AMAZON.

COM FINANCIAL
S TAT E M E N T A N A LY S I S
INTRODUCTION
Amazon.com is an online retail sales industry that has gained increased popularity.
Online shopping is a click away with easy access and a great variety of items to shop for. From
the accounting perspective I have analyzed Amazons ability to pay what they owe, how well
sales are going, how profitable it is, and how their stock is doing. The financial statement,
balance sheet, and income statements for the years 2011 and 2012 were analyzed.
ABILITY TO PAY CURRENT LIABILITIES

A couple of different ratios are used to determine how likely a business is going to be
able to pay its debts, which are called liabilities. They can include accounts such as accounts
payable where money is owed because the company had to borrow some money. The chart
below includes four different ratios that are used to see a companys standing in how well it can
pay money owed. The working capital ratio indicates if a company has or does not have enough
current assets to cover its short-term debt. Current ratio measures the same thing as the working
capital. Amazons current ratio as of 2012 is of 1.12 and the industrys average is between 1 and
1.54. Therefore, it is doing okay. The cash ratio identifies if the company is able to pay its
liabilities with cash and it can be good to have a high ratio. The acid-test ratio goal is to see if the
company would be able to pay all its current liabilities if they came due today. Amazon would be
able to pay its current liabilities (debt due this year) if they were due today because it is higher
than 1. Also, the online retail industrys average is 1:82.

Ratio
Working Capital
Current Ratio
Cash Ratio
Acid-Test Ratio

2012
2294
1.12
.18
60.24

2011
2594
1.17
.29
52.63

Industry Average
1.54:1
1:82

ABILITY TO SELL MERCHANDISE INVETORY AND COLLECT

RECEIVABLES
Amazon is doing a great job in selling its inventory and collecting
payments owed by customers. Its higher than 4.8, the industry average,
inventory rate shows that it is easy for the company to sell its inventory. The
inventory is not held for very long. On 2012 the average of days that
inventory was held was 44 days compared to the industry average of 75.42
day. The fewer days held the better it is. The gross profit percentage is very
important because it shows if a company is making a profit or losing money.
It gross profit improved from 2011 to 2012 but the industry average is of
33.55% so Amazon is not quite there. The higher the accounts receivable
turnover ratio the better it is because its focus is to show how fast cash is
collected. Amazon is, once again, above average on the accounts receivable
turnover ratio with the industrys average being at 10.11 and it tool an
average of 17.7 days to collect the money.

Ratio
Inventory Turnover
Days sales in inventory
Gross profit percentage
Receivables turnover
Days sales in

2012
8.3
44
24%
20.9
17.7

2011
9.1
40.1
22%
23.1
15.8

receivables

ABILITY TO PAY LONG TERM DEBT

Amazon has a big room for improvement in its ability to pay long term debt which is debt that
takes longer than a year to pay off. The lower the ratio the better and unfortunately for Amazon
it is above the 34% average. The times-interest-earned ratio evaluates a businesss ability to pay
interest expense. In this case the higher the better and it looks like that from 2011 to 2012 the
ratio decreased and while 5.23 is near the 5.33 average it is a something that needs improvement.
Ratio

2012

2011

Debt to total
assets
Debt to Equity
Times-InterestEarned

75%

69%

Industry
Averages
34%

3
5.23 times

2.3
15.18 times

52%
5.33 times

PROFITABILITY
Amazon is doing great at selling their products but when it comes to making a profit for
the year 2012 it faced some news. The profit margin ratio shows how much net income is earned
on every dollar. The average is at 2.87% and Amazon had a loss of profit on 2012 putting it at a
low -.06%.
Ratio
Profit Margin
Return on Assets
Asset Turnover
Return on Common
Stockholders Equity
Earnings per Share

2012

2011

-0.06
-.005
2.1 times
-49%

1.31
.08
2.2 times
8.63%

-.09

Industry
Average
2.87%
4.76%
1.66 times
11.39%

EVALUATING STOCK AS AN INVESTESTMENT

Stocks as an investment is the last subject to go over. The earnings per share ratio is the
amount of net income or lost for each share of the companys outstanding stock. The average is
of 47.17. Although 2011 was an okay year for those who bought stock from amazon on 2012
things changed. Therefore investing on Amazon on 2012 was not a good idea.
Ratios
Price-Earning
Dividend Yield
Dividend Payout

2012

2011

-2834.7
0%
0%

131.37
0%
0%

Industry
Average
47.17

CONCLUSION
Amazon is doing great in selling their products but is struggling in making a
profit. It suffered from a net loss. When it comes to paying current liabilities Amazon
is on top of it but when it comes to long-term liabilities the debt become harder to
pay off. Based on 2012, if someone was to invest on Amazon through the purchase
of stock it would be someone willing to take a risk.
Gisela Arellano
Accounting 1120