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