The Financial Analysis of Expedia Essay
Originally founded by Microsoft in 1995, Expedia was the first travel agency established online by a large technological company. It was formerly part of the Microsoft Network (MSN) while still on its developing stages but was released shortly by Microsoft as an independent online travel agency in 1999, still maintaining controlling number of stocks. The first Expedia’s president and CEO was Richard Barton, who was responsible as well for the idea of selling travel online. It offers customers options to make flight, hotel and car reservations by then.
As early as 1998, it expanded its horizons to the United Kingdom which was a dead ringer of the original site. A breakthrough was made by Expedia on March 1997, wherein it had reported bookings worth $1 million just in a period of 7 days, 80% of which is due to airline bookings. Eventually, Expedia’s website was upgraded on the same year. Features of which includes seat selection, real-time basis flight information and a detailed directory of prepaid and postpaid hotels in different destinations.
Expansions in Canada, Germany, Australia, Netherlands, France, China and Norway followed shortly in the middle of 1999. In 2001, USA Networks, Inc. bought majority of the stocks of Expedia and
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prepaid and postpaid hotels, cars, destination packages, cruises as well as ticket admissions Revenues increased by 15% in comparison to last year’s ending, 2004. As a result of this, there was an increase as well in the gross profit by 13%. If you can notice, the operating income also increased up to 65%. This increase was due to increased revenue, decrease in operating expense, and flat amortization of non-cash marketing and amortization expenses. Financial Analysis for the year ending, 2006
Revenues increased by only 6% this year, the reason for which is the decrease in domestic air revenue, coupled with an increase of worldwide airfares which is where the revenues of Expedia rely most. Gross profit increased to 6% as well. Net income increased by $16 million due to a net increase in income related to derivatives and other factors. Financial Analysis for the year ending, 2007 Revenues increased by this time at 19%. This was driven by increased hotel, advertising and media revenue. There was a revenue margin of approximately 13. 34%.
Gross Profit for this year Expedia; A Financial Analysis 7 reached $2. 10 billion, an increase of exactly 21%. This was again due to advertising and media revenue with a mix of cost reductions from various efficiency initiatives. This year, net income increased up to $51 million due to same factors impacting the increase of revenue. Application of Risk Measurement to Determine Stability Expedia has been rated for how many years as having Average Financial Condition. It has been currently rated as having Aggressive Accounting and Governance Risk.
If a company has a low Accounting and Governance Risk, this indicates that the company is experiencing heightened corporate integrity risk, meaning there is a great probability of future class action litigation, material financial restatements or impaired equity performance. Some of the material risks the company is more likely to be facing and its issues are: Revenue Recognition (Receivables Accounting), Expense Recognition (Amortization Policies), Asset-Liability Valuation (Asset Valuation), High Risk Events (Capital Structure), Governance (Management Issues).