Liquidity Ratios:

Liquidity ratios determine the ability of the company to pay out its obligation. We can analyze the liquidity position of the company by calculating current ratio and quick ratio of the company.The current ratio and quick ratio ofLinkedIn were same at2.46 in 2009 because LinkedIn does not have any inventory and in 2010 it decreased to 1.63. On the other hand, the current ratio and quick ratio of XING were same at2.10 in 2009, because XING does not have any inventory and in 2010 it improved to 2.14.

Gearing Ratio:

Gearing ratio reveals the proportion of debt and equity in the capital structure of the company. We can determine the gearing position of the company by calculating shareholder’s equity/total assets, total debt to total assets and total debt to total equity ratio.In 2009, the reported shareholder’s equity/total assets, total debt to total assets and total debt to total equity ratios of LinkedIn are 0.65, 0.35 and 0.53 respectively while these ratios improved with the passage of time and hence in 2010theybecome 0.52, 0.48 and 0.92 respectively. On the other hand, in 2009, the reported shareholder’s equity/total assets, total debt to total assets and total debt to total equity ratios of XING are 0.65, 0.35 and 0.53 respectively while these ratios improved with the passage of time and hence in 2010theybecome 0. 65, 0.35 and 0.56 respectively

Operating Performance:

The outcomes of common size analysis and ratio analysis revealed that the operating performance of the company from 2003 to 2007 was in improving phase. The results show that the company effectively controls its expenses to generate the income. Moreover, by analyzing current assets and fixed assets, we can conclude that the company invests more in current assets to support its short-term status hence, therefore, the long-term growth of the company is in threatening position.

Financial Performance:

The outcome ratio analysis reveal that the financial performance of the company from 2009 to 2010 is in improving phase. The results show that both the companiesdecreasedtheir equity portion and increasetheir debts portion. Along with this, the companies also increased investment in current assets and reduced current liabilities which improved the overall liquidity position hence from this analysis, we can conclude that the companies take effective steps to reduce overall risks. In the year 2009, both the companies LinkedIn and XING reported losses and they have improved their financial performance in the fiscal year 2010 as they both reported profits in the year. (See Exhibit 1)

What do you think LinkedIn’s value is based on a comparables analysis? Be sure to provide enough support for which comparable companies and metrics you decide to use to determine LinkedIn’s true value?

I have selected XING comparable company to determine the value of LinkedIn.The XING has witnessed an increment in itsmembership per month and also its revenues from the subscriptionshavealso increased. The two matrices were used to compare the two companies based on the EBITDA and net profit. The EBITDA margin of XING in the fiscal year 2010 was 31%,whereasthe EBITDA margin of LinkedIn was 20%………………

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