Financial SWOT Analysis of

Amazon Inc.

Submitted to
Submitted by: Med Akram Meghraoui

Table of Contents
Amazon Inc. Financial Strengths

1. Income statement five year trend analysis

2. Total return analysis

3. Retained Earnings growth

Analysis...4
Amazon Inc. Financial Weaknesses
1.

Amazon Inc. liquidity analysis

2. Amazon Inc. financial leverage analysis

5
5
6

Amazon Inc. Financial

Opportunities
7
1. Amazon Inc. Investment
opportunities.
.8
Amazon Inc. Financial
Threats
9
1. Amazon Inc. dividend
analysis.
....9
Conclusion
....10
References.

...11

Amazon Inc. Financial Strengths

1. Income statement five year trend analysis

From analyzing the income statement of Amazon Inc over the last five years we notice a
constant increase in the yearly revenues. Despite the positive increase in revenues the
company has realized two negative net income balances during the years 2012 and 2014.
The negative net income balances are offset by the high growth level estimated at 802.56%
from 2012 to 2013, and 347.30% from 2014 to 2015.

2. Total return analysis

The graph above illustrates the total return changes for Amazon Inc and its direct competitor
Ebay over the last 10 years. As a margin of comparison the total return percentage change of
the S&p500 index is also provided.
After some fluctuations from the year 2006 to 2010, the percentage change of Amazon inc
total return has been in a constant increase. On the other hand Ebay and the S&P 500 index
total return percentage change have seen no significant increases in comparison to Amazon
Inc total return percentage change.

3. Retained Earnings growth Analysis

From the graph above we can clearly see that Amazon Inc. has steadily retained profits
over the last 10 years.
The strongest statement that we can conclude from analyzing this graph is that Amazon
Inc. is adopting a strategy of cumulating retained earnings and that the company is
nowadays in a strong position to invest for the future.

Amazon Inc. Financial Weaknesses

1. Amazon Inc. liquidity analysis

Current ratio

2006
1.33

2007
1.39

2008
1.30

2009
1.33

2010
1.33

2011
1.17

2012
1.12

2013
1.07

2014
1.12

Current ratio
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

The graph above illustrates the movements of Amazon Inc. current ratio over a period of 10
years.
From 2006 to 2010 Amazon Inc current ratio remained stable with little fluctuations. Starting
2010 Amazon Inc current ratio started to decline gradually, going from a peak of 1.33 to a low
of 1.08 in 2015.
This deterioration can be interpreted as a real weakness for Amazon Inc in terms of handling
its liquidity, since the current ratio is a good indicator of the financial health of any company.

2015
1.08

2. Amazon Inc. Financial leverage analysis

TL to TA

2006
0.90

2007
0.82

2008
0.68

2009
0.62

2010
0.63

2011
0.69

2012
0.75

2013
0.76

2014
0.80

TL to TA
1.00
0.80
0.60
0.40
0.20
0.00
2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

The graph above illustrates the movements of Amazon Inc. leverage ratio over a 10 year
period.
What can be concluded from this graph is that starting 2009 Amazon Inc started using debt to
fuel its growth. a leverage degree that is in constant increase as for Amazon inc. means
consequently a higher financial risk.

2015
0.80

Amazon Inc. Financial Opportunities

1. Amazon Inc. Investment opportunities

It is apparent from the graph above that Amazon Inc. has a substantial amount of FCF at hand
to invest for future growth opportunities. The question is where all this money is going.

From the chart above we can conclude that the money is going into more fulfillment capacity
investments (warehouses). The chart shows an enormous increase in Amazons physical
infrastructure, as measured in square feet.
This investment creates two main financial opportunities that can benefit Amazon Inc. over
the long run
A) More warehouses means the ability for Amazon Inc. to increase its Inventory capacity.
B) Proximity - as Amazon builds warehouses closer to customers, the shipping time goes
down and so too does the shipping cost.

Amazon Inc. Financial Threats

1. Amazon Inc. Dividend analysis

Amazon Inc. has never distributed dividends as the graph above shows.
No dividend history over the past 10 years draws away the interest of so many potential
investors. A situation that may pose as a serious financial threat and handicap to the future
growth of the company.

Conclusion

Multinational corporations nowadays are extremely sensitive to demographic, political,

technological and economic developments. The financial stability of any company
nowadays depends on so many external as well as internal variables. Amazon Inc. is no
exclusion to this rule.
Amazon Inc. have demonstrated a high level of financial stability over the past 10 years in
a rapidly growing and shifting industry which is the retail industry.
Amazon Inc. adopted a long term investment strategy starting from 2009 that has shown
its results nowadays and has affected positively the financial statements of the company.
The strong financial position of Amazon Inc. only indicates a brighter future for the
company in a retail industry with multiple rooms for growth opportunities.

10

References

https://www.stock-analysis-on.net
http://www.morningstar.com/
http://www.marketwatch.com

http://www.vuru.co/

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