The World 's Largest Online Trading Website

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On Labor day in 1995, the founder of eBay, Pierre Omidyar, conducted an experiment. Omidyar tested the auction site and was stunned that his broken laser pointer was sold. This was the beginning of the booming industry in e-commerce. eBay had expanded their company internationally for the past few years. eBay is considered the world’s largest online trading website and one of the leading market leaders in the world. We will focus on comparing eBay to its best performer, Amazon, which are two of the largest businesses in the e-commerce industry. According to the NASDAQ, eBay and Amazon are noted as the market leaders of online business. Amazon sells a broad range of products to their customers such as DVDs, CDs, multimedia devices, as well …show more content…

The three ratios I will use to compare the two companies are the leverage ratio, liquidity ratio and profitability ratio.
According to the income statement, last year’s sales revenue grew to around 35% while eBay only had a 3% increase. On 2015, eBay and Amazon had continue to increase in total revenue according to the statistics. In the last fiscal year, we can imply that eBay and Amazon are successful in producing profit.
In the leverage ratio, the debt ratio revealed that eBay is at 25.7% and Amazon is at 55.9%. This tells us that Amazon has more debt to pay than eBay. eBay has lower percentage in risk operation than Amazon because eBay’s assets are invested more in equity than in debt. In comparison to Amazon, eBay has greater borrowing power and financial flexibility to expand its company.
Using the current ratio to compare liquidity from the two business, it tells us that eBay is 1.6 and Amazon is 2.6 from the current ratio. This tells us that both companies have the ability to pay off their liabilities. In the last fiscal year, the statistics had shown that eBay had a much higher current ratio than Amazon, this tells us that eBay produced more cash and cash equivalents to pay off its short-term liabilities compared to Amazon. Although this tells us that eBay is not financing enough of its assets like mergers and acquisitions. The quick ratio cannot be used to compare the two businesses as eBay doesn’t have inventory.
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