Discussion 2

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School

Purdue Global University *

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Course

GB550

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Management

Date

Nov 24, 2024

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docx

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Uploaded by SharkGirl97

Initial Post: November 11, 2023 Hello Classmates, As we enter into Unit 2 I am realizing how little I initially knew about financial management. Because my undergraduate degree was in a liberal arts field, there are many concepts within business I do not have much experience with. While it can be a bit discouraging I have decided to buckle down and see how much I can absorb as I learn about new ideas and events. One thing I have learned this week is more about financial reports and how they can be utilized. While I was just entering elementary school in 2002, there are many things I learned from examining the 2002 financial statements involving Meyer and eBay. Below I have pasted the questions from the initial prompt and inserted my answers below them. Use the 2002 Financial Statement data to replicate Meyer's report calculations that illustrate the following conclusion based on the 2001 data reached in the report: eBay has never been profitable. Why? Why not? It was revealed in the 2002 financial analysis of eBay that the company’s annual income statement and balance sheet that the company was experiencing challenges that they were struggling to overcome. At the time eBay was a very new and unique concept for a selling space based completely online. For this reason, it was and is difficult to compare the business and its analytics to other businesses from 2002. From a surface level, it appears that the company’s sales struggled when compared to companies within the same industry, but there is much more nuance when comparing eBay to other (loosely) similar businesses. Though eBay surpassed its competitors in terms of net profit margin (at 20.58%) the company

still had many existing pitfalls. Thus when compared to other businesses (that are within the same industry but not nearly as intricate and computer and community-based) it is easy to see how one could find that eBay has never been profitable when ignoring these nuances. Do you agree with Meyer's report concept of "unfettered" cash flow? Why? Why not? A deficit of $539,000 was revealed by Meyer’s reporting as he investigated the concept of unfettered cash flow. This disclosed deficit was found to cause an insufficient cash flow for stock buybacks which illuded to challenges as the company struggled to pay their shareholders what they were owed in the form of dividends. Cash flow is identified by subtracting investments after taxes from the net operating profits. When examining free chas flow the reports revealed a deficit of $116,030. These reports hint at a potential for overestimating FCF (Free Cash Flow). This revelation could be seen as deceitful to investors. FCF is a metric utilized in reports to this day when conducting financial reports. The finding could be used to further mislead others by making the financial numbers look more positive than they truly are. For this reason, I agree with Meyer’s report concept of unfettered cash flow. It disclosed important information necessary for coming to an informed conclusion and brought important numbers and information to light. What other conclusions can you reach about the company from the case study? As I addressed previously, I think it is a bit difficult to identify and access the issues with eBay (in 2002) given how unique and new the core concept of the business was. There were no other large businesses like it at the time so coming up with projections and profitability predictions was extremely difficult. Despite this, given the plethora of information that Meyer was able to uncover, it does seem that eBay was trying to at a bare

minimum limit the information available to its stakeholders and stockholders. Despite the information disclosed that can be seen as negative, there were a few positives uncovered as well. The company’s financial standing was improving according to reports. There was a 62% rise in sales which resulted in a 156% increase in earnings per share. Thank you for reading my post this week! I hope you are all having an excellent Unit Two. I am eager to see how other students have reacted to this same information and are excited to engage with any replies I may receive. Sincerely, Michayla Abrahams References Kimmel, P. D., Weygandt, J. J., & Mitchell, J. E. (2022). Accounting Tools for Business Decision Making (8th ed.). John Wiley & Sons, Inc. Hawkins, D. F., & Cohen, J. (2003). eBay Inc.: Internet Success or Fairy Tale? Harvard Business Review. https://www.hbs.edu/faculty/Pages/item.aspx?num=30555 Response 1: November 13, 2023 Hello Shanel, I believe you make a lot of solid points in your initial point and we have quite a few points in common when analyzing your initial post next to mine. Despite this, I chose to reply to your post because I disagree with one of the conclusions you have come to about the financial status of eBay from 2002 into the present. I disagree that the core issue of

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eBay was that they did not have the right people in the right positions at the time. I believe that the correct people were in place, or at the very least the professionals behind the scenes were making adequate business decisions. Instead, I believe that the core issue is that eBay was like no other business at the time so its growth was unpredictable and unprecedented as they forged into the unknown. While you have compared the company to the growth of Amazon, I believe they are two different beasts. When stripping away everything that these two companies have become, at their core they are conceptually different. Amazon began as an online bookstore and eBay was founded as an online auction website. While Amazon eventually transitioned into a website with selling functionality to the general public, eBay began that way. Bookstores (online and otherwise) were well-established locations so the next logical step was to have one offer their library online. Auction-style sales, on the other hand, are much more rare and would have had a less smooth transition into an online space. I believe that it was this initial difference that caused eBay to struggle much more than Amazon ever did. Even if eBay had had more experienced business workers running the company, they still would have stumbled gaining an audience and traction on an online platform. Ultimately, aside from reports that were misleading about the financial success of the company, I believe eBay could have had the same successful launching point that Amazon did if they had broken into a more popular niche initially. Thank you for your post this week! I hope you are enjoying this class and am eager to read your response if you choose to write one. Sincerely, Michayla Abrahams

References Kimmel, P. D., Weygandt, J. J., & Mitchell, J. E. (2022). Accounting Tools for Business Decision Making (8th ed.). John Wiley & Sons, Inc. Hawkins, D. F., & Cohen, J. (2003). eBay Inc.: Internet Success or Fairy Tale? Harvard Business McFadden, C. (2021, February 17). The Rise and Rise of Amazon: A Brief History of the Everything Store. Interesting Engineering. https://interestingengineering.com/a-verybrief- history-of-amazon-the-everything-store . Response 2: November 14, 2023 Hello Sabrina, While I enjoyed reading your post and agree with many of your findings from the 2002 eBay financial records, I must admit I do not agree with your further conclusions stated at the end of your post. I do not think that it was ethically right for eBay to refuse to pay their dividends and instead invest more money into their (arguably failing and nonprofitable business). I believe it is at best morally questionable to further invest money when one owes money to others and at worst can be seen as deceitful business practices. While the acquisition of PayPal essentially brought them back into the black, I believe that it was a bit of luck that saved their failing company rather than strategic business moves. I think that it is easy to look at eBay with rose-tinted glasses as we know where the business ended up and can see how their path forged them into a well-known

company. Had we been looking at the company back in 2002, before it established itself, I feel we would be less biased in our findings and scrutinize their questionable practices more. I think when examining work like Meyer’s it is critical that we put ourselves in the time frame that the findings were written rather than with today’s knowledge. In 2002, the bottom line was that eBay would have been perceived as deceitful, unprofitable, and a failing company that was undesirable to stockholders. Knowing what eBay would become allowed us to forgive unethical practices. Thank you for your post this week! I found it very thought-provoking and just wanted to share my interpretation of the reports. One of my favorite classes I have taken is Business Perspectives, which centered around ethics so that is one topic I enjoy delving into. If you have time to reply, I am eager to spark up a conversation but if not I hope you have a great week! Sincerely, Michayla Abrahams References Kimmel, P. D., Weygandt, J. J., & Mitchell, J. E. (2022). Accounting Tools for Business Decision Making (8th ed.). John Wiley & Sons, Inc. Hawkins, D. F., & Cohen, J. (2003). eBay Inc.: Internet Success or Fairy Tale? Harvard Business Review. https://www.hbs.edu/faculty/Pages/item.aspx?num=30555

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Discussion 2

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