Unit6_assignment2
bamaboi
unit3_assignment2_mba6016.docx
1
Running Head: FINANCIAL
Financial Overview
Stanley Thompson
MBA 6016
31 January 2016
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 with its headquarter in Seattle, WA is a leading e-commerce company. Amazon provides a range of products and services on retail basis through internet. The company operates in number of countries in Asia and Europe. The company resells its own product as well as providing portals to third party vendors to sell their own goods through its website. The company is also engaged in services like subscription in digital contents. Majority of the company’s revenue is derived from sales of consumer retail products to consumers.
Year Ended 2013 2012
Net Sales:
North America $ 44,517 $ 34,813
International $29,935 $26,280
Consolidated $74,452 $61,093
Net Sales Mix:
North America 60% 57%
International 40% 43%
Consolidated 100% 100%
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.
The current ratios and quick ratios of Amazon for the periods 2013 and 2012 show moderate liquidity position. Current ratio has decreased from 1.12 in 2012 to 1.07 in 2013. Also liquidity ratio has decreased from 0.80 in 2012 to 0.75 in 2013. Focussing on the asset management ratios, the inventory turnover ratio , days sales outstanding ratio, fixed asset turnover ratio, total asset turnover ratios are all very much satisfactory. Moreover the ratios have remained stable over the concerned two years. Thus it can be said that that Amazon posses the ability to efficiently utilize its fixed assets to generate sales. The high inventory turnover ratio shows the company’s ability to effectively manage its inventory. Moreover the ratios have remained stable over the years 2013 and 2012 suggesting a stable position of the company in respect to asset management.
From the analysis of the debt management ratio it is evident that the company uses high amount of debt in its business. This significantly increases the financial risk of the company. Analyzing the profitability ratios of the company it can be concluded that the profitability of the company is very much poor. In fact the ROE and Profit Margin of the company for year 2012 were negative suggesting that the company has performed very poorly so much as profitability is concerned and has in fact depleted value of its shareholders. The profitability ratios of the year 2013 were all positive but are very much unsatisfactory.
Compare all ratios to industry averages. Evaluate the company's ratios against the industry averages.
Comparing Amazon’s financial ratios with industry averages, it can be concluded that the liquidity position of the company is below industry standard. Comparing the asset management ratios with the industry standards it can be concluded that the company has performed above par so far as asset management is concerned. However, on comparing the company’s debt management ratios with the industry standard it can be said that the company is undertaking huge amount of financial risk which is above industry standard.
Finally, comparing the profitability ratios of the company with the industry standard, it can be said that the company has performed very poorly and has failed to meet its shareholder’s expectations regarding profitability.
Analyze the company's cash flows
From the analysis of Amazon’s cash flows for the year 2012 and 2013, it can be concluded that the company has a very stable cash flow structure. But the net increase in cash and cash equivalents has significantly reduced from 2815 million USD in 2012 to 574 million USD in 2013. Thus, suggesting a decline in the Company’s cash flow model in the year 2013.
Assess the overall financial health of your company based on this financial analysis.
Overall financial health of the company particularly its profitability structure raises concern. So far as liquidity, cash flow structure, and asset management is concerned the company is able to maintain a satisfactory level of performance. Also the significant decline in net cash inflow in the year 2013 in comparison with the previous year raises significant concern regarding the company’s financial health.
