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This report created from the financial statements of The Amazon.com, Inc. Company (AMZN)



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This report created from the financial statements of The Amazon.com, Inc. Company (AMZN)


Running Head: FINANCIAL ANALYSIS 1 Financial Analysis

 

Students Name Executive summary FINANCIAL ANALYSIS 2 This report created from the financial statements of The Amazon.com, Inc. Company (AMZN)

 

provides an analysis and evaluation of the actual and the prospective liquidity, profitability and the

 

financial stability of the company. The methods that have been used in the analysis include trend analysis,

 

the vertical analysis and the horizontal analysis. Also we have used certain analysis such as Quick ratio,

 

debt ratio, and the current ratios. More calculations that have been used includes the returns on the owners

 

equity, the earning per share, net operating working capital, total operating capital, net operating capital,

 

net operating profit after taxes, operating cash flow and free cash flow. A result from the data reveals that,

 

all the company ratios are above the industries averages. Comparative performance is good in the area of

 

the liquidity, credit control and inventory management.

 

The report finds that the tidings for the company are positive in the near future. The major areas of

 

weakness highlighted require further investigation and immediate action by management. The

 

recommendations that were provided include; Improving the average accounts receivable collection period,

 

Raising/ increasing the inventory turnover and reduction of prepayments in order to have enough

 

operating cash for the subsequent periods. The investigation in this report also had its shortcomings that arose and are highlighted as; FINANCIAL ANALYSIS 3 The forecasted figures used are estimates that sometimes maybe arbitrate; we also cannot fully

 

provide data on the position of other companies with the data limitation we have experienced. The

 

monthly details would have given us more information from which we could base a proper in year trend

 

analysis, rather than the blanket whole year analysis provided. Though we had the above mentioned strain

 

in preparation of this report, we still great belief that the analysis provided is best suited to show the

 

standing of the Amazon.com, Inc. Company (AMZN).

 

In the financial report below, the strengths, weakness, opportunity and threats have been highlighted as we

 

analyze the various financial sub segments. Identify your company, its industry, and analyze the important segments (percentage of sales

 

or subsidiaries) of your company compared to its industry and its overall business

 

Amazon.com, Inc. operates as an online retailer in North America and internationally. It operates through the North America, International, and Amazon Web Services (AWS) segments. The company

 

serves consumers through retail websites, such as amazon.com, amazon.ca, and amazon.com.mx, which

 

primarily include merchandise and content purchased for resale from vendors and those offered by thirdparty sellers. Amazon.com, Inc. was founded in 1994 and is headquartered in Seattle, Washington. The

 

only company that has been able to match the flirtatious margins by competitors. This development must

 

be watched to avoid the company slipping into a deep competition for sales. The company falls under the

 

Catalog & Mail Order Houses Industry which is a service sector industry. Perform a complete financial analysis of your chosen company's financial statements horizontal,

 

vertical (Percentage of Sales and Common-Size), and changes in ratios?for the last two years. FINANCIAL ANALYSIS 4 In the income statement the revenue of 88.98 billion is an increase as compared to the financial year ended

 

31st December 2013 where it was at 74.45billion, which is a 19.52% increase. Such a positive increase is

 

encouraging though it?s not the best for company since it was raised against the increased net receivables.

 

Such a situation is a weakness to the company since growth in sales with increased net receivables will

 

have a negative impact in the future. Net receivables increase is a potential for increased bad debt which

 

will be a threat to the long term operation of Amazon Company. The negative revenue growth is a

 

weakness to the company since decreased growth will mean that the net profits will reduce. FINANCIAL ANALYSIS 5 The gross profit of the co is a decrease from the previous year. The earning before interest and taxes of

 

0.69 billion is lower than the markets EBITDA but lower than 2013. The amount of sales being higher

 

than 2013 is strength but it gross profit being lower than that 2013 is a weakness. The balance sheet show

 

the earning per share of -5.22 that is below the market and 2013 so it is the list EPS in the whole industry.

 

Such a case is a weakness that must be analyzed by the board. It can be corrected by the board increasing

 

the amount that is attributable for dividends and reducing the investment. FINANCIAL ANALYSIS 6 Compare all ratios to industry averages. Evaluate the company's ratios against the industry

 

averages FINANCIAL ANALYSIS 7 The ratios provided for the market and the specific companies that are provided are the operating

 

margin, gross margin, earning per share and price per earning. The gross margin of the co is the lowest

 

in the industry. The margin being lower than that of the market means that the company has a greater

 

cushion in terms of loss and the amount of loss that can be accommodated is quite large. This is one of

 

the weaknesses of the company that is highly disregards in terms of boosting long term earnings.

 

The earnings per share of the co is negative in year 2014 compare to market which is a weakness that the

 

management must analyze and make changes in terms of the amount attributed to shareholder. The

 

levels of comparison show that the company is operating below the market rates and therefore are at a

 

risk threat of losing the shareholders. FINANCIAL ANALYSIS 8 Compare all ratios to industry averages. Evaluate the company's ratios against the industry

 

averages. The company?s ratios are quite lower than the market ratios in vital ratios such as the gross margin and

 

the operating margin as compared to industries. The only ratio where the company performed below the

 

industry is in the EPS where they showed a weakness at negative EPS against the markets positive EPS. Analyze the company's cash flows. The net cash flows for the year end period to December 2014 at negative meaning that the company

 

ended the year with a negative outflow. The company also showed some form of laxity in changing the

 

debtor?s period and the creditor?s period in order to better their cash in hand. This is a weakness that will

 

threaten the performance of the company in the next financial year. The financial year returns from

 

investment activities were all negative returns meaning that either most of the investments were at the

 

early development with opportunity that the inflow will be positive in the future. FINANCIAL ANALYSIS 9 Assess the overall financial health of your company based on this financial analysis. The company is financially healthy since they can be able to meet their current obligations when they

 

arise. The total current assets stand at 31,327,000 against the current liability of 28,089,000. From this

 

data we can say that the company in the short term is financially healthy. This is an opportunity for the

 

company to gain for the operations of the year and invest more to increase liquidity. Further more in the

 

long-term the company is still solvent with assets of 54,505,000 against the liability of 43,764,000. This

 

is another strong point and an opportunity to counter the competitors with lower assets to cover for the

 

liability

 

The company has been faced by the threat of contingency liabilities that affects the operation of the

 

business. Contingencies though not recorded in the statement are potential source of cash outflow if

 

those cases are ruled against the company. The law suits include those filed in relation to monopolistic

 

and discriminatory practices. Some of those cases that have been settled out of court have ended up

 

costing the company a lot of money. Such situations affect the company?s cash flow and also the long

 

term position of the state.

 

The emergence of other co?s as a strong competitor is worrying for the company and is also a big threat

 

too. The other has had market capitalization which is higher than the markets and that of Amazon. Such

 

emergence is a threat to the market share of sales and the oversea market strategy. References

 

http://finance.yahoo.com FINANCIAL ANALYSIS 10

 


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