Financial analysis and comparison of amazon and ebay Essay

Financial analysis and comparison of amazon and ebay - Essay Example Two of the mainstream [and most popular] e-commerce businesses today are Amazon.com and eBay Inc. Both of these online sites are in major competition with each other. This paper would discuss a comparative financial analysis between both sites through their respective financial ratios and therefore, their financial conditions during the year 2007 to 2009 – when the recession was at its peak. Amazon.com. was founded by Jeff Bezos on 1994 while followed by Pierre Omidyar who founded eBay Inc. on 1995. Amazon.com only used to be an online bookseller but now has widened its scope and now sells a variety of products online. Amazon.com is the largest non-travel e-commerce site across the globe (Keynote, 2009). Meanwhile, eBay Inc. is a significant networking company which specializes on online auctions. Almost anything can be possibly bought and sold in eBay Inc. It owns PayPal and Skype (Keynote, 2009). Liquidity: Liquidity, which is determined in the balance sheet, is a crucial factor in the financial condition of the business. Liquidity is the capability of the business to defray obligations with the use of its cash in times necessary and thus, sustain the business in the long run. The higher the liquidity, the more competitive it becomes (Credit Guru, 2009a). Liquidity uses the Current Ratio, Quick Ratio/ Acid Test where inventory is not included and the Net Working Capital Ratio. Liquidity Ratios are better if they are higher (Zeromillion, 2009). By the end of 2009, eBay Inc. had a 2.3 current ratio while Amazon.com had 1.3. This means that in meeting $1.00 of its current liability, eBay Inc. had $2.30 cents of current assets while Amazon.com had only $1.50 cents to cover up $1.00 of its current liability. In this case, eBay Inc. was more capable of outlaying cash for its obligations due within the specific year than Amazon.com. The same was true for the previous years. eBay Inc. had 2.32 times as much as it required in meeting its current liabilities by