Note: Sample below may appear distorted but all corresponding word document files contain proper formattingExcerpt from Term Paper:
Amazon is a Fortune 100 company, recording over $61 billion in revenue in the 2012 fiscal year, with a net loss of $39 in that period. The company is a retailer, operating almost exclusively online. Amazon runs a large family of retail websites, several of which are the market leaders. The flagship site Amazon.com is ranked as the #11 website in the world in terms of traffic by Alexa, which itself is an Amazon subsidiary (Alexa.com, 2013). Amazon is the dominant player in online retailing in several countries, including the U.S., the UK, Germany and Canada (Myslewski, 2013).
Amazon was founded in 1994 and is based in Seattle. The company has always focused its efforts on online retailing. Initially, Amazon was focused on books and music, but very quickly began to branch out into other retailing fields. Today, Amazon has a very broad product range, and including its partner retailers it offers millions of different products through its suite of websites. Amazon was founded in the earliest days of the Internet, before it was a mass market medium, and this allowed Amazon to gain first-mover advantage in the online retailing sector. This advantage occurred not only because Amazon was able to build a strong brand in online retailing, but because the company was able to develop technologies that put it ahead of all other competitors in online retailing. Johnson (2010) notes several facets of Amazon's innovation, including the development of new markets and finding new ways to profit in old markets. Amazon's customer relationship management software in particular has been a key success factor (Business Week, no date).
Despite its strong market position, Amazon faces an uncertain operating environment. The pace of technological change in online retailing is rapid, and the space is occupied by companies with strong bricks and mortar presence. Among other major online retailers are Wal-Mart, Apple and Staples, all with significant store networks. Amazon therefore competes against firms by specializing in online, and must maintain technological advantage in order to maintain the advantage that its strong brand and competitive positioning have given it. Amazon's brand has been ranked by Interbrand (2012) as the 20th-most valuable in the world, but Amazon will need to maintain its technological competitive advantage in order to retain this strength.
In recent years, the U.S. economy has struggled, but Amazon did not share in those struggles. Revenue growth has been strong and steady in the past five years, increasing from $19.16 billion in 2008 to $61.0 billion in 2012. Amazon saw a loss last year, however, something it had not been close to in the previous four years. This was the second consecutive year of declining profits. Part of the role of financial analysis is to better understand the dynamics that lead to results like this. By investigating the financials of Amazon, it will be easier to determine why the company's profits have fallen so dramatically in the past couple of years. Operating income has declined in the past couple of years, indicating that at least part of the problem comes at the cost level for the company, but its income tax was also considerably higher in 2012 than in previous years. The first step will be to conduct a thorough review of the financial statements.
Review of Financial Statements
There are several different ways to break down financial statements. The first is through horizontal analysis, which compares recent performance against past performance. Vertical analysis is a means by which changes in percentages of items on the income statement and balance sheet can be identified. These changes will identify some of the changes in the company's finances over time. Finally, ratio analysis will provide further depth to understanding Amazon's financials, and can be used in combination with horizontal and vertical techniques.
Horizontal analysis compares current results to past results in order to get a sense of trends. Starting with Amazon's income statement, the horizontal analysis for the past three years looks as follows:
Amazon Income Statement
The horizontal analysis reveals a number of things. The top line, revenue, has seen impressive growth over the past three years, steadily increasing. The cost of goods sold has increased at roughly the same rate as the revenue, with just a slightly lower rate of increase in 2012. This is important, because it indicates that any pressure on earnings is not coming from the company's gross margin. What this means is that Amazon has been able to maintain its pricing power over both suppliers and consumers, and may have even increased its pricing power in 2012. The strength of the company's brand and its market share have allowed it to maintain margins. It is expected that as the company grows it should be able to get volume discounts from suppliers, and it is possible that this has happened in 2012. The other implication of this finding is that Amazon's profit problems are more likely to be internal, since bargaining power does not appear to be an issue.
Indeed, both the major expense categories have grown faster than sales over the past three years. Selling, general and administrative expenses are at 318% of 2009 levels; research & development expenses are at 368% of 2009 levels. Both of these figures represent higher growth than has been experienced on the total revenue side. As a result, while gross income has grown faster than revenue, operating income has declined. It is worth nothing that in 2010, the increases in expenses were not significantly different than the increases in revenue. It is only in the past two years that expenses have increased rapidly. There are a number of potential factors for such increases. The emphasis on technological innovation and maintaining industry-leading technology might explain why Amazon has increased its R&D expenses so quickly. Further, the company's move into tablets with the Kindle has represented a slight shift in business model that could also have resulted in significant R&D increases. While income tax is higher than it used to be, it has not grown as rapidly as revenue. However, it has grown faster than operating income, which is the basis for tax calculation. An increase in tax beyond the increase in operating income has to be disconcerting for management and investors.
A horizontal analysis must also be conducted on the balance sheet. This is as follows, for the past three years:
Amazon Balance Sheet
The horizontal analysis of Amazon's balance sheet shows that total assets have increased 73.2% in the past two years. Of these, the biggest growth lines have been plant, property and equipment (192.5%) and receivables (112%). However, the increase in total equity has been slower than the increase in total assets. This means that the value of the company has not grown as quickly as its asset base. Equity growth has been a fairly meager 19.3% over the past two years. This is not entirely surprising, since the company lost money last year and has seen two years of decreasing profitability. Amazon has therefore financed its recent growth primarily with debt. Long-term debt has increased 381% in the past two years, the fastest rate of growth of any balance sheet line item. The growth in debt specifically pertains to the 2012 fiscal year, where Amazon added $3 billion in debt. This was the company's first debt issue in a decade, and was done in part to take advantage of very low financing rates, with the highest rate on the debt being 2.5% at the time of issue (Mead, 2012).
Another major form of financial statement analysis is the vertical analysis, which compares line items to a baseline item. For the income statement, revenue is the baseline item and for the balance sheet the total assets represent the baseline item. The vertical analysis data for Amazon's income statement is presented here:
Amazon Income Statement
This analysis shows the slight decrease in cost of goods sold more clearly. It also highlights the increase in expenses. The percentage figures illustrate that the selling, general and administrative expenses increased from 13% in 2010 to 16% of revenue in 2012. The R&D expense increased from 5% of revenue in 2010 to 7% in 2012.…[continue]
"Financial Analysis Of Amazon Com Inc 2012 Annual Report" (2013, September 14) Retrieved December 9, 2016, from http://www.paperdue.com/essay/financial-analysis-of-amazoncom-inc-2012-96279
"Financial Analysis Of Amazon Com Inc 2012 Annual Report" 14 September 2013. Web.9 December. 2016. <http://www.paperdue.com/essay/financial-analysis-of-amazoncom-inc-2012-96279>
"Financial Analysis Of Amazon Com Inc 2012 Annual Report", 14 September 2013, Accessed.9 December. 2016, http://www.paperdue.com/essay/financial-analysis-of-amazoncom-inc-2012-96279
Wal-Mart's Annual Report: The role of ethics and compliance in a business can be described as the link between the business environment and the three levels of the organization or business. These levels are the macro level, which is the national or global context of the business, the institutional level that entails the ethics that characterize a company, and the individual level ie. personal ethics in an organization. In the
BEST BUY CO. INC. STRATEGIC ANALYSIS Strategic Analysis of Best Buy Current situation A- Current performance B- Strategic posture Corporate Governance A- Board of directors B- Top management External Environment: Opportunities and threats A- Natural physical environment B- Societal Environment C- Task Environment D- Summary of external environment Internal Environment: Strengths and Weakness A- Corporate Structure B- Corporate Culture C- Corporate resources D- Summary of internal environment Analysis of Strategic Factors (SWOT) A- Situational Analysis Strategic Alternatives and Recommended Strategy A- Strategic Alternatives Recommended Strategy Implementation Evaluations and control Part II Functional and Business strategies of
Foot Locker Company Evaluation Foot Locker is one of the global leaders in the athletic footwear, apparel and multichannel retailing market., with 3,500 stores globally operating in 21 countries. The company operates retail outlets across a variety of brands including Foot Locker, Lady Foot Locker, Kids Foot Locker, Champs Sports, Footaction and CCS. As of this writing the company employs just over 38,007 employees with the majority being part-time (approximately 25,000)
finance and financial entrepreneurship. The basis of the article is on a discussion that was held on this subject among four leading lights of financial entrepreneurship in the United States - Michael Milken, Lewis Ranieri, Richard Sandor and Myron Scholes. These people are famous in their own right and have had a sizeable role in financial entrepreneurship in the U.S. over the last 20 years. We have first discussed
Internet and Global Finance Strategies Within the present competitive business environment, firms are continuously looking for various strategies to be ahead of their competitors and achieve competitive market advantages. Many firms have identified that internet technology is a powerful tool to enhance competitive market advantages. The traditional organizations have identified that internet is a powerful tool to deliver value to customer and presently, the internet technology has enabled firms to coordinate
business2community.com/social-media/2012s-ten-worst-social-media-Disaster-0370309 Using contemporary illustrative examples from academic literature and reputable business publications, discuss the concept of "Social Business" and the resultant opportunity and challenges that are currently being faced by the retail industry globally. Concept of Social Business Concept of Social Business with Retailers Social Media and Retailing Best Practices in Administering Social Media There is a growing body of research that confirms that companies of all sizes and types can realize a wide array
United Parcel Service (UPS) Foundational facts Current financials Prospective assessment Tough competition and soaring costs Suggestions United Parcel Service (UPS) United Parcel Service (UPS) is an American multinational corporation that operates in three major industry sectors i.e. logistics service, freight forwarding service, and courier express service. UPS is services-based company and is headquartered in Atlanta, Georgia. The company has worldwide operations. Being a public limited company, it is traded on New York Stock Exchange (NYSE) having the