Analysis of Liquidity Ratios
Liquidity ratios measure the company ability to meet its short-term obligations.
Liquidity Ratios (Summary)
eBay Inc., liquidity ratios
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Current ratio | 1.60 | 2.19 | 2.31 | 3.49 | 1.51 | |
| Quick ratio | 1.26 | 1.85 | 2.01 | 2.98 | 1.43 | |
| Cash ratio | 1.10 | 1.66 | 1.86 | 2.71 | 0.58 |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
The liquidity profile exhibits a distinct pattern characterized by a sharp increase in all liquidity metrics in 2015, followed by a steady and consistent decline through 2018. Despite the downward trend observed in the latter part of the period, the organization maintained a liquidity position above 1.0 across all three ratios, suggesting a continued ability to meet short-term obligations.
- Current Ratio
- The current ratio rose significantly from 1.51 in 2014 to a peak of 3.49 in 2015. From this high, the ratio experienced a gradual contraction over the subsequent three years, ending the period at 1.60 in 2018. This movement indicates a reduction in the margin of current assets available to cover current liabilities after the 2015 peak.
- Quick Ratio
- The quick ratio closely mirrored the trajectory of the current ratio, increasing from 1.43 in 2014 to 2.98 in 2015, before descending to 1.26 by 2018. The narrow gap between the current and quick ratios throughout the period suggests that inventory levels are minimal and do not significantly impact the organization's immediate liquidity.
- Cash Ratio
- The most substantial volatility is observed in the cash ratio, which surged from 0.58 in 2014 to 2.71 in 2015. A steady decline followed, with the ratio reaching 1.10 by December 31, 2018. This pattern indicates a significant accumulation of cash and cash equivalents in 2015, followed by a period of strategic utilization or redistribution of these liquid assets.
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Current Ratio
eBay Inc., current ratio calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current assets | 7,126) | 7,743) | 8,875) | 7,904) | 26,531) | |
| Current liabilities | 4,454) | 3,539) | 3,847) | 2,263) | 17,531) | |
| Liquidity Ratio | ||||||
| Current ratio1 | 1.60 | 2.19 | 2.31 | 3.49 | 1.51 | |
| Benchmarks | ||||||
| Current Ratio, Competitors2 | ||||||
| Amazon.com Inc. | — | — | — | — | — | |
| Home Depot Inc. | — | — | — | — | — | |
| Lowe’s Cos. Inc. | — | — | — | — | — | |
| TJX Cos. Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Current ratio = Current assets ÷ Current liabilities
= 7,126 ÷ 4,454 = 1.60
2 Click competitor name to see calculations.
A significant shift in the liquidity profile is observed between 2014 and 2015, characterized by a substantial reduction in both current assets and current liabilities. Following this transition, the company maintained a relatively stable asset base but experienced a gradual increase in short-term obligations, leading to a compression of the liquidity margin over the subsequent three years.
- Current Asset Trends
- Current assets decreased sharply from 26,531 million US$ in 2014 to 7,904 million US$ in 2015. From 2015 through 2018, assets remained within a narrow range, peaking at 8,875 million US$ in 2016 before declining to 7,126 million US$ by the end of 2018.
- Current Liability Trends
- A drastic reduction in current liabilities occurred between 2014 and 2015, falling from 17,531 million US$ to 2,263 million US$. Subsequently, a steady upward trend is observed, with liabilities increasing annually to reach 4,454 million US$ in 2018, nearly doubling the 2015 levels.
- Current Ratio Interpretation
- The current ratio exhibited significant volatility, rising from 1.51 in 2014 to a peak of 3.49 in 2015, primarily driven by the disproportionate decrease in current liabilities. Following this peak, the ratio entered a consistent downward trend, declining to 2.31 in 2016, 2.19 in 2017, and finishing at 1.60 in 2018. While the ratio remains above 1.0, indicating an ability to cover short-term obligations, the trend suggests a tightening of liquidity since 2015.
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Quick Ratio
eBay Inc., quick ratio calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cash and cash equivalents | 2,202) | 2,120) | 1,816) | 1,832) | 6,328) | |
| Short-term investments | 2,713) | 3,743) | 5,333) | 4,299) | 3,770) | |
| Accounts receivable, net | 712) | 695) | 592) | 619) | 797) | |
| Loans and interest receivable, net | —) | —) | —) | —) | 3,600) | |
| Funds receivable and customer accounts | —) | —) | —) | —) | 10,545) | |
| Total quick assets | 5,627) | 6,558) | 7,741) | 6,750) | 25,040) | |
| Current liabilities | 4,454) | 3,539) | 3,847) | 2,263) | 17,531) | |
| Liquidity Ratio | ||||||
| Quick ratio1 | 1.26 | 1.85 | 2.01 | 2.98 | 1.43 | |
| Benchmarks | ||||||
| Quick Ratio, Competitors2 | ||||||
| Amazon.com Inc. | — | — | — | — | — | |
| Home Depot Inc. | — | — | — | — | — | |
| Lowe’s Cos. Inc. | — | — | — | — | — | |
| TJX Cos. Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Quick ratio = Total quick assets ÷ Current liabilities
= 5,627 ÷ 4,454 = 1.26
2 Click competitor name to see calculations.
An evaluation of the liquidity position from 2014 to 2018 reveals a significant structural shift in the balance sheet followed by a gradual decline in the quick ratio. The period is characterized by a sharp contraction in both liquid assets and short-term obligations between 2014 and 2015, establishing a new baseline for liquidity management.
- Quick Ratio Trajectory
- The quick ratio experienced a sharp increase from 1.43 in 2014 to a peak of 2.98 in 2015. Following this peak, a consistent downward trend was observed, with the ratio declining to 2.01 in 2016, 1.85 in 2017, and reaching 1.26 by December 31, 2018. While the ratio remains above 1.0, indicating a sufficient ability to cover short-term obligations without relying on inventory, the margin of safety has narrowed significantly over the four-year period following 2014.
- Quick Asset Trends
- Total quick assets decreased substantially from 25,040 million US dollars in 2014 to 6,750 million US dollars in 2015. After a slight recovery to 7,741 million US dollars in 2016, assets entered a period of steady decline, ending at 5,627 million US dollars in 2018. This sustained reduction in liquid reserves contributed to the overall weakening of the liquidity ratio.
- Current Liabilities Analysis
- Current liabilities saw a dramatic reduction from 17,531 million US dollars in 2014 to 2,263 million US dollars in 2015. Subsequently, short-term obligations trended upward, increasing to 3,847 million US dollars in 2016 and reaching 4,454 million US dollars by 2018. The inverse relationship between declining quick assets and rising current liabilities from 2016 onward explains the steady compression of the quick ratio.
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Cash Ratio
eBay Inc., cash ratio calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cash and cash equivalents | 2,202) | 2,120) | 1,816) | 1,832) | 6,328) | |
| Short-term investments | 2,713) | 3,743) | 5,333) | 4,299) | 3,770) | |
| Total cash assets | 4,915) | 5,863) | 7,149) | 6,131) | 10,098) | |
| Current liabilities | 4,454) | 3,539) | 3,847) | 2,263) | 17,531) | |
| Liquidity Ratio | ||||||
| Cash ratio1 | 1.10 | 1.66 | 1.86 | 2.71 | 0.58 | |
| Benchmarks | ||||||
| Cash Ratio, Competitors2 | ||||||
| Amazon.com Inc. | — | — | — | — | — | |
| Home Depot Inc. | — | — | — | — | — | |
| Lowe’s Cos. Inc. | — | — | — | — | — | |
| TJX Cos. Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Cash ratio = Total cash assets ÷ Current liabilities
= 4,915 ÷ 4,454 = 1.10
2 Click competitor name to see calculations.
The financial trajectory between 2014 and 2018 reveals a significant reconfiguration of the liquidity profile, characterized by a dramatic shift in the relationship between cash reserves and short-term obligations.
- Cash Asset Trends
- Total cash assets exhibited an overall downward trend, decreasing from US$ 10,098 million in 2014 to US$ 4,915 million in 2018. While a temporary increase was recorded in 2016, the general movement indicates a sustained reduction in the absolute volume of cash held over the five-year period.
- Current Liabilities Dynamics
- A substantial contraction in current liabilities occurred between 2014 and 2015, where obligations fell from US$ 17,531 million to US$ 2,263 million. Following this sharp decline, current liabilities entered a period of gradual growth, rising steadily each year to reach US$ 4,454 million by the end of 2018.
- Cash Ratio Interpretation
- The cash ratio experienced a sharp spike from 0.58 in 2014 to 2.71 in 2015, a change primarily driven by the aggressive reduction in current liabilities. Since 2015, a consistent decline in the ratio has been observed, falling to 1.86 in 2016, 1.66 in 2017, and 1.10 in 2018. This pattern suggests a normalization of liquidity levels after an initial period of extreme over-liquidity relative to current debts.
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