Amazon and EBAY Financial Analyses - Essay Example

Amazon.com its own products to consumers like the Kindle e-reader, at relatively low prices and free shipping incentives. It operates in two major segments: North America and International. It was founded in July 1994 by Jeffrey P. Bezos and its headquarters is in Seattle. Mr. Bezos is still the CEO, Chairman and President of the Company- he took office in 1994 after founding the company. The senior Vice President is Mr. Thomas J. Szkutak who has been in office since 2002. Other executives include Ms. Kathy Sheehan, Mr. Phil Hardin and Ms. Mary Bowman. Amazon.com has been able to increase its revenues to $74.5B from $61.1B in the previous years. It bounced back with a profit of $274M after a loss in the previous year of around $39M.

This may be attributed to a decrease in the percentage of sales related to the cost of goods. Currently, the market price of its shares is $327.82, a 3.58% increase. The table below shows the annual financial statement of the company. EBay Inc. is an online trading company that allows sellers and buyers to exchange products and services ranging from collectible and memorabilia to coins and sporting tickets. It also has an online payment service- PayPal. Its headquarters is located at Hamilton Avenue, San Jose, California.

It has three presidents: John J Donahoe (President/CEO), Craig Hayman (President-Enterprise Business), and Devin N Wenig (President-Market Places). eBay shares are currently valued at $54.36, this is a 0.02% decrease. The financial position of companies at the end of every fiscal year is very important for investors as it forms the basis of their future decisions. There are many types of ratios in use today, however, the ones that are more important to the investors are the profitability and liquidity ratios as they reveal the financial position of the company at the end of that year.

Profitability is an important piece of information for investors as it will either attract them to a company or scare them away. This is due to the fact that high revenues and increased stock prices don’t necessarily equate to high dividends for investors. Profitability ratios, therefore, give investors a clue of the likelihood that a company will turn in a profit. They include profit margin, return on equity (ROE), return on assets (ROA), gross margin, and operating margin.

Generally, a higher profit margin is considered ideal. For this ratio to be somewhat reliable, it should be monitored for several years. A constant decrease in profit margins is a serious issue for a company. This indicates that the company is either suffering from rising costs or is facing increased competition from other players in the industry. A very low-profit margin indicates that a company will be in a bad position if the market conditions fluctuate. A high profit margin compared to the industry may mean that a company may have temporary advantages over other companies.