Amazon Financial Statement Analysis Essay

Length: 5 pages Sources: 3 Type: Essay Paper: #57701303 Related Topics: Financial Statement, Stock Price, Financial Health, Amazon Published January 24, 2023
Excerpt from Essay :

Financial Health

Company Overview

Amazon is the worlds leading online retailer. The Seattle-based company started in 1994, selling mainly things like books and music, but it has expanded its products steadily since then. Today, Amazon is not only a retailer but also a media company, as they produce and market streaming content. They have long been an innovator in digital merchandising, and their techniques are widely-copied by competitors today. Amazon today is one of the worlds largest companies, with a vat product line. They compete against all other retailers a consumer is often faced with a decision to go to a store to buy something, or buy it from Amazon, and this owes to their position as the default online retailer.

The following is a review of the past three years of Amazons financial statements. During this period, the company has extended its lead as the number one online retailer (BI Intelligence, 2017), and started to grow into other businesses, including building out its streaming content business. It has continued to build out its international presence, most recently adding Australia to its list of countries (Westbrook & Kaye, 2017).

Horizontal Analysis

Income Statement

2014

2015

%

2016

%

Revenue

88988

107006

120%

135987

153%

COGS

62572

71651

115%

88265

141%

Gross Income

26416

35355

134%

47722

181%

Other Expenses

26238

33122

126%

43536

166%

Operating Income

178

2233

1254%

4186

2352%

Non-Operating Expense

289

665

230%

294

102%

Net Income (loss)

-241

596

-247%

2371

-984%

Amazons horizontal income statement highlights the companys growth over the past few years. It has seen revenues grow 53% in two years, but its costs have grown slower, helping the company to be more profitable from the gross income level on down. The result is that where in 2014 Amazon lost money, it made $2.3 billion in net income in 2016, mainly on the strength of having a lower cost of goods sold on its revenues in recent years than it had before.

Balance Sheet

2014

2015

%

2016

%

Cash

14557

15890

109%

19334

133%

Securities

2859

3918

137%

6647

232%

Inventories

8299

10243

123%

11461

138%

Accounts Receivable

5612

5654

101%

8339

149%

Current Assets

31327

35705

114%

45781

146%

Property & Equipment

16967

21838

129%

29114

172%

Total Long-Term Assets

23178

29042

125%

37621

162%

Total Assets

54505

64747

119%

83402

153%

Accounts Payable

16459

20397

124%

25309

154%

Total Current Liabilities

28089

33887

121%

43816

156%

Long-Term Debt

8265

8227

100%

7694

93%

Other LT liabilities

7410

9249

125%

12607

170%

Total Liabilities

43764

51363

117%

64117

147%

Shareholders' Equity

10741

13384

125%

19285

180%

Total Liabilities & Equity

54505

64747

119%

83402

153%

A horizontal analysis of the companys balance sheet highlights this growth. The companys current assets have grown 46% in two years, and its total assets have grown 53% in that time the same rate at which the revenues have grown. Worth noting is that the securities have grown, where inventories grew at a slower rate than the income in either sales or cost of goods sold. This indicates that Amazon is becoming more efficient in terms of its inventory turnover and cash…this point in time, because that requires further analysis of the business, the current stock price, and that sort of thing.

What can be said here is that Amazon is in good financial condition. If an investor puts their money into Amazon, certainly the stock price could go down, but there is no reason to think that Amazon was end up insolvent in the foreseeable future. All questions of valuation and volatility aside, Amazon is a company is good financial health. There are no red flags in its liquidity ratios. Its income statements are getting stronger because revenues are growing more quickly than cost of goods sold, which has not only turned the company profitable, but substantially so. The metrics are trending in the right direction, too. All told, Amazon should be a safe investment from a solvency point of view.

I do not presently see any downside risks to Amazon, because the analysis above showed not just good financial health but that the company is trending in the right direction, lowering its long-term debt, revenues growing faster than costs, and liquidity ratios improving. If there are red flags of weaknesses in…

Sources Used in Documents:

References


Amazon 2014 Annual Report. In possession of the author.


Amazon 2016 Annual Report. In possession of the author


BI Intelligence. (2017) Amazon accounts for 43% of US online retail sales. Business Insider. Retrieved April 15, 2018 from http://www.businessinsider.com/amazon-accounts-for-43-of-us-online-retail-sales-2017-2


Westbrook, T. & Kaye, B. (2018) In Australia, Amazon is still finding its way. Reuters. Retrieved April 15, 2018 from https://www.reuters.com/article/us-australia-amazon-com/in-australia-amazon-is-still-finding-its-way-idUSKBN1FP0FC


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