Assignment 3.....Amazon

Running head: AMAZON FINANCILA ANALYSIS 0

AMAZON FINANCILA ANALYSIS 3

Amazon Financial Analysis Assignment 2

Amazon Financial Analysis

Company Description

Amazon .com, Inc., is a United States electronic market as well as cloud computing that offers a comprehensive pack of services in relation to e-commerce services, where individuals owning business user accounts and buy on Amazon.com for their employers. Amazon.com opened its virtual doors on the World Wide Web in July 1995. We seek to be Earth’s most customer-centric company. We are guided by four principles: customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking. In each of our segments, we serve our primary customer sets, consisting of consumers, sellers, developers, enterprises, and content creators. In addition, we provide services, such as advertising services and co-branded credit card agreements. Amazon.com administrators can enhance as well as man business account users and sorts like methods of payments as well as shipping addresses, options of reporting, and approval workflows in regard to the need of the business. It is a multinational in nature making it to run most of its activities globally as its headquarters are located in Seattle, Washington United States of America (Jones, Comfort & Hillier, 2007). Other Amazon branches are located in different countries, for instance, Australia, Canada, China, Korea, Netherlands, UK, Mexico, and Japan. The company SIC code is 5942.The company has a stock price per share of $218.83 in reference to current stock exchange market standings.

The Amazon.com services as a segment help in the provision of large delivery services on the ground via the principal Marriage system. The other services provided by the company are held within the jurisdiction of the company line of business.

The company provides a wide range of services in line with Subsidiaries like Whole Foods Market, Audible Inc., Zappos services in the whole world with USA topping the list. The company is also engaged in marketing and sales of products for other companies. It provides sales and marketing services on top of the information technology support services as well as customer support services (Idowu & Towler, 2004). There is the global supply service as well as the chain supply services. The company capital structure in 2016 was approximated for USD 3.2 billion.

It is important to note that Amazon.com does not rely on third-party logistics. Non-reliance on third-party logistics allow the company to deliver goods on time and with minimal cost. It also minimizes instances of hoarding of products which may inconvenient the buyer. In most of the cases, the company distributes products using its distribution outlets. The use of own distributions outlets allows the company to get instant feedback from the customers.

Financial Analysis Based On Income Statements

The corporation recorded a summary of the income statements for the year 2015, 2016 and 2017 as follows.

Financial years
Assets	2014	2015	2016
Total Cash	10,945	11,989	12,628
Total Current assets	20,870	24,284	25,981
Total Non-Current Assets	26,125	34,075	35,924
Total Assets	37,068	46,064	48,552
Total Current Liabilities	5,956	8,008	7,918
Total Non-Current Liabilities	16,119	24,272	24,561
Total Liabilities	22,076	32,280	32,479
Total Shareholder’s equity	26,128	34,075	35,925
Total Liabilities	37,070	46,065	48,555

Financial Analysis Based On Balance Sheet

Profitability	2015-05	2016-05	2017-05	TTM
Tax Rate %	35.31	36.42	33.58	34.87
Net Margin %	4.76	3.52	3.61	4.72
Asset Turnover (Average)	1.49	1.40	1.21	1.28
Return on Assets %	7.09	4.92	4.37	6.06
Financial Leverage (Average)	2.03	1.93	3.34	2.97
Return on Equity %	13.57	9.72	12.64	18.69
Return on Invested Capital %	12.44	8.82	8.55	9.63
Interest Coverage	61.40	30.94	9.15	—

The Amazon.com has an overall upward trend in its profitability ratios right from the base year to the target year. A look at the ratios provides an insight and a reason for potential investors to invest in the company shares. There are possibilities of risks in the investment into the company but based on the previous financial information provided, the company stands not to make losses. A decision by investors to venture in into buying the company assets in terms of stocks and shareholding has less associated risks.

Based On Cash Flows

Cash Flow Ratios	2014-05	2015-05	2016-05	TTM
Operating Cash Flow Growth % YOY	-904.00	—	637.00	—
Free Cash Flow Growth % YOY	—	—	—	—
Cap-Ex as a % of Sales	7.75	9.16	9.57	8.11
Free Cash Flow/Sales %	1.60	2.15	1.77	-0.65
Free Cash Flow/Net Income	0.31	0.97	0.49	-0.14

The company net cash flows as indicated in the table right from the base year are overall increasing and in such cases, the company has chances of making improvement in future business transactions (Andersen & Skjoett-Larsen, 2009). The use cash flow ratios above provide insight into the flow of cash in the firm making a good grounding for prediction of the company net cash flows for the next financial year.

Ratio Analysis

Ratios	Fiscal Years	Significance of the ratio
	2014	2015	2016
Current Ratio	1.43	1.55	2.50	Determination of current assets available to offset short-term debts
Quick Ratio	1.56	1.75	1.92	Show how fast the FedEx can come up with cash on a short notice
Inventory Turnover	68.5	70.0	68.80	Show the volume of goods and services sold per year
Asset Turnover	1.40	1.30	1.50	Help measure the efficiency inclined on the FedEx assets on sales per year
Leverage Ratio	1.65	1.80	2.00	For assessment of company able to meet its financial obligations.
Debt/Equity	13.6	14.4	15.5	Percentage funds provided by creditors in comparison with that FedEx owners
Cross-Margin	25.8	30.5	32.5	Company efficiency during the production time and process
Return on Assets	4.85	5.50	5.34	For return on all assets by FedEx
Return on Equity	8.50	7.80	8.80	FedEx profitability measure over total shareholder equity
Return to Capital	5.40	6.60	6.80	For effectiveness of FedEx on borrowed money

Amazon.com Beta Analysis

Amazon.com overall Beta Value from 2014 all through to 2016 is recorded to be at 1.38. The figure is reached at after the estimation of the market risk and risk-free rate and risk premiums of US National Stock Exchange rates (McCall, 2017). The underlying assumptions of the Capital Asset Pricing Model (CAPM) in relation to the company are as follows:

The company has an outstanding market capital of $60,303.55, 59,405.65 and 62,605. 55 for 2015, 2016 and 2017 respectively. The company has an outstanding share capital that averages at 265.75 for the three fiscal years. The annual dividend yield for the company is calculated to be at 0.90 with a net dividend of 0.55 estimated for an average of the three consecutive years

Marriot Graph Showing the Trend in the Market Shares

The company is optimally in operation at the stock exchange market following the performance of other firms of its level and that of competitors (Tate, Ellram & Kirchoff 2010). In an attempt for other e-commerce Corporation like Alibaba to make a relatively larger share of the market, the company underprices its shares and sells them as a lump sum deposit.

References

Andersen, M., & Skjoett-Larsen, T. (2009). Corporate social responsibility in global supply chains. Supply chain management: an international journal, 14(2), 75-86.

Jones, P., Comfort, D., & Hillier, D. (2007). What's in store? Retail marketing and corporate social responsibility. Marketing Intelligence & Planning, 25(1), 17-30.

Idowu, S. O., & Towler, B. A. (2004). A comparative study of the contents of corporate social responsibility reports of UK companies. Management of Environmental Quality: an international journal, 15(4), 420-437.

McCall, N. C. (2017). Financial Reporting: An Analysis of Accounting Methods and Principles (Doctoral dissertation, The University of Mississippi). http://thesis.honors.olemiss.edu/902/

Tate, W. L., Ellram, L. M., & Kirchoff, J. F. (2010). Corporate social responsibility reports: a thematic analysis related to supply chain management. Journal of supply chain management, 46(1), 19-44.