HEBEI UNIVERSITY OF

ECONOMICS AND BUSINESS

NAME:SHEPHERD JUNIOR MASASI
COURSE:FINANCIAL STATEMENTS ANALYSIS
STUDENT NUMBER:201442310026

FINANCIAL ANALYSIS OF
AMAZON.Inc COMPANY
INTRODUCTION
Amazon.com, Inc., incorporated on May 28, 1996, offers a range of products and services
through its Websites. Considered a pioneer in online retailing, Amazon.com, Inc. expanded
during the late 1990s to offer the "Earth's Biggest Selection" of books, CDs, videos, DVDs,
electronics, toys, tools, home furnishings and housewares, apparel, and kitchen gadgets.
Through third-party agreements, Amazon.com also sells products from well-known retailers
including Toysrus.com Inc., Target Corporation, Circuit City Stores Inc., the Borders Group,
Waterstones, Expedia Inc., Hotwire, National Leisure Group Inc., and Virgin Wines.
Sometimes criticized for its focus on market share over profits, Amazon.com put investor
fears to rest when it secured its first net profit during the fourth quarter of 2001.

Geographic Reach
Amazon rings up 60% of its sales in North America. Important international markets
include Germany, Japan, and the UK, each contributing roughly 10%, 11%, 8%, and
8% respectively of the company's 2015 sales. Amazon also does business in Brazil,
China, France, Italy, Australia, Mexico, the Netherlands and Spain. The company's
Appstore serves customers in some 200 countries.

FINANCIAL STATEMENTS
FROM 2013 TO 2016
Annual Income Statement (values in 000's)

Period Ending: Trend 12/31/2016 12/31/2015 12/31/2014 12/31/2013

Total Revenue $135,987,00 $107,006,000 $88,988,000 $74,452,000

0

Cost of Revenue $88,265,000 $71,651,000 $62,752,000 $54,181,000

Gross Profit $47,722,000 $35,355,000 $26,236,000 $20,271,000

Operating Expenses

Research and $0 $0 $0 $0
Development

Sales, General and $43,536,000 $33,122,000 $26,058,000 $19,526,000

Admin.

Non-Recurring Items $0 $0 $0 $0

Other Operating Items $0 $0 $0 $0

Operating Income $4,186,000 $2,233,000 $178,000 $745,000

Add'l income/expense $190,000 ($206,000) ($79,000) ($98,000)

items

Earnings Before $4,376,000 $2,027,000 $99,000 $647,000

Interest and Tax

Interest Expense $484,000 $459,000 $210,000 $141,000

Earnings Before Tax $3,892,000 $1,568,000 ($111,000) $506,000

Income Tax $1,425,000 $950,000 $167,000 $161,000

Minority Interest $0 $0 $0 $0

Equity Earnings/Loss ($96,000) ($22,000) $37,000 ($71,000)

Unconsolidated
Subsidiary

Net Income-Cont. $2,371,000 $596,000 ($241,000) $274,000

Operations
Period Ending: Trend 12/31/2016 12/31/2015 12/31/2014 12/31/2013

Net Income $2,371,000 $596,000 ($241,000) $274,000

Net Income Applicable $2,371,000 $596,000 ($241,000) $274,000

to Common
Shareholders

ANNUAL STATEMENTS OF FINANCIAL

POSITION
Period Ending: Tren 12/31/2016 12/31/2015 12/31/2014 12/31/2013
d

Current Assets

Cash and Cash Equivalents $19,334,000 $15,890,000 $14,557,000 $8,658,000

Short-Term Investments $6,647,000 $3,918,000 $2,859,000 $3,789,000

Net Receivables $8,339,000 $5,654,000 $5,612,000 $4,767,000

Inventory $11,461,000 $10,243,000 $8,299,000 $7,411,000

Other Current Assets $0 $0 $0 $0

Total Current Assets $45,781,000 $35,705,000 $31,327,000 $24,625,000

Long-Term Assets

Long-Term Investments $0 $0 $0 $0

Fixed Assets $29,114,000 $21,838,000 $16,967,000 $10,949,000

Goodwill $3,784,000 $3,759,000 $3,319,000 $2,655,000

Intangible Assets $0 $0 $0 $0

Other Assets $4,723,000 $3,445,000 $2,892,000 $1,930,000

Deferred Asset Charges $0 $0 $0 $0

Total Assets $83,402,000 $64,747,000 $54,505,000 $40,159,000

Current Liabilities

Accounts Payable $39,048,000 $30,769,000 $26,266,000 $21,821,000

Short-Term Debt / Current Portion of $0 $0 $0 $0

Long-Term Debt

Other Current Liabilities $4,768,000 $3,118,000 $1,823,000 $1,159,000

Period Ending: Tren 12/31/2016 12/31/2015 12/31/2014 12/31/2013
d

Total Current Liabilities $43,816,000 $33,887,000 $28,089,000 $22,980,000

Long-Term Debt $7,694,000 $8,227,000 $8,265,000 $3,191,000

Other Liabilities $12,607,000 $9,249,000 $7,410,000 $4,242,000

Deferred Liability Charges $0 $0 $0 $0

Misc. Stocks $0 $0 $0 $0

Minority Interest $0 $0 $0 $0

Total Liabilities $64,117,000 $51,363,000 $43,764,000 $30,413,000

Stock Holders Equity

Common Stocks $5,000 $5,000 $5,000 $5,000

Capital Surplus $17,186,000 $13,394,000 $11,135,000 $9,573,000

Retained Earnings $4,916,000 $2,545,000 $1,949,000 $2,190,000

Treasury Stock ($1,837,000 ($1,837,000 ($1,837,000 ($1,837,000)

) ) )

Other Equity ($985,000) ($723,000) ($511,000) ($185,000)

Total Equity $19,285,000 $13,384,000 $10,741,000 $9,746,000

Total Liabilities & Equity $83,402,000 $64,747,000 $54,505,000 $40,159,000

ANNUAL STATEMENTS OF CASHFLOWS

Period Ending: Trend 12/31/2016 12/31/2015 12/31/2014 12/31/2013

Net Income $2,371,000 $596,000 ($241,000) $274,000

Cash Flows-Operating Activities

Depreciation $8,116,000 $6,281,000 $4,746,000 $3,253,000

Net Income $2,040,000 $2,486,000 $1,363,000 $1,181,000

Adjustments
Period Ending: Trend 12/31/2016 12/31/2015 12/31/2014 12/31/2013

Changes in Operating Activities

Accounts Receivable ($3,367,000 ($1,755,000) ($1,039,000) ($846,000)

)

Changes in Inventories ($1,426,000 ($2,187,000) ($1,193,000) ($1,410,000)

)

Other Operating ($9,976,000 ($6,109,000) ($3,692,000) ($2,292,000)

Activities )

Liabilities $18,685,000 $12,608,000 $6,898,000 $5,315,000

Net Cash Flow- $16,443,000 $11,920,000 $6,842,000 $5,475,000

Operating

Cash Flows-Investing Activities

Capital Expenditures ($6,737,000 ($4,589,000) ($4,893,000) ($3,444,000)

)

Investments ($3,023,000 ($1,066,000) $807,000 ($520,000)

)

Other Investing ($116,000) ($795,000) ($979,000) ($312,000)

Activities

Net Cash Flows- ($9,876,000 ($6,450,000) ($5,065,000) ($4,276,000)

Investing )

Cash Flows-Financing Activities

Sale and Purchase of $0 $0 $0 $0

Stock

Net Borrowings ($3,740,000 ($3,882,000) $4,426,000 ($617,000)

)

Other Financing $0 $0 $0 $0
Activities

Net Cash Flows- ($2,911,000 ($3,763,000) $4,432,000 ($539,000)

Financing )

Effect of Exchange ($212,000) ($374,000) ($310,000) ($86,000)

Rate

Net Cash Flow $3,444,000 $1,333,000 $5,899,000 $574,000

 ANNUAL RATIOS

Period Ending: Trend 12/31/2016 12/31/2015 12/31/2014 12/31/2013

Liquidity Ratios

Current Ratio 104% 105% 112% 107%

Quick Ratio 78% 75% 82% 75%

Cash Ratio 59% 58% 62% 54%

Profitability Ratios

Gross Margin 35% 33% 29% 27%

Operating Margin 3% 2% 0% 1%

Pre-Tax Margin 3% 1% 0% 1%

Profit Margin 2% 1% 0% 0%

Pre-Tax ROE 20% 12% 1% 5%

After Tax ROE 12% 4% 2% 3%

EVALUATION OF THE ABOVE RATIOS

CURRENT RATIO

The current ratio is mainly used to give an idea of a company's ability to

pay back its liabilities (debts) As such, current ratio can be used to make a
rough estimate of a company’s financial health. Amazon’s current ratios
from 2013 to 2016 are all above 1(100%)which means the company is
capable of meeting its financial obligations or paying its short term debts .

Quick ratio
The quick ratio is an indicator of a company’s short-term liquidity, and
measures a company’s ability to meet its short-term obligations with its
most liquid assets. Amazon’s quick ratios are all below 1(100%)with a
record of 75% in 2013,82% in 2014,75% in 2015 and 78% in 2016.This
means the company is relying heavily on inventory or other assets to pay
its short- term debts

CASH RATIO

The cash ratio calculates a company's ability to pay current liabilities

using only cash and cash equivalents on hand. If a company's cash ratio
is equal to 1, the company has exactly the same amount of current
liabilities as it does cash and cash equivalents to pay off those debts. The
cash ratios of Amazon are all below 1(100%) from 2013 to 2016. This
means there is insufficient cash on hand to pay off short term debt.

GROSS MARGIN
GROSS margin is a calculation of a gross profit percentage after
deducting cost of sales from the revenue .To get gross margin we divide
gross profit by the sales revenue .Amazon has made a gross profit margin
of 27% in 2013,29% in 2014,33% in 2015 and 35% in 2016 .

Operating Margin
Operating income is revenue less operating expenses for a given period of
time . Amazon’s revenue was able to cover its operating expenses except
for 2014 where it made a loss.

Pre-tax Margin
Pretax profit margin is a company's earnings before tax as a percentage of
total sales or revenues. The higher the pretax profit margin, the more
profitable the company. In 2013, The pre- tax profit margin was 1% then it
decreased to 0% because of the 2014 loss. It then increased to 1% in
2015 and continued to increase to 3% in 2016.

Profit Margin
Profit margin is part of a category of profitability ratios calculated as net
income divided by revenue, or net profits divided by sales. Amazon has
recorded 0% profit margins in 2013 and 2014 then it recorded 1% in 2015
and 2% in 2016.Although it made profits in 2014 and 2016,the profits
have been very low mostly as a result of too much expenses.

Pre-tax ROE
The rate of return on an investment that does not take the taxes the
investor must pay on this return. The pretax rate of return is the measure
most commonly cited for investments in the financial world. Amazon
recorded pre-tax ROE of 5% in 2013, and the lowest of 1% in 2014, 12%
in 2015 and 20% in 2016 .

After -tax ROE

These are the returns of profits which are attributable to the shareholders
for the investment they have made in the business after deducting all other
expenses and taxation. Amazon has recorded after-tax ROE of 3% in
2013,2% in 2014,4% in 2015 and 12% in 2016.The lowest record in 2014
is probably because of a lower profit or the loss recorded. The After-tax
Roe increased gradually from 2015 to 2016 because of increase in profits
which were available for distribution to the shareholders.

CONCLUSSION
Comparing Amazon and E-bay,my suggestion would be for the potential investors to invest in
the latter.The returns on equity of Amazon company are quite lower than those of E-
bay.Shareholders’ main interest in the business is to get as much return on their equity as
possible.The liquidity perfomance of Amazon is good but when comparing it with that of E-
bay it is poor.As a solution,Amazon should try to cut its budget on many expenses and keep
low levels of inventories as much as possible.