Financial Profiles of Companies

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eBay is a growth company with low fixed costs associated with its business. The company's growth has been relatively stable, and it tends to track the broad economy and the development of e-commerce. With a beta of 0.92, the growth in eBay's business seems fairly reliable. The company is profitable and its growth is managed slowly. Based on this assessment, eBay can handle some debt as a means to lower its cost of capital, but should not have more than the 30% range. There are a few reasons for this. The first is that while eBay has the top market position in its industry, the industry itself is still growing. Thus, eBay might not be able to retain its leading market position. The company's current cash flow can support taking on debt, but the future cash flow is uncertain. Thus, eBay can expect to meet some debt obligations, but should not take on too much leverage. It is also worth mentioning that eBay should use more equity in its capital structure because it is oriented towards long-term growth. Equity will help the company to align its capital structure with the time frame of the investment, which is for the long run. Clorox has a beta of 0.37. Its business is very stable and both its revenue and net income have not varied much in the past several years. The company has a dominant position in its industry and can expect to maintain that position and the stable cash flows for the foreseeable future. In addition, the lack of growth in the business means that any need
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