected in the balance sheet of eBay are common stock, treasury stock, and retained earnings. 8. List the names of any 3 Asset accounts from the Balance Sheet. Three asset accounts reflected in the balance sheet of the firm are cash, account receivable and long term investments. 9. What is the total dollar value of their Current and Total Liabilities? The value of the current liabilities of eBay at the end of 2012 was $10,924 million, while the value of the total liabilities of the company was $16,209 million. 10. What is the total value of Stockholders Equity? The total value of the stockholders equity of the company in 2012 was $20,865 million. 11. How many common shares has the company authorized, issued and outstanding? The company has 3,580 million shares authorized, 1,294 million shares issued, and 1,286 million shared outstanding. 12. What is the par value of each common share? The par value of eBay common stocks is $0.001 (Annual Report: eBay, 2012). 13. What price is the share trading at on the date that you were conducting this research? The price of EBAY common stocks as of April 27, 2013 was $52.54 (Yahoo, 2013). 14. What was the highest price that the share traded at over the last 52 weeks? The highest price that the eBay common stock was traded during the last 52 weeks is $58.04. 15. What was the lowest price that the share traded at over the last 52 weeks? The lowest price that the common stock of eBay was traded during the last 52 weeks was $38.00 16. Provide a brief explanation for the 52 week high price and 52 week low price of the company. In other words, why did the company’s stock price go up and come down or vice versa? In order to visualize the movement of the price of the common stocks of eBay during the last 52 weeks a graph of the price of eBay’s common stock for the last year is illustrated below. (Yahoo, 2013). The graph shows that during the last year the eBay common stock has experience an upwards trend it its prices. A potential reason that the stocks of the firm climbed is due to the good results of the quarterly financial statements of the company. 17. Write about any recent activity/event affecting the company in your own words. Do you think this activity had any effect on the stock prices? The different business activities of eBay have helped the company maximize the shareholders wealth of the investors. The company has been aggressively targeting growth in the European continent. Due to the growth in the region the company recently opened an international operations center in Dundalk, Ireland (Ebayinc, 2013). The firm has been keeping up with the latest technological trends. The PayPal subsidiary of eBay developed a phone application that allows people to send and receive money worldwide using the capabilities of their smartphone. The acquisition of GSI Corporation allowed the firm to increase its capabilities in ecommerce interactive marketing services. The firm has been able to use technology in order to gain a competitive advantage over the competition. eBay is impacted by seasonality with the 4th quarter, Christmas season, being the best quarter of the year. An increase in the number of listings has positively impacted the revenues of the firm. In 2012 eBay had 350 million listings on its website (Annual Report: eBay, 2012). 18. Write about any aspect of the company’s financial operations based on what you have studies in the class. eBay Inc. generated total revenues of $14,072 million in 2012. The revenues of the company increase by 20.77% in comparison with the previous year. The gross margin of eBay in 2012 was 42.78%. Gross margin is a measure of the broad profitability of the firm. In 2012 eBay achieved a net income of $2,609 million. The net income of the company was lower than the previous year by $620 million. The net margin of eBay in 2012 was 18.54%. Net margin measures the absolute profitability of a company and it is calculated by dividing net income by total sales. The profitability of the company is outstanding considering the fact that the average net margin in its industry is 4.8% (Dun & Bradstreet, 2012). The total assets account of the company as of December 31, 2012 was $37,074 million. The firm’s assets have increased by 36.15%. The earnings per share (EPS) of eBay in 2012 was $2.02. A high EPS ratio has a positive effect on the market share price of a company’s common stock. The price to earnings ratio of the firm was $25.50. This metric is an index of whether a stock is relatively cheap or relatively expensive in relation to its current earnings (Garrison & Noreen, 2003). The way to calculate the price-earnings ratio is by dividing the market share price by the earnings per share of the enterprise. The market capitalization of eBay is $62.04 billion. A person can calculate the market capitalization of a corporation by multiplying market share price by the total shares outstanding of the company. During 2012 eBay had a return of assets (ROA) of 7.04%. Return on assets measures how effective a company has been at generating profits from its assets. The company had a return on equity (ROE) in 2012 of 12.5%. The return on equity metric measures the ability of a company to obtain net income from its equity. The formula to calculate return on equity is net income divided by total equity. The current ratio of the company in 2012 was 1.96. To calculate current ratio you must divide current assets by current liabilities. The current ratio measures the ability of a company to pay off its current liabilities. eBay’s current ratio is good because it is above one. The working capital of the company in 2012 was $10,474 million. This metric measures the ability of a company to pay off its current liabilities using solely its current assets. The quick acid ratio is a liquidity ratio similar to the current ratio with the exception that inventory is subtracted from the denominator of the current ratio formula. Since eBay did not have any inventory in 2012 its quick ratio is the same as its current ratio. The debt ratio is a solvency ratio that measures the ability of the company to pay all its debt. To calculate debt ratio the formula utilized is total liabilities divided by total assets. In 2012 eBay had a debt ratio of 0.44. The company’s total debt is relatively low for such a large firm. The debt to equity ratio of eBay during 2012 was 0.78. This financial metric calculates the amount of assets being provided by creditors for each dollar of assets being provided by the stockholders (Garrison, et. al., 2003). The formula to calculate the debt to equity ratio is total liabilities divided by total revenues. The asset utilization ratio of eBay in 2012 was 0.38. Asset utilization measures how effective a company has been at generating sales from its assets. It is calculated dividing sales by total assets. The cash position of eBay as of December 31, 2012 was $6,817 million. The firm’s cash reserves have increased by 45.32% since the previous year. The organization had an inflow of cash from operating activities of $3.84 billion in 2012. During 2012 the corporation had an outflow of cash from investing activities of $3.76 billion. In terms of cash from financing activities eBay had an inflow of $1.95 billion. Based on the financial analysis performed on the company I would recommend an investor to purchase eBay common stock based on the company’s solid profitability, efficiency, and liquidity. 19. Please include a web link to the Annual report A link to 2012 annual report of eBay is illustrated below. http://files.shareholder.com/downloads/ebay/2447549420x0xS1065088-13-4/1065088/filing.pdf References Annual Report: eBay (2012). Retrieved April 27, 2013 from http://files.shareholder.com/downloads/ebay/2447549420x0xS1065088-13-4/1065088/filing.pdf Dun & Bradstreet (2012). Key Business Ratios: SIC 5963. Retrieved April 27, 2013 from Dun & Bradstreet database. Ebayinc.com (2013). New Dundalk Center Makes a Milestone for eBay Inc. in Ireland. Retrieved April 27, 2013 from http://www.ebayinc.com/in_the_news/story/new-dundalk-center-marks-milestone-ebay-inc-ireland Garrison, R., Noreen, E. (2003). Managerial Accounting (10th ed.). Boston: McGraw-Hill Irwin. Yahoo.com (2013). eBay Inc. (EBAY). Retrieved April 27, 2013 from http://finance.yahoo.com/q?s=ebay&ql=1 Read More