GB550: Unit 2 DQ 1 of 2. Kaplan University.1. Use the 2002 Financial Statement data to replicate the Meyer's report calculations that illustrate the
... [Show More] following conclusion based on the 2001 data reached in the report: eBay has never been profitable. Why? Why not?
As indicated in the case study, EBay has not at any time paid cash dividends on the company stock. They intended to be persistent with maintaining company’s earnings to fund growth in the future.
“After the proxy Meyer usually bounces to the cash-flow statement. Rather than looking only at free cash flow, which is usually described as operating cash flow minus capital spending minus dividends, he takes it one step further to arrive at his "unfettered free cash flow," which takes into account the cost of making investors whole after employee stock options are exercised” (Greenberg, 2003, para. 5).
Through the preparation of the unfettered free cash flow statement it reveals EBay’s capabilities for purchasing back the worker stock alternatives if they were utilized immediately and how they would not have the capability to pay the stock alternatives if they happen to be utilized immediately.
2. Do you agree with Meyer's report concept of "unfettered" cash flow? Why? Why not?
I am in agreement Meyer’s report concept of unfettered cash flow presently. From viewing the data in the statements I am convinced by the sure executions for instance giving out shares to workers who produce surplus shares. As I stated above if EBay attempted to re-buy the shares they would be absent of free cash flow to accommodate. EBay could utilize some reorganization of the company with a view to achieving greater efficiency and profit or to adapt to a changing market. If the repurchasing of stock is want the business desires this would be necessary. The repurchasing of stock with increased prices is not promising for the business’ prosperity. The financial statement neglects to reveal the price to cover the cost of buying back the stock.
3. What other conclusions can you reach about the company from the case study?
Despite the fact that EBay appears lucrative by the financial statements as they obtain recent debt and become larger they could be placing the company in harm’s way if they fail to start working on the differently organizing their statements of finances. I can reach this conclusion because Meyer has a specialty for raising red flags about a company’s accounting and their stock (Greenberg, 2003). I consider him as a reliable source.
Investors in this company would have a problem with the financial reports, especially the negative amounts of residual cash flows.
“The free cash flow numbers are interesting because these free cash flows, estimated by Meyer, must be used by management to pay providers of capital. After one applies the [Show Less]