Etsy and the LongHaul Consider your assigned role in the sit

Etsy and the Long-Haul

Consider your assigned role in the situation, and let that guide your perspective. Look deeper at the details: facts, problems, organizational goals, objectives, policies, strategies. Next, consider the concepts, theories, tools and research you need to use to address the issues presented. Then, complete any research, analysis, calculations, or graphing to support your decisions and make recommendations.

Scenario
Investigate the areas of corporate finance as you examine basic financial statements for Etsy (ETSY), an online retailing e-commerce platform. Etsy, which was formed in 2005, held its initial public offering in 2015, and we can thus think of Etsy as a new, publicly traded firm. Etsy has experienced rapid growth (Egan, 2015; Securities and Exchange Commission, n.d.). It is also the largest certified socially-responsible company, or B Corporation, to go public in the United States (Schweiger & Marcus, 2015; Sweeney, 2013). Benefit corporations expand the obligations of boards legally, requiring them to consider environmental and social factors, as well as the financial interests of shareholders. This gives directors and officers the legal protection to pursue a mission and consider the impact their business has on society and the environment. An enacting state\'s benefit corporation statutes are placed within existing state incorporation codes so that existing code applies to benefit corporations in every respect, except where explicit provisions unique to the benefit corporation form have been included. Directors are required to balance stockholders\' interests, interests of those materially affected by the corporation\'s conduct, and a specific public benefit(s) identified in the firm’s certificate of incorporation. Prior to engaging in this discussion, please review the Management Discussion and Analysis (MD&A) section of Etsy’s Annual Report to Shareholders, and other research or materials of your choosing to become familiar with Etsy. Etsy’s financial statements are provided, for your convenience. You may also visit Yahoo Finance, and type Esty’s ticker symbol (ETSY) into the search box, to investigate more recent activity, however your answers here should address financial statements that are provided for your use.

Module Outcomes:

Assess differences between accounting value or “book” value, and market value.

Determine a firm’\'s cash flow from its financial statements.

A balance sheet needs to balance.

Balance Sheet Identity:

Assets = Liabilities + Shareholders’ equity

Cash flow from assets = Cash flow to creditors + Cash flow to stockholders

The Price/Book ratio is of particular interest for value investors.

Questions

Using the balance sheet identity (which implies that assets must be equal to liabilities plus owners’ equity),

Etsy- Balance Sheet All numbers are quoted in thousands Period Ending Assets Current Assets 31-Dec-15 31-Dec-14 31-Dec-13 Cash And Cash Equivalents Short Term Investments Net Recelvables Inventory Other Curent Assets 271,244 21,620 56,669 69,659 19,184 25.977 36,795 18,075 18,194 9,521 12,241 3,721 Total Current Assets 359,054 127,061 76,785 Long Term Investments Property Plant and Equlpment Goodwill 105,021 75,538 23,107 27,752 30,831 5.346

Solution

Accounting value or book value of a company is the mathematical difference between the total of assets figure & the total liabilities figuren, both read from the balance sheet as at a particular date. In effect, it is the total shareholders\' networth--ie. Share capital (both equity& preference)PLUS Retained earnings. Here, Etsy\'s book value or accounting value as at Dec 31, 2015 = Total assets-Total liabilities ie. 553061-222563= 330498 which is the same as Total stockholders\' equity,ie. 330498 WHEREAS, Total Market value of Etsy is simply,its no.of shares outstanding *market price per share --ie. The ruling rate in the stock market, as on a particular date, here, Dec.31,2015 (taken from Nasdaq historical stock prices page) 1212964 shares o/s* $ 8.26 1212964* 8.26 10019083 For the fiscal year ended Dec 31, 2015 Cash flows Generated from Operating Activities 29211 Used in Investing activities -23283 Generated from Financing activities 199608 Effect of Exchange rate changes -3951 Net change to cash 201585 Add: Beginning balance of cash 69659 Ending balance of cash 271244 Balance Sheet Identity: Assets = Liabilities + Shareholders’ equity For the fiscal yr. ended 2015 553061=222563+330498 Price-to-Book= Market value/Book value 10019083/330498= 30 Shows market value is 30 times the book value, which shows Etsy\'s stock are well received in the stock market.