dissonetwo

Discussion Scenario In this module’s discussion activity, you will investigate these 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.

Etsy - Balance Sheet All numbers are quoted in thousands

Period Ending 31-Dec-15 31-Dec-14 31-Dec-13

Assets

Current Assets

Cash And Cash Equivalents 271,244 69,659 36,795

Short Term Investments 21,620 19,184 18,075

Net Receivables 56,669 25,977 18,194

Inventory - - -

Other Current Assets 9,521 12,241 3,721

Total Current Assets 359,054 127,061 76,785

Long Term Investments - - -

Property Plant and Equipment 105,021 75,538 23,107

Goodwill 27,752 30,831 5,346

Intangible Assets 2,871 5,410 493

Other Assets 6,967 7,363 428

Deferred Long Term Asset Charges 51,396 - -

Total Assets 553,061 246,203 106,159

Current Liabilities

Accounts Payable 45,635 21,083 10,389

Short/Current Long Term Debt 24,872 12,328 6,070

Other Current Liabilities 9,615 8,042 2,760

Total Current Liabilities 80,122 41,453 19,219

Long Term Debt 7,571 3,148 38

Other Liabilities 73,450 54,153 1,428

Deferred Long Term Liability Charges 61,420 149 1,259

Total Liabilities 222,563 98,903 21,944

Stockholders' Equity

Misc Stocks Options Warrants - 80,212 80,212

Common Stock 113 44 33

Retained Earnings -86,440 -32,377 -17,134

Treasury Stock - - -

Capital Surplus 406,020 103,355 20,944

Other Stockholder Equity 10,805 -3,934 160

Total Stockholder Equity 330,498 67,088 4,003

Net Tangible Assets 299,875 30,847 -1,836

Table 1. Etsy Balance Sheet

Etsy - Income Statement All numbers are quoted in thousands

Period Ending 31-Dec-15 31-Dec-14 31-Dec-13

Total Revenue 273,499 195,591 125,022

Cost of Revenue 96,979 73,633 47,779

Gross Profit 176,520 121,958 77,243

Operating Expenses

Research Development 42,694 36,634 27,548

Selling General and Administrative 135,710 91,575 48,962

Total Operating Expenses 178,404 128,209 76,510

Operating Income or Loss -1,884 -6,251 733

Income from Continuing Operations

Total Other Income/Expenses Net -24,584 -3,419 -373

Earnings Before Interest And Taxes -26,468 -9,670 360

Interest Expense 1,526 590 302

Income Before Tax -27,994 -10,260 58

Income Tax Expense 26,069 4,983 854

Net Income -54,063 -15,243 -796

Table 2. Etsy Income Statement

Etsy - Cash Flow All numbers are quoted in thousands

Period Ending 31-Dec-15 31-Dec-14 31-Dec-13

Net Income -54,063 -15,243 -796

Operating Activities, Cash Flows Provided By or Used In

Depreciation 18,717 17,291 12,388

Adjustments To Net Income 55,236 10,593 5,910

Changes In Accounts Receivables -15,764 -10,172 -7,739

Changes In Liabilities 25,126 16,884 8,741

Changes In Inventories - - -

Changes In Other Operating Activities -41 -7,266 -1,962

Total Cash Flow From Operating Activities 29,211 12,087 16,542

Investing Activities, Cash Flows Provided By or Used In

Capital Expenditures -11,116 -1,304 -7,762

Investments -2,448 -1,110 2,722

Other Cash flows from Investing Activities -9,719 -18,309 -9,985

Total Cash Flows From Investing Activities

-23,283 -20,723 -15,025

Financing Activities, Cash Flows Provided By or Used In

Dividends Paid - - -

Sale Purchase of Stock 199,041 41,915 1,140

Net Borrowings -3,377 -1,480 -1,265

Other Cash Flows from Financing Activities - -75 -

Total Cash Flows From Financing Activities 199,608 45,237 -103

Effect Of Exchange Rate Changes -3,951 -3,737 446

Change In Cash and Cash Equivalents 201,585 32,864 1,860

Table 3. Etsy Cash Flow Statement