Analysis of Solvency Ratios
Solvency ratios also known as long-term debt ratios measure a company ability to meet long-term obligations.
Solvency Ratios (Summary)
Debt Ratios
Coverage Ratios
eBay Inc., solvency ratios
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 solvency profile exhibits a distinct shift toward increased leverage and higher debt dependency over the five-year period ending December 31, 2018. While the organization maintains a viable capacity to service its obligations, there is a noticeable contraction in the margin of safety across all primary solvency metrics.
- Debt and Leverage Metrics
- A consistent upward trajectory is observed in the debt-to-equity ratio, which rose from 0.38 in 2014 to 1.47 in 2018, indicating a strategic shift toward debt financing relative to shareholder equity. Similarly, the debt-to-assets ratio increased from 0.17 to 0.40, and the debt-to-capital ratio grew from 0.28 to 0.60, confirming that a larger proportion of the total asset base and capital structure is now funded by debt. Financial leverage also experienced an overall increase, rising from 2.27 to 3.63, despite a temporary decline in 2016.
- Coverage and Serviceability Metrics
- A significant downward trend is evident in the ability to cover fixed obligations. The interest coverage ratio declined sharply from 29.71 in 2014 to 9.34 in 2018, representing a substantial reduction in the cushion available to meet interest expenses from operating profits. Parallel to this, the fixed charge coverage ratio dropped from 13.52 to 7.12 over the same period. Although these ratios remain well above critical thresholds, the trend suggests increased pressure on cash flows to service debt and other fixed obligations.
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Debt to Equity
eBay Inc., debt to equity 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) | ||||||
| Short-term debt | 1,546) | 781) | 1,451) | —) | 850) | |
| Long-term debt | 7,685) | 9,234) | 7,509) | 6,779) | 6,777) | |
| Total debt | 9,231) | 10,015) | 8,960) | 6,779) | 7,627) | |
| Stockholders’ equity | 6,281) | 8,063) | 10,539) | 6,576) | 19,906) | |
| Solvency Ratio | ||||||
| Debt to equity1 | 1.47 | 1.24 | 0.85 | 1.03 | 0.38 | |
| Benchmarks | ||||||
| Debt to Equity, 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
Debt to equity = Total debt ÷ Stockholders’ equity
= 9,231 ÷ 6,281 = 1.47
2 Click competitor name to see calculations.
Between 2014 and 2018, the solvency profile transitioned from a conservative capital structure to one characterized by significantly higher leverage. The overall trend indicates a weakening of the solvency position, primarily driven by a substantial contraction in stockholders' equity rather than solely by the accumulation of debt.
- Debt to Equity Ratio
- A consistent upward trajectory is observed in the debt to equity ratio, which rose from 0.38 in 2014 to 1.47 by 2018. Although a brief correction occurred in 2016 when the ratio declined to 0.85, the subsequent years showed a sharp increase, signaling that the company became increasingly reliant on borrowed funds to finance its operations and assets.
- Total Debt Trends
- Total debt exhibited moderate volatility, increasing from 7,627 million USD in 2014 to a peak of 10,015 million USD in 2017. A slight reduction to 9,231 million USD was noted in 2018, yet the total debt remained substantially higher than the levels recorded at the beginning of the period.
- Stockholders' Equity Dynamics
- The most significant impact on the solvency ratios stemmed from the volatility in stockholders' equity. A sharp decline occurred between 2014 and 2015, where equity dropped from 19,906 million USD to 6,576 million USD. Despite a temporary recovery to 10,539 million USD in 2016, equity continued to diminish, reaching 6,281 million USD by 2018.
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Debt to Capital
eBay Inc., debt to capital 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) | ||||||
| Short-term debt | 1,546) | 781) | 1,451) | —) | 850) | |
| Long-term debt | 7,685) | 9,234) | 7,509) | 6,779) | 6,777) | |
| Total debt | 9,231) | 10,015) | 8,960) | 6,779) | 7,627) | |
| Stockholders’ equity | 6,281) | 8,063) | 10,539) | 6,576) | 19,906) | |
| Total capital | 15,512) | 18,078) | 19,499) | 13,355) | 27,533) | |
| Solvency Ratio | ||||||
| Debt to capital1 | 0.60 | 0.55 | 0.46 | 0.51 | 0.28 | |
| Benchmarks | ||||||
| Debt to Capital, 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
Debt to capital = Total debt ÷ Total capital
= 9,231 ÷ 15,512 = 0.60
2 Click competitor name to see calculations.
A sustained increase in the reliance on debt relative to total capital is evident between 2014 and 2018. The debt to capital ratio more than doubled over this five-year period, indicating a significant shift in the solvency profile and the overall composition of the capital structure.
- Total Debt Evolution
- Total debt exhibited a fluctuating but generally upward trajectory. After a slight decrease from 7,627 million USD in 2014 to 6,779 million USD in 2015, debt levels rose steadily to a peak of 10,015 million USD in 2017. A moderate reduction was observed in 2018, with total debt closing at 9,231 million USD.
- Total Capital Volatility
- Total capital experienced a sharp contraction between 2014 and 2015, falling from 27,533 million USD to 13,355 million USD. While a partial recovery occurred in 2016, reaching 19,499 million USD, a subsequent downward trend followed, resulting in a final value of 15,512 million USD by the end of 2018.
- Debt to Capital Ratio Analysis
- The debt to capital ratio rose from 0.28 in 2014 to 0.60 in 2018. The most acute increase occurred between 2014 and 2015, where the ratio ascended to 0.51, primarily driven by the substantial decrease in total capital. Despite a slight dip to 0.46 in 2016, the ratio continued to climb through 2017 and 2018, reflecting an increasing proportion of debt within the total capital base.
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Debt to Assets
eBay Inc., debt to assets 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) | ||||||
| Short-term debt | 1,546) | 781) | 1,451) | —) | 850) | |
| Long-term debt | 7,685) | 9,234) | 7,509) | 6,779) | 6,777) | |
| Total debt | 9,231) | 10,015) | 8,960) | 6,779) | 7,627) | |
| Total assets | 22,819) | 25,981) | 23,847) | 17,785) | 45,132) | |
| Solvency Ratio | ||||||
| Debt to assets1 | 0.40 | 0.39 | 0.38 | 0.38 | 0.17 | |
| Benchmarks | ||||||
| Debt to Assets, 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
Debt to assets = Total debt ÷ Total assets
= 9,231 ÷ 22,819 = 0.40
2 Click competitor name to see calculations.
The solvency profile from 2014 to 2018 is characterized by a significant shift in leverage and asset composition. An initial period of low leverage transitioned into a more consistent and higher debt-to-asset relationship following a substantial contraction in the asset base.
- Asset Base Volatility
- A sharp decrease in total assets is observed between 2014 and 2015, falling from US$ 45,132 million to US$ 17,785 million. While assets subsequently grew to a peak of US$ 25,981 million in 2017, they declined again to US$ 22,819 million by the end of 2018, indicating significant volatility in the company's total resource base.
- Total Debt Trajectory
- Debt levels fluctuated moderately over the period. After a decrease to US$ 6,779 million in 2015, total debt entered an upward trend, peaking at US$ 10,015 million in 2017. A subsequent reduction occurred in 2018, with debt totaling US$ 9,231 million.
- Debt to Assets Ratio Trends
- The debt to assets ratio experienced a primary spike from 0.17 in 2014 to 0.38 in 2015, driven largely by the precipitous drop in total assets. From 2015 through 2018, the ratio remained relatively stable but exhibited a gradual upward trajectory, ending the period at 0.40. This suggests a progressive increase in the proportion of assets financed through debt.
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Financial Leverage
eBay Inc., financial leverage 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) | ||||||
| Total assets | 22,819) | 25,981) | 23,847) | 17,785) | 45,132) | |
| Stockholders’ equity | 6,281) | 8,063) | 10,539) | 6,576) | 19,906) | |
| Solvency Ratio | ||||||
| Financial leverage1 | 3.63 | 3.22 | 2.26 | 2.70 | 2.27 | |
| Benchmarks | ||||||
| Financial Leverage, 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
Financial leverage = Total assets ÷ Stockholders’ equity
= 22,819 ÷ 6,281 = 3.63
2 Click competitor name to see calculations.
The analysis of financial leverage from 2014 to 2018 reveals a systemic shift in the capital structure, characterized by a progressive increase in the financial leverage ratio and a substantial contraction in stockholders' equity. While total assets experienced extreme volatility in the early part of the period, the latter years are marked by a trend toward higher financial risk resulting from a diminishing equity base.
- Financial Leverage Ratio Trends
- The financial leverage ratio exhibited a general upward trajectory, increasing from 2.27 in 2014 to 3.63 by 2018. A period of relative stability was observed between 2014 and 2016, where the ratio fluctuated slightly around 2.26 to 2.70. However, a significant acceleration occurred between 2016 and 2018, with the ratio climbing sharply to 3.63, indicating an increased reliance on debt or other liabilities to finance assets.
- Stockholders' Equity Analysis
- A severe and sustained decline in stockholders' equity is evident, falling from 19,906 million in 2014 to 6,281 million in 2018. The most drastic reduction occurred in 2015, followed by a partial recovery in 2016. The subsequent steady decline from 2016 through 2018 served as the primary driver for the rising leverage ratio, as the equity cushion supporting the company's assets was significantly reduced.
- Total Asset Volatility
- Total assets underwent a sharp contraction between 2014 and 2015, decreasing from 45,132 million to 17,785 million. Following this decline, assets showed a moderate recovery, peaking at 25,981 million in 2017 before decreasing to 22,819 million in 2018. The divergence between the relatively stable asset levels from 2016 to 2018 and the continuing drop in equity underscores the escalation in financial leverage during the final two years of the observed period.
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Interest Coverage
eBay Inc., interest coverage 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) | ||||||
| Net income (loss) | 2,530) | (1,016) | 7,266) | 1,725) | 46) | |
| Less: Income (loss) from discontinued operations, net of income taxes | 2) | (4) | (19) | (222) | —) | |
| Add: Income tax expense | 190) | 3,288) | (3,634) | 459) | 3,485) | |
| Add: Interest expense | 326) | 292) | 225) | 144) | 123) | |
| Earnings before interest and tax (EBIT) | 3,044) | 2,568) | 3,876) | 2,550) | 3,654) | |
| Solvency Ratio | ||||||
| Interest coverage1 | 9.34 | 8.79 | 17.23 | 17.71 | 29.71 | |
| Benchmarks | ||||||
| Interest Coverage, 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
Interest coverage = EBIT ÷ Interest expense
= 3,044 ÷ 326 = 9.34
2 Click competitor name to see calculations.
The interest coverage ratio exhibits a pronounced downward trend between 2014 and 2018, reflecting a decrease in the relative capacity of operating earnings to service debt obligations. Although the ratio remains well above the critical threshold of 1.0, the safety margin has contracted significantly over the analyzed period.
- Earnings Before Interest and Tax (EBIT)
- Operating earnings displayed significant volatility throughout the five-year window. A peak of 3,876 million US$ was recorded in 2016, following a decline in 2015 and preceded by a starting value of 3,654 million US$ in 2014. By 2018, EBIT reached 3,044 million US$, indicating an inconsistent trajectory in core operational profitability.
- Interest Expense
- A consistent and linear increase in interest expenses is observed. Costs rose steadily from 123 million US$ in 2014 to 326 million US$ in 2018. This sustained growth suggests an expansion of the debt burden or an increase in the cost of borrowing over the timeframe.
- Interest Coverage Ratio Analysis
- The coverage ratio declined sharply from 29.71 in 2014 to 8.79 in 2017, before a marginal recovery to 9.34 in 2018. This deterioration is the result of a compounding effect: the steady rise in interest obligations coincided with fluctuating operating income, leading to a substantial reduction in the multiplier used to cover interest payments.
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Fixed Charge Coverage
eBay Inc., fixed charge coverage 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) | ||||||
| Net income (loss) | 2,530) | (1,016) | 7,266) | 1,725) | 46) | |
| Less: Income (loss) from discontinued operations, net of income taxes | 2) | (4) | (19) | (222) | —) | |
| Add: Income tax expense | 190) | 3,288) | (3,634) | 459) | 3,485) | |
| Add: Interest expense | 326) | 292) | 225) | 144) | 123) | |
| Earnings before interest and tax (EBIT) | 3,044) | 2,568) | 3,876) | 2,550) | 3,654) | |
| Add: Rent expense | 118) | 105) | 84) | 79) | 159) | |
| Earnings before fixed charges and tax | 3,162) | 2,673) | 3,960) | 2,629) | 3,813) | |
| Interest expense | 326) | 292) | 225) | 144) | 123) | |
| Rent expense | 118) | 105) | 84) | 79) | 159) | |
| Fixed charges | 444) | 397) | 309) | 223) | 282) | |
| Solvency Ratio | ||||||
| Fixed charge coverage1 | 7.12 | 6.73 | 12.82 | 11.79 | 13.52 | |
| Benchmarks | ||||||
| Fixed Charge Coverage, 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
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= 3,162 ÷ 444 = 7.12
2 Click competitor name to see calculations.
Between 2014 and 2018, a general downward trend is observed in the company's fixed charge coverage, indicating a reduction in the margin of safety available to meet fixed financial obligations. While the coverage remains substantial, the ratio decreased from a peak of 13.52 in 2014 to 7.12 by the end of 2018.
- Fixed Charge Coverage Ratio
- The ratio exhibited relative stability between 2014 and 2016, fluctuating within a range of 11.79 to 13.52. However, a significant contraction occurred in 2017, where the ratio dropped to 6.73, representing a sharp decline from the 2016 level. A slight recovery to 7.12 was noted in 2018, though the figure remained significantly lower than the levels observed in the first three years of the period.
- Earnings Before Fixed Charges and Tax
- Earnings demonstrated notable volatility over the five-year period. After a decrease in 2015 and a peak of 3,960 million USD in 2016, earnings fell to 2,673 million USD in 2017. The subsequent recovery to 3,162 million USD in 2018 was insufficient to restore the coverage ratio to its historical highs.
- Fixed Charges Trend
- A consistent upward trajectory in fixed charges is evident from 2015 onward. Fixed charges increased from 223 million USD in 2015 to 444 million USD in 2018. This steady growth in fixed obligations, occurring simultaneously with fluctuating earnings, served as the primary driver for the deterioration of the solvency coverage during the latter half of the analyzed period.
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