eBay Inc. Multinational Enterprise: An In-Depth Report on Developments

This report provides a comprehensive analysis of eBay Inc. as a multinational enterprise, examining its recent internal and external developments. It begins by exploring the impact of COVID-19 on eBay's revenues and the strategic transfer of its Korean businesses to Emart. The report then delves into eBay's dividend policy, highlighting its continuous dividend payments over the past three years and comparing its dividend yield to industry standards. Sources of finance, including debt and equity, are analyzed, with a focus on changes in short-term borrowings and retained earnings. A detailed calculation of financial ratios, including profitability, liquidity, and efficiency ratios, provides insights into eBay's financial health and performance. The analysis covers key metrics such as net profit margin, return on capital employed, current ratio, cash ratio, and fixed asset turnover ratio, offering a thorough understanding of eBay's position in the industry. Desklib provides access to similar reports and solved assignments for students.

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Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
Section A..........................................................................................................................................3
Development one: Covid-19...................................................................................................3
Development two: Transfer of its Businesses in Korea to Emart..........................................4
Section B..........................................................................................................................................5
Dividend Policy and Sources of Finance ........................................................................................5
Dividend Policy:.....................................................................................................................5
Sources of Finance:................................................................................................................6
Section C: Calculation of Financial Ratios......................................................................................7
CONCLUSION .............................................................................................................................15
REFERENCES .............................................................................................................................17

INTRODUCTION
eBay, an international consumer goods company, which operates electronically and is
based in California, America, henceforth bridges the gap between international buyers and
sellers. The major marketplace, through which the company operates is its e-commerce platform
called eBay.com along with the eBay suite of mobile apps. This platform provides access to
users for various purposes such as to list items, buy or sell them and pay for the same via
multiple payment options. Furthermore, all the mentioned activities are performed through
online and offline channels including the retailers, distributors, import or export companies,
auctioneers and others. The company was formerly known as Auction Web and was found by
Pierre Omidyar in 1995, also through establishing itself multinationally, the company achieved a
massive turnover of $10.42 Billion in 2021.
The purpose of the report is to track, analyse and report on the recent developments in the
internal and external environment of eBay Inc. This report discusses the recent events related to
eBay bearing a financial impact such as change in revenues and profits, changes in market
valuation, etc. Also, the financial resources, through which eBay has raised its capital from, are
critically analysed for further development and decisions together with the dividend policy
applied for structuring the dividend payout. Furthermore, Ratio Analysis is performed for
understanding the position and status of company in the industry through various perspectives.
MAIN BODY
Section A
Development one: Covid-19
Before Covid-19 pandemic the online B2B and B2C business was at a peak level. The
trade volumes was high and the turnover of companies providing online marketplace was
growing rapidly at a fast pace. This increase in turnover in-turn resulted in creating high net-
worth enterprises which became profitable (Alvarez and et. al., 2021). Operations were smooth
however the retail sector did not expect a sudden slowdown of the economy. eBay initially begun
its operations as an online auction platform or service, however down the lane its business
expanded and it provided all forms of e-commerce services. In the period from 2013 to 2020, its
net revenues increased by 24.4% from $7150 million in 2013 to $8894 million in 2020.

However, with the pandemic creating uncertain economic environment the revenues have seen a
digressive growth.
For Quarter 1 of 2020, eBay made $2.4 billion in revenues which was down by 2% on an
as-reported basis and achieved a Gross Merchandise Volume of $21.3 billion which was down
by 1% on an as-reported basis. From this information, the conclusion is clear, that the pandemic
was capable of impacting the corporation adversely and decreased its revenue as well. The result
of these trends created a 6% drop in gross profit. For sustaining in the impact of Covid–19 the
company took advantage of pandemic driven surge in online shopping and its active buyers
increased by 7%, against a total of 185 million active consumers by the end of 2020. The results
of the surge can be seen in fourth quarter of 2020 where the revenues rose to $2.87 billion
refuting the average figure estimated by financial analysts amounting to $2.70 billion (Rana and
Dastin, 2022).
Development two: Transfer of its Businesses in Korea to Emart
On November 14, 2021, eBay Korea concludes the deal with E-mart, which resulted in
merger of two well-established entities that could become the driving force of e-commerce
business in Korea (Amir and et. al., 2020). The sale which was previously announced, following
80.01% of outstanding equity interests approximately amounting to $3 billion of gross cash
proceeds on the closing date of transaction of eBay Korea were finalized on November 14 only,
which was also subjected to certain adjustments specifically assessed for indebtedness, cash,
working capital, transaction, expenses and certain taxes.
This takeover resulted in profit before tax of $3.2 billion including currency translation
adjustment of $81 million and $44 million gain relating to net investment hedge settled in fourth
quarter, 2021, moreover, an income tax expense amounting to $369 million. For last month, the
company reportedly earned revenue of $2.5 billion that being 11% higher in the third quarter of
the financial year (Somera, 2021), which accounted for a 10% increment in foreign exchange on
neutral basis.
The company has continued to buyback the shares which were worth $7 billion during
the financial year, having achieved approximately $85 billion worth of gross merchandise
volume for preceding year (Madahi and et. al., 2022). The strategic objective ahead by
assembling two efficient e-commerce and retail companies is to unlock tremendous potential in

Korean markets. Further under the merger, E-mart will remodel its offline stores into fulfilment
centres to enhance supply chain management of eBay.
Section B
Dividend Policy and Sources of Finance
Dividend Policy:
Dividend policy refers to a policy that is used by company to frame its dividend payment
to its shareholders. Whenever a firm earns profits, it is required to decide whether it wants to
distribute the dividend or not and its disbursement depends on the policy frame by firm for it.
eBay is paying its dividend continuously for the last three years. The reports attached
below shows that it pays cash dividend four times in an accounting year. During the last years,
eBay is giving a dividend yield of 2.01% and an annualized payout of 0.88 per share paid in four
instalments. As compared to the industry standards eBay is paying higher dividends. Distribution
of higher dividends emphasise that objective of eBay is to maximise its shareholders wealth.
According to walters' model, dividends are relevant and they do affect the share prices which in-
turn seems the objective of eBay.

Sources of Finance:
Sources of finance refers to the manner in which the companies arrange their capital for
the business. There are various sources such as shares, debentures, loans from banks and retained
earnings ( Lipson, 2020).
eBay has sufficiently funded its operations through a combination of finance sources including
debt and equity. It has total common stock of 2 million with additional paid in capital of $16659
million at the end of 2021. While looking at the debt, eBay has a long term debt of $7727 million
and short-term debt of $1355 million at the end of 2021. eBay has significantly increased its
short-term borrowings from last year when it was standing at $6 million (eBay Annual Report,
2021).
It can be viewed in table below that eBay is having a total equity of $9778 million at year
ending 2021 which is a much larger figure than last year when total stockholders equity was
$3561 million. The retained earning increased by $13129 million from last year 2020.
Further the long term and short term debt figures are given in the below table. It consist
of long term debt, operating lease liabilities, deferred tax liabilities, short-term debts, accounts
payables.
eBay is showing a positive return with increase in cash generation from operations. This is due to
favourable raise in working capital of firm with increase in its short-term debts.

The net gearing ratio for eBay expressed as percentage for year ending 2021 is 92.88%.
This implies that for every $1 of equity company has $0.93 as debt. eBay has a high gearing ratio
as it uses short term debts to fund its operations.
Section C: Calculation of Financial Ratios
 Profitability Ratios
Particulars 2021 2020
Net Profit Margin =
Net Income/Sales
13608/10420
=1.3
5667/8894
=0.64
Return on Capital
Employed =
Net Operating
Profit after tax/
Capital employed
2777/17505
=0.16
1778/11301
=0.16

Comments:
The company witnessed an increased rate of profit, with 1.3 being profit for 2021 and
0.64 for 2020. This is due to earnings from discontinued operations, also a decrease in expenses
or higher sale price and reduced cost of production can also increase rate of profit. If the total
sales for upcoming years could not be maintained, then the overall profit will decline in the
income as well as comprehensive income statement. Hence, it is suggested that to maintain
current net profit margin with proper resource management, the operating expenses can be
significantly diminished and simultaneously profitability can be increased. However, a high
profit margin may not be adequate to judge a company's overall financial position, also if
comparison of ratio is made with companies in different industries, it will undeniably result in
arbitrary analysis (Lipson, 2020)
The return on capital employed defines the Company's position in the industry by
measuring the profit earned and amount invested by shareholders and creditors (Adesina, 2019).
The return for both the years are measured at 0.16 approx. which implies that the company is
maintaining its investments efficiently and can improve the same, with reduction in cash set
aside for working capital. It can also improve its real estate footprint and make mutual
concessions between debt and equity invested in the business, while concentrating on keeping
equity portion higher as compared to long term debts. The stabilized rate of return will benefit
investors as well as shareholders, however this ratio provides a vague idea about what business
segments are performing well, hence cannot be adopted for future investments decisions.

2020 2021
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
0.18
Return on Invested Capital
Column
Year
ROIC
2020 2021
0
0.05
0.1
0.15
0.2
0.25
0.3
Net Profit Margin
Column
Year
NPV

 Liquidity Ratios
Particulars 2021 2020
Current Ratio=
Current
Assets/Current
Liabilities
9111/4622
= 2
7190/4002
=1.8
Cash Ratio=
Cash + Marketable
securities/Current
Liabilities
7323/4622
= 1.6
3493/4002
= 0.89
Comments:
A higher current ratio signifies that company is more capable of paying off its debts as it
has larger proportion of current assets in comparison to current liabilities. The company seems to
witness an increase in the current asset ratio for 2021, in contrast to year 2020, which does not
necessarily mean that the it's position is favourable. A current ratio higher then 2, may indicate
that the company has invested a large amount of cash in fulfilling its working capital
requirements, moreover, it has low inventory turnover rates or unpaid dues. In the above
mentioned scenario, current ratio of 2020 was optimal, however due to reasons mentioned above,
the ratio increased to 2021. This is an indication towards reliable usage of assets and liabilities,
nonetheless it should not exceed the industry average unreasonably, which it did, stating that the
assets are not used in a manner, leading to future benefits flowing towards the company (Louw
and et. al., 2022).
The cash ratio defines relationship between cash, cash equivalents, marketable securities and
current liabilities. A cash ratio above 1, signifies a better liquidity position, or evaluates a
company's ability to pay off near-cash resources and short term debts. Here, the cash ratio
increased from 0.89 in 2020 to 1.6 in 2021, which implies towards a sound liquidity position,
where the company can easily manage short term debts and any contingent liability of similar
nature, arising in the near future. Likewise, high cash ratio also showcases the growth potential

by virtue of acquisitions and mergers. Even so, eBay should not accumulate excess cash towards
any activity in a business (Zahir and et. al, 2021). It must be noted, that considerable ambiguity
exists in defining what instruments are cash equivalents hence cash ratio does not provide
absolute assurance on liquidity of company.
2020 2021
1.7
1.75
1.8
1.85
1.9
1.95
2
2.05
Current Ratio
Column
Year
CR
2020 2021
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
Cash Ratio
Column
Year
CR

 Efficiency Ratios
Particulars 2021 2020
Fixed asset
Turnover Ratio =
Revenue/Fixed
assets
10420/17515
=0.6
8894/11940
=0.74
Accounts Receivable
Turnover Ratio=Net
Credit Sales/
Accounts
Receivables
10420/98
=106.32
8894/362
=24.56
Comments:
Fixed Asset Turnover Ratio is used for keeping track of how efficiently the company's
assets are managed (Söylemez, 2021). Generally, the higher the fixed asset turnover ratio, the
better the position of the company is. In an organisation where the fixed asset turnover ratio is
high, the long term assets may be efficiently managed. eBay's fixed asset turnover ratio is lower
then the ideal ratio of 1 hence it needs to minimize its investments in long term assets and at the
same time, it also indicates that the company must introduce new products to revive its turnover.
Another case could be, that eBay made investments in new fixed assets without fully utilizing
the existing ones.
The accounts receivable is defined as the number of times in a year that a business collects its
average receivables. Usually accountants and analysts use this ratio to measure how efficiently a
company collects dues on the credit provided to the consumers. A higher ratio indicates a better
and streamlined receivable cycle (D'Mello and et. al., 2020). Furthermore, it implies that the
company has garnered a better consumer base, by proficient use of resources. In case of eBay,
the company witnessed higher turnover ratio of 106.32 in 2021 as compared to 2020 where the
ratio dropped down to 24.56. The increase in ratio could indicate that eBay is being conservative
in extending credits to the customers. It could also imply that the company is either efficient or