Etsy vs Amazon for the Market of Artisan Goods

Asset Management 

The fixed assets turnover for Etsy was 0.03 in 2013. It dropped to -0.13 in 2014 and further to -0.29 in 2015. That signified a reduction in the ability of the company to generate sales from its fixed assets (Barua & Saha, 2015). The ratio at Amazon started at 0.02 in 2013, dropped to -0.01 in 2014, and then rose to 0.02 in 2015. Generally, the fixed assets turnover for Amazon was higher than that of Etsy. The other ratio that was used to analyze the asset management at both Amazon and Etsy was the asset turnover ratio. The ratio indicated a drop over the three years. Therefore, the management of the assets has reduced in the three years (Utami, 2017). The ratio reported a decrease at Amazon from 2013 to 2014 and an increase after that. That stated a beginning in the asset management of the company. The ratio analysis in the asset management aspect of both companies indicates that Amazon is a financial role model in the performance to Etsy. The ratio analysis of the two companies also shows that they share similar characteristics in that they have struggled in the ratios of asset management in the year 2014. Amazon then shot up in both ratios in the fiscal year 2015 while Etsy performed poorly. 

Profitability 

One of the economic ratios that indicate the profitability of both Etsy and Amazon is the net profit margin (Lacinka, Fathoni & Gagah, 2018). Etsy had a decrease in the net profit margin starting at -0.64% in 2013 and going down through 2014 towards -20.5% in the fiscal year 2015. The company's profitability over the three financial years has exponentially reduced. On the other hand, Amazon had a decrease in the profitability in 2014 and then rose again in 2015. The efforts of reverting the drop in the net profit margin at Amazon can be applied to the scenario of Etsy, which has been worsening as the years go by in its investment (Lacinka et al., 2018). The return on investments for Etsy in 2013 stood at -19.9%. The company was making losses. The ROI further went down to -22.7 in 2014 and then slightly rose to -16.9% in the fiscal year 2015. Amazon recorded an ROI of 2.8% in 2013. It then dropped to -2.2%. The ROI rose to 4.4% in 2015. Apart from the financial year 2014, Amazon has been performing well in the market. Similar to Etsy, Amazon's financial journey has not been smooth. Nevertheless, Amazon has generally performed better than Etsy and therefore can be an economic role model to the latter. 

Use of Leverage 

In the financial year 2013, Etsy had a debt ratio of 0.04%. The company to finance the assets is using a meager amount in debt. The number of the assets funded by the debt increased to 1.2% in 2014 and further 1.4% in 2015. That indicated that Etsy had started growing its amount in debt to try to save the company from running bankrupt due to its low performance (Heider & Ljungqvist, 2015). On the other hand, 7.9% of assets at Amazon were being financed by debts in 2013. The debt ratio increased in 2014 indicating an increase in the company's sourcing of debt. The debt ratio then reduced in 2015. From the outlook, Amazon was using up more money in the form of debt to service its assets (Heider & Ljungqvist, 2015). The debt to equity ratio of Amazon in 2013 indicated that the company had its shareholders financing most of the company's operations. That was similar to the case of Etsy for the three years. Therefore, Etsy and Amazon share some similarities in the debt to equity ratio (Lewis & Tan, 2016). Amazon is, however, performing better on average than Etsy in the industry. It is therefore recommended that Etsy conduct a benchmarking process at Amazon to learn the financial sustainability that the company has been embracing (Lewis & Tan, 2016). 

References 

Barua, S., & Saha, A. K. (2015). Traditional Ratios vs. Cash Flow based Ratios: Which One is Better Performance Indicator?. Advances in Economics and Business , 3 (6), 232-251. 

Heider, F., & Ljungqvist, A. (2015). As certain as debt and taxes: Estimating the tax sensitivity of leverage from state tax changes. Journal of Financial Economics , 118 (3), 684-712. 

Lacinka, A., Fathoni, A., & Gagah, E. (2018). Analyze Effect Of Debt To Equity Ratio, Net Profit Margin, And Earning Per Share To The Company's Stock Prices Lq45 Listed On The Indonesia Stock Exchange Year 2012-2015. Journal of Management , 4 (4). 

Lewis, C. M., & Tan, Y. (2016). Debt-equity choices, R&D investment and market timing. Journal of Financial Economics , 119 (3), 599-610. 

Utami, W. B. (2017). Analysis of Current Ratio Changes Effect, Asset Ratio Debt, Total Asset 

Turnover, Return On Asset, And Price Earnings Ratio In Predicting growth Income By Considering Corporate Size In The Company Joined In LQ45 Index Year 2013-2016. International Journal of Economics, Business and Accounting Research (IJEBAR) , 1 (01). 

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