Module 2: Introduction to Reformulation Catalog & Mail order house industry

1. Module 2: Introduction to Reformulation Catalog & Mail order house industry

3. Industry Definition Comprised of companies that sell products through “non-store” channels, including catalogs, online sales, television, and radio Products and services are delivered through the mail Companies in this industry typically have low amounts of inventory and commonly act as the “middle-man” in sales transactions Source: business.highbeam.com

4. eBay • Transaction based business model • Marketplace • eBay.com • StubHub.com and other small websites • Payments • PayPal • Bill Me Later • Marketing, Classifieds, Advertising Services • eBay Enterprises

6. Balance Sheet Cash and cash equivalents Short-term investments Accounts receivable Loans and interest receivable Funds receivable and customer accounts Other current assets Long-term investments Property & equipment Goodwill Intangible assets Other assets Short Term Debt Accounts Payable Funds payable and amounts due to customers Accrued expenses and other current liabilities Deferred revenue Income tax payable Deferred and other tax liabilities Long-term debt Other liabilities Common stock Additional paid-in capital Treasury stock Retained earnings Accumulated other comprehensive income

7. Calculating NEA Cash and cash equivalents Short-term investments Accounts receivable Loans and interest receivable Funds receivable and customer accounts Other current assets Long-term investments Property & equipment Goodwill Intangible assets Other assets Short Term Debt Accounts Payable Funds payable and amounts due to customers Accrued expenses and other current liabilities Deferred revenue Income tax payable Deferred and other tax liabilities Long-term debt Other liabilities Common stock Additional paid-in capital Treasury stock Retained earnings Accumulated other comprehensive income

8. Loans and Interest Receivable Represent purchased consumer receivables Arise from loans through Bill Me Later Monthly bill to consumers for repayment

9. Funds Receivable and Customer Accounts Related to Payments segment Clearing Period before cash is received Part of the business/production activities

10. Calculating NEA Cash and cash equivalents Short-term investments Accounts receivable Loans and interest receivable Funds receivable and customer accounts Other current assets Long-term investments Property & equipment Goodwill Intangible assets Other assets Short Term Debt Accounts Payable Funds payable and amounts due to customers Accrued expenses and other current liabilities Deferred revenue Income tax payable Deferred and other tax liabilities Long-term debt Other liabilities Common stock Additional paid-in capital Treasury stock Retained earnings Accumulated other comprehensive income

11. Computation of NEA

12. Calculating NFL Cash and cash equivalents Short-term investments Accounts receivable Loans and interest receivable Funds receivable and customer accounts Other current assets Long-term investments Property & equipment Goodwill Intangible assets Other assets Short Term Debt Accounts Payable Funds payable and amounts due to customers Accrued expenses and other current liabilities Deferred revenue Income tax payable Deferred and other tax liabilities Long-term debt Other liabilities Common stock Additional paid-in capital Treasury stock Retained earnings Accumulated other comprehensive income

13. Result: Net Financial Assets

14. Check NEA – NFL = CSE $13,213 – (7,652) = $20,865

17. Income Statement Net revenues Cost of net revenues Sales & marketing Product development General & administrative Provision for transaction and loan losses Amortization of acquired intangible assets Interest & Other, Net Provision for income taxes Foreign currency translation, net Unrealized gains (losses) on investments, net Unrealized gains (losses) on hedging activities, net

18. Calculating EPAT Net revenues Cost of net revenues Sales & marketing Product development General & administrative Provision for transaction and loan losses Amortization of acquired intangible assets Interest & Other, Net Provision for income taxes Foreign currency translation, net Unrealized gains (losses) on investments, net Unrealized gains (losses) on hedging activities, net

19. Calculating Income Tax Provision

20. Calculating EPAT Net revenues Cost of net revenues Sales & marketing Product development General & administrative Provision for transaction and loan losses Amortization of acquired intangible assets Interest & Other, Net Provision for income taxes Foreign currency translation, net Unrealized gains (losses) on investments, net Unrealized gains (losses) on hedging activities, net

21. EPAT

22. FEAT Calculated a benefit instead of an expense

23. Check EPAT – FEAT = Comprehensive Income $2700 – (216) = $2,916

24. Questions/Concerns Does Income Tax Payable need to be split? What is the “Other” in “Interest & Other, Net” on the Income Statement? Acquisition of GSI Commerce in May 2011? Any other questions?