Financial Statement Analysis Report

Final Financial Analysis Project This is the compiled financial analysis project. The final report should be no more than 10 pages in length (including cover and reference page(s), use 1” margins, and be typed in either Times New Roman or Arial 12-point font. Include tables and graphs as appropriate.

Amazon.com Inc (NMS: AMZN)
Income Statement
12/31/2023
12/31/2022
$ 255,887,000 $ 242,901,000
318,898,000
271,082,000
$ 574,785,000 $ 513,983,000
(In thousands)
Net product sales
Net services sales
Total net sales
Operating Expenses:
Cost of sales
Fulfillment expenses
Marketing expenses
Sales & marketing
Technology & content expenses
General & administrative expenses
Other operating expense (income), net
Total operating expenses & costs
Operating income
Interest income
Interest expense
Other Income
Total non-operating income (expenses)
Income (loss) before income taxes
Provision (benefit) for income taxes
Equity-method investment activity, net of tax
Net income (loss)
Weighted average shares outstanding-basic
Weighted average shares outstanding-diluted
Year end shares outstanding
Net income (loss) per share-basic
Net income (loss) per share-diluted
$
$
304,739,000 $ 288,831,000
90,619,000
84,299,000
11,816,000
42,238,000
85,622,000
73,213,000
44,370,000
11,891,000
767,000
1,263,000
537,933,000 $ 501,735,000
36,852,000 $ 12,248,000
2,949,000
989,000
(3,182,000)
(2,367,000)
938,000
(16,806,000)
705,000
(18,184,000)
37,557,000
(5,936,000)
(7,120,000)
3,217,000
(12,000)
(3,000)
30,425,000
$(2,722,000)
$
$
10,304,000
10,492,000
10,383,000
2.95 $
2.90 $
$
$
10,189,000
10,189,000
10,242,000
-0.27
-0.27
N)
12/31/2021
$ 241,787,000
228,035,000
$ 469,822,000
$ 272,344,000
75,111,000
32,551,000
56,052,000
8,823,000
62,000
$ 444,943,000
$ 24,879,000
448,000
(1,809,000)
14,633,000
13,272,000
38,151,000
(4,791,000)
4,000
$ 33,364,000
$
$
10,120,000
10,300,000
10,180,000
3.30
3.24
Amazon.com Inc (NMS: AMZN)
Balance Sheet
(In thousands)
12/31/2023
Cash & cash equivalents
$
73,387,000
Marketable securities
13,393,000
Inventories
33,318,000
Accounts receivable, net & other current assets, gross
52,253,000
Total current assets
$ 172,351,000
Property & equipment, net
204,177,000
Operating leases
72,513,000
Goodwill
22,789,000
Other assets
56,024,000
Total assets
$ 527,854,000
Liabilities and Stockholder Equity
Current Liabilities
Accounts payable
$
84,981,000
Accrued expenses & other current liabilities
64,709,000
Unearned revenue
15,227,000
Total current liabilities
$ 164,917,000
Long-term lease liabilities
77,297,000
Long-term debt
58,314,000
Other long-term liabilities
25,451,000
Stockholder Equity
Common stock
$
109,000
Treasury stock, at cost
(7,837,000)
Additional paid-in capital
99,025,000
Accumulated other comprehensive income (loss) (3,040,000)
Retained earnings (accumulated deficit)
113,618,000
Total stockholders’ equity (deficit)
$ 201,875,000
Total Liabilities and Equity
$ 527,854,000
Total Liabilities
$
325,979,000
om Inc (NMS: AMZN)
Balance Sheet
$
12/31/2022
12/31/2021
53,888,000 $ 36,220,000
16,138,000
59,829,000
34,405,000
32,640,000
42,360,000
32,891,000
146,791,000 $ 161,580,000
$
186,715,000
160,281,000
66,123,000
56,082,000
20,288,000
15,371,000
42,758,000
27,235,000
462,675,000 $ 420,549,000
$
$
$
$
79,600,000 $ 78,664,000
62,566,000
51,775,000
13,227,000
11,827,000
155,393,000 $ 142,266,000
72,968,000
67,651,000
67,150,000
48,744,000
21,121,000
23,643,000
$
$
108,000 $
5,000
(7,837,000)
(1,837,000)
75,066,000
55,538,000
(4,487,000)
(1,376,000)
83,193,000
85,915,000
146,043,000 $ 138,245,000
462,675,000 $ 420,549,000
$
316,632,000
Amazon.com Inc (NMS: AMZN)
Cash Flow Statement
(In thousands)
Operating Activities
Net income (loss)
D & Amortization of PPE & capitalized content costs, operating lease assets, & other
Stock-based compensation
Other operating expense (income), net
Other expense (income), net
Deferred income taxes
Inventories
Accounts receivable, net & other current assets
Other assets
Accounts payable
Accrued expenses & other liabilities
Accrued advertising
Net cash flows from operating activities
Financing Activities
Purchases of property & equipment
Proceeds from property & equipment sales & incentives
Acquisition net of cash acquired, marketable securities, and other
Sales and maturines of marketable securities
Purchase of marketable securities
Net cash flows from investing activities
Investing Activities
Common Stock purchased
Proceeds from short-term debt, and other
Repayments of short-term debt, and othe
Proceeds from long-term debt
Repayments of long-term debt
Principal repayments of finance lease
Principal repayments of financing obligation
Net cash provided by (used in) financing activities
Foreign currency effect on cash, cash equivalents, and restricted cash
Net increase (decrease) in cash, cash equivalents, and restricted cas
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD
nc (NMS: AMZN)
w Statement
12/31/2023
$
12/31/2022
12/31/2021
30,425,000 $ -2,722,000 $ 33,364,000
48,663,000
41,921,000
34,296,000
24,023,000
19,621,000
12,757,000
137,000
(748,000)
16,966,000
(14,306,000)
(5,876,000)
(8,148,000)
(310,000)
1,449,000
(2,592,000)
(9,487,000)
(8,348,000)
(21,897,000)
(18,163,000)
(12,265,000)
(13,275,000)
(9,018,000)
5,473,000
2,945,000
3,602,000
4,578,000
(1,558,000)
2,123,000
(2,428,000)
84,946,000
46,752,000
46,327,000
(52,729,000)
4,596,000
(5,839,000)
5,627,000
(1,488,000)
(49,833,000)
(63,645,000)
5,324,000
(8,316,000)
31,601,000
(2,565,000)
(37,601,000)
(61,053,000)
5,657,000
(1,985,000)
59,384,000
(60,157,000)
(58,154,000)
18,129,000
(25,677,000)
(3,676,000)
(4,384,000)
(271,000)
(15,879,000)
403,000
19,637,000
73,890,000
(6,000,000) 41,553,000
7,956,000
(37,554,000)
(7,753,000)
21,166,000
19,003,000
(1,258,000)
(1,590,000)
(7,941,000)
(11,163,000)
(248,000)
(162,000)
9,718,000
6,291,000
(1,093,000)
(364,000)
17,776,000
(5,900,000)
54,253,000
36,477,000
Amazon.com Inc (NMS: AMZN)
Statement of Comprehensive Income
(In thousands)
Net income (loss)
Other comprehensive income (loss)
Foreign currency translation adjustments, net of tax
Available-for-sale debt securities:
Change in net unrealized gains (losses), net of tax o
Less: reclassification adjustment for losses (gains) included in “Other income (expense)
Net change
Other, net of tax
Total other comprehensive income (loss)
Comprehensive income (loss)
Amazon.com Inc (NMS: AMZN)
Statement of Stockholder Equity
(In thousands)
Balance as of January 1, 2021
Net income
Other comprehensive income (loss)
Stock-based compensation and issuance of employee benefit plan stock
Balance as of December 31, 2021
Net loss
Other comprehensive income (loss)
Stock-based compensation and issuance of employee benefit plan stock
Common stock repurchased
Balance as of December 31, 2022
Net loss
Other comprehensive income (loss)
Stock-based compensation and issuance of employee benefit plan stock
Balance as of December 31, 2023
(NMS: AMZN)
rehensive Income
12/31/2023
$30,425,000
12/31/2022
$(2,722,000)
12/31/2021
$33,364,000
1,027,000
(2,586,000)
(819,000)
366,000
50,000
416,000
4,000
1,447,000
$31,872,000
(823,000)
298,000
(525,000)
(3,111,000)
-$5,833,000
(343,000)
(34,000)
(377,000)
(1,196,000)
$32,168,000
Amazon.com Inc (NMS: AMZN)
Statement of Stockholder Equity
Shares
10,066,000
109,000
10,175,000
113,000
(46,000)
10,242,000
141,000
10,383,000
Amount
105,000
1,000
106,000
2,000
108,000
1,000
109,000
Treasury
Stock
(1,837,000)
(1,837,000)
(6,000,000)
(7,837,000)
(7,837,000)
Additional Accumulated
Paid In
Other Comp.
Capital
Income
42,765,000
(180,000)
(1,196,000)
12,672,000
55,437,000 (1,376,000)
(3,111,000)
19,629,000
75,066,000 (4,487,000)
1,447,000
23,959,000
99,025,000 (3,040,000)
Retained
Earmings
52,551,000
33,364,000
85,915,000
(2,722,000)
83,193,000
30,425,000
113,618,000
Total
Stockholder
Equity
93,404,000
33,364,000
(1,196,000)
12,673,000
138,245,000
(2,722,000)
(3,111,000)
193,631,000
(6,000,000)
146,043,000
30,425,000
1,447,000
23,960,000
201,875,000
2 Years Prior
200
190
180
170
160
150
140
130
120
110
100
90
80
70
60
50
40
30
20
10
0
Prior Year
Current Year
172.01
164.25 166.72
163
154.7
151.94
120.6 127.12
113
106.21
103.3
84
1
2
3
Stock Price Quaterly 2021
Quarter Close
Adj. Close
1 154.7
154.7
2 172.01
172.01
3 164.25
164.25
4 166.72
166.72
Stock Price Quaterly 2022
Quarter Close
Adj. Close
1 163
163
2 106.21
106.21
3 113
113
4 84
84
Stock Price Quaterly 2023
Quarter Close
Adj. Close
1 103.29
103.29
2 120.58
120.58
3 127.12
127.12
4 151.94 151.94
4
1
2
3
4
1
2
3
4
200
190
180
170
160
150
140
130
120
110
100
90
80
70
60
50
40
30
20
10
0
HORIZONTAL ANALYSIS
Amazon
Comparative Income Statements
For the Years Ending December 31
Net Sales
Cost of goods sold
Gross Margin
Operating expenses:
Selling expenses
Administrative expenses
Total operating expenses
Income from continuing operations
Income tax expense
Non recurring items
Net income
Current Year
(CY)
Prior Year
(PY)
2 Years Prior
(2YP)
574,785,000
304,739,000
270,046,000
513,983,000
288,831,000
225,152,000
469,822,000
272,344,000
197,478,000
11,816,000
44,370,000
233,194,000
36,852,000
(7,120,000)
(12,000)
30,425,000
42,238,000
11,891,000
212,904,000
12,248,000
3,217,000
(3,000)
(2,722,000)
32,551,000
8,823,000
172,599,000
24,879,000
(4,791,000)
4,000
33,364,000
1
Percentage Difference
(CY – PY)/PY
(PY – 2YP)/2YP
11.83%
5.51%
19.94%
9.40%
6.05%
14.01%
-72.03%
273.14%
9.53%
200.88%
-321.32%
300.00%
-1217.74%
29.76%
34.77%
23.35%
-50.77%
-167.15%
-175.00%
-108.16%
VERTICAL ANALYSIS
Amazon
Comparative Income Statements
For the Years Ending December 31
Net Sales
Cost of goods sold
Gross Margin
Operating expenses:
Selling expenses
Administrative expenses
Total operating expenses
Income from continuing operations
Income tax expense
Non recurring items
Net income
Current Year
(CY)
Prior Year
(PY)
2 Years Prior
(2YP)
100%
53.02%
46.98%
100%
56.19%
43.81%
100%
57.97%
42.03%
2.06%
7.72%
40.57%
6.41%
-1.24%
0.00%
5.29%
8.22%
2.31%
41.42%
2.38%
0.63%
0.00%
-0.53%
6.93%
1.88%
36.74%
5.30%
-1.02%
0.00%
7.10%
Net Sales
COGS
Gross Margin
Net Income
2YP
469,822,000
272,344,000
197,478,000
33,364,000
PY
513,983,000
288,831,000
225,152,000
(2,722,000)
CY
574,785,000
304,739,000
270,046,000
30,425,000
600,000,000
500,000,000
400,000,000
300,000,000
200,000,000
100,000,000
(100,000,000)
600,000,000
500,000,000
400,000,000
2YP
300,000,000
PY
CY
200,000,000
100,000,000
Net Sales
(100,000,000)
COGS
Gross Margin
Net Income
HORIZONTAL ANALYSIS
Amazon
Comparative Balance Sheets
For the Years Ending December 31
Percentage Difference
Current Year (CY)
Prior Year (PY)
2 Years Prior
(2YP)
Current assets
Long-term investments
Property, plant, & equipment
Intangible assets
Other assets
Total assets
172,351,000.00
72,513,000.00
204,177,000.00
22,789,000.00
56,024,000.00
527,854,000.00
146,791,000.00
66,123,000.00
186,715,000.00
20,288,000.00
42,758,000.00
462,675,000.00
161,580,000.00
56,082,000.00
160,281,000.00
15,371,000.00
27,235,000.00
420,549,000.00
17.41%
9.66%
9.35%
12.33%
31.03%
14.09%
Current liabilities
Long-term liabilities
Total liabilities
164,917,000.00
161,062,000.00
325,979,000.00
155,393,000.00
161,239,000.00
316,632,000.00
142,266,000.00
140,038,000.00
282,304,000.00
6.13%
-0.11%
2.95%
Paid-in capital
Retained earnings
Treasury stock
Total stockholders’ equity
Total liabilities &
stockholders’ equity
99,025,000.00
113,618,000.00
(7,837,000.00)
201,875,000.00
75,066,000.00
83,193,000.00
(7,837,000.00)
146,043,000.00
55,538,000.00
85,915,000.00
(1,837,000.00)
138,245,000.00
31.92%
36.57%
0.00%
38.23%
527,854,000.00
462,675,000.00
420,549,000.00
14.09%
(CY – PY)/PY
Percentage Difference
(PY – 2YP)/2YP
-9.15%
17.90%
16.49%
31.99%
57.00%
10.02%
9.23%
15.14%
12.16%
35.16%
-3.17%
326.62%
5.64%
10.02%
VERTICAL ANALYSIS
Amazon
Comparative Balance Sheets
For the Years Ending December 31
2 Years Prior
(2YP)
Current Year (CY)
Prior Year (PY)
Current assets
Long-term investments
Property, plant, & equipment
Intangible assets
Other assets
Total assets
32.65%
13.74%
38.68%
4.32%
10.61%
100.00%
31.73%
14.29%
40.36%
4.38%
9.24%
100.00%
38.42%
13.34%
38.11%
3.65%
6.48%
100.00%
Current liabilities
Long-term liabilities
Total liabilities
31.24%
30.51%
61.76%
33.59%
34.85%
68.44%
33.83%
30.27%
64.10%
Paid-in capital
Retained earnings
Treasury stock
Total stockholders’ equity
Total liabilities and
stockholders’ equity
18.76%
21.52%
-1.48%
38.24%
14.22%
15.76%
-1.48%
31.56%
10.52%
16.28%
-0.35%
32.87%
100.00%
100.00%
100.00%
Assets
Liabilities
Stockholders’ Equity
2 YP
420,549,000
282,304,000
138,245,000
PY
462,675,000
316,632,000
146,043,000
CY
527,854,000
325,979,000
201,875,000
600,000,000
500,000,000
400,000,000
300,000,000
200,000,000
100,000,000
600,000,000
500,000,000
400,000,000
2 YP
300,000,000
PY
CY
200,000,000
100,000,000
Assets
Liabilities
Stockholders’
Equity
Amaazon
Statement of Stockholders’ Equity
For the Year Ending December 31, CY
Common Stock, $x
Par
Balance, January 1
Issuance for additiona shares for cash
Purchase of treasury stock
Net income (loss)
Cash dividends
Treasury stock
Balance, December 31
Number of shares outstanding
$
$
$
108,000.00
1,000.00
109,000.00
APIC – CS
Retained Earnings
$ 75,066,000.00 $ 83,193,000.00
$ 23,959,000.00 $ 30,425,000.00
$ 99,025,000.00 $ 113,618,000.00
2 Years Prior
(2YP)
Prior Year (PY)
Current Year (CY)
$ 10,175,000.00
$ 10,242,000.00
$
10,383,000.00
Number of shares out
$10,400,000.00
$10,350,000.00
$10,300,000.00
$10,250,000.00
$10,200,000.00
$10,150,000.00
$10,100,000.00
$10,050,000.00
2 Years Prior (2YP)
Y
Treasury Stock
Total Stockholders’
Equity
$ (7,837,000.00) $ 146,043,000.00
$
23,960,000.00
$
$
30,425,000.00
$
$
$ (7,837,000.00) $ 201,875,000.00
Number of shares outstanding
2 Years Prior (2YP)
Prior Year (PY)
Current Year (CY)
Statement of Cash Flows
Amazon
For the Years Ending December 31
Cash Flow Activity
Current Year (CY)
Prior Year (PY)
2 Years Prior (2YP)
Net cash provided (used by) operating activities
Net cash provided (used by) investing activities
Net cash provided (used by) financing activities
Increase (decrease) in cash
Beginning cash balance
Ending cash balance
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
84,946,000.00
(49,833,000.00)
(15,879,000.00)
19,637,000.00
54,253,000.00
73,890,000.00
46,752,000.00
(37,601,000.00)
9,718,000.00
17,776,000.00
36,477,000.00
54,253,000.00
46,327,000.00
(58,154,000.00)
6,291,000.00
(5,900,000.00)
42,377,000.00
36,477,000.00
Operating Activities
Investing Activities
Financing Activities
Ending Balance
2 YP
PY
CY
46,327,000 $ 46,752,000.00 $ 84,946,000.00
(58,154,000) $ (37,601,000.00) $ (49,833,000.00)
6,291,000 $ 9,718,000.00 $ (15,879,000.00)
36,477,000 $ 54,253,000.00 $ 73,890,000.00
100,000,000
80,000,000
60,000,000
40,000,000
20,000,000
Operating Activities
(20,000,000)
(40,000,000)
(60,000,000)
2 YP
PY
CY
Operating Activities
Investing Activities
Financing Activities
Ending Balance
Net Income
Operating Activities
2 YP
33,364,000
46,327,000
PY
(2,722,000)
46,752,000
CY
30,425,000
84,946,000
90,000,000
80,000,000
70,000,000
60,000,000
50,000,000
40,000,000
30,000,000
20,000,000
10,000,000
(10,000,000)
90,000,000
80,000,000
70,000,000
60,000,000
2 YP
50,000,000
PY
40,000,000
CY
30,000,000
20,000,000
10,000,000
(10,000,000)
Net Income
Operating Activities
COMPETITORS
Ebay
Alibaba
Target
Walmart
Liquidity Ratios:
Current ratio
Quick (acid-test) ratio
Current cash debt ratio
Amazon
Current Yr.
1.05
0.84
0.53
0.82
0.2
0.34
2.16
2.2
2.45
1.81
1.53
0
0.91
0.27
0.11
6.98
5.8
7.14
Profitability Ratios:
Profit margin on sales
Return on assets
Return on common equity
Earnings per share
Price-earnings ratio
Payout ratio
5.29%
5.76%
15.07%
2.93
51.85
–
4.16%
4.75%
13.48%
4.64
30.31
34.25%
13.49%
3.21%
25.96%
5.19
17.7
26%
11.86%
5.19%
8.21%
24.7
16.39
22.43%
2.49%
6.79%
33.50%
5.98
26.91
48.60%
1.86%
1.24%
-24.33%
0.1
35.20%
Efficiency Ratios:
Accounts receivable turnover
Inventory turnover
Asset turnover
12.15
9.00
1.16
77.05
8.19
2.56
13.46
0
0.47
0
18.71
0.49
64.38
6.12
1.98
6.42
11.92
0.62
Solvency Ratios:
Debt to assets
Times interest earned
Cash debt coverage
0.62
12.80
0.26
0.23
11.5
0.47
2.79
7.1
1.4
0.61
24.5
2.78
0.3
8.3
0.56
0.1
19.9
0.34
Source:
Macro Trends
Investing.Com
Stock Analysis
Stock Analysis on Net
Industry Ratios
Shopify
Industry
1.09
0.72
–
4.89%
7.06%
21.40%
5.24
46.61
13%
2.48
9.07
1.57
0.81
14.26
–
1
Module 2: Financial Statement Analysis
Name of Corporation: Amazon Incorporation
Location of the Corporate Headquarter: Seattle, Washington.
Fiscal Year End: 31st December
Industry: E-Commerce Retail
Primary Products and Services
1. Apparel
2. Industrial and scientific supplies
3. Sports Goods
4. Health and personal care
5. Toys
Major Competitors of Amazon
1. Walmart
2. Alibaba
3. Flipkart
4. Netflix
5. Otto Group
Stock Price Trend
Stock analysis of the corporate stock revealed a mixed trend during the three years. The
stock price dropped from $154 in quarter one to $166 in quarter 4 in 2021. The stock crashed
2
much in 2022, ending at $84 in the 4th quarter. It struggled to profit in 2022, significantly
contributing to its share price falling. However, Amazon stock reverted in 2023 with an
increasing trend. The stock price increased from $103 in quarter one to $151.94 in 2023 end.
Amazon’s healthy profit in 2023 became the primary reason for this growth. Amazon stock is
much more volatile. It could sink lower or rise again in the future. Hence, it possesses a
potential investment risk.
Horizontal and Vertical Analysis of Income Statement
1. What was the increase or decrease in revenue from year to year?
Total revenues increased by 9.40% in 2022 compared to 2021. It increased by 11.83% in
2023 compared to 2022.
2. Did the cost of goods sold increase or decrease from year to year? Was this increase or
decrease consistent with the trend in revenues? That is, did the ratio of cost of goods
sold to revenues increase or decrease?
The cost of goods sold increased by 6.05% in 2022 and by 5.51% in 2023. However, the
rising trend was inconsistent with revenues. Cost of goods sold as a ratio to revenues reported a
decreasing trend. Costs of goods sold accounted for 57.97% of total revenues in 2021. It
decreased to 56.19% in 2022 and dropped to 53% in 2023.
3. Was there an increase or decrease in gross margin? Net Margin? Was the increase or
decrease consistent with the trend in revenues?
3
There was an increase in gross margin. The gross margin increased by 14.01% in 2022 and
19.94% in 2023. The increase was consistent with revenues. It increased from 42.03% in 2021 to
46.98% in 2023 as ratio of revenues.
4. Did operating expenses increase or decrease from year to year? Was this increase or
decrease consistent with the trend in revenues? That is, did the ratio of operating
expenses to revenues increase or decrease?
Amazon incurred more in operating expenses in 2022 and 2023. Its operating expenses
increased by 23.35% from 2022 to 2021. However, the percentage increase declined in 2023,
with operating expenses increasing by 9.53% in 2022. Vertical analysis reveals a mixed trend in
operating expenses as a ratio of revenues. Its total operating expense ratio was 36.74% in 2021.
The ratio increased to 41.42% in 2022 and dropped to 40.57% in 2023.
5. Did income from operations increase or decrease from year to year? Was this increase
or decrease consistent with the trend in revenues? That is, did the ratio of income from
operations to revenues increase or decrease?
Amazon suffered losses from continuing business operations in 2022. The income from
continuing operations declined by 50.77% in 2022 than 2021. However, the company recovered,
reporting a 200% increase in 2023. The trend was inconsistent with revenues. While Amazon
reported increasing revenue trend, its income from continuing operations signaled a mixed trend.
Amazon could generate only 2.38% of revenues as income in 2022 and 6.41% in 2023.
6. In addition to the above, other items are required to be disclosed on the income
statements prepared using GAAP. Were there interest expenses, unusual or infrequent
4
items, discontinued operations, or extraordinary items? If so please describe and
discuss accordingly.
There are several other account titles in the income statement. Amazon has an interest
income with an increasing trend. It had $448,000 in interest income in 2021, 989,000 in 2022,
and 2,949,000 in 2023. The income statement also has an account of interest expense and other
income. Its interest expenses are continuously rising, indicating more borrowing. The other
income account presented a mixed trend. In addition, one can notice an extraordinary item of
equity investment method. Amazon reported the income/losses incurred from using the equity
method to record the profits on investment in other companies.
7. Were there any other significant observations from a review of the income statement?
The income statement account lineup reveals that Amazon heavily invests in technology and
content expenses. It invested $56.052 million in technology in 2021, $73.213 in 2022, and
$85.622 million in 2023. Amazon also incurred millions of dollars as fulfillment expenses. These
expenses represent costs incurred from product handling to receiving and distribution.
Based on the horizontal analysis, vertical analysis and the comparison chart with balance
sheet items, respond to the following questions.
1. What was the increase or decrease in assets from year to year? Which assets were
the primary reasons for the increase or decrease?
From 2022 to 2023, Amazon’s total assets increased by 14.09% from $462,675,000 to
$527,854,000, primarily due to a 17.41% rise in current assets, a 9.35% increase in property,
plant, and equipment, and a 31.10% surge in other assets. From 2021 to 2022, total assets grew
5
by 10.01% from $420,549,000 to $462,675,000, driven mainly by a 16.46% increase in property,
plant, and equipment and a 56.99% rise in other assets.
2. Did liabilities increase or decrease from year to year? Which liabilities had the
most impact?
Liabilities from 2022 to 2023 saw a modest increase of 2.95% from $316,632,000 to
$325,979,000, with current liabilities increasing by 6.13% having the most impact. The previous
year, from 2021 to 2022, total liabilities rose by 12.15% from $282,304,000 to $316,632,000,
primarily due to a 15.12% increase in long-term liabilities.
3. Was there an increase or decrease in stockholders’ equity? Why?
Stockholders’ equity experienced a substantial increase of 38.25% from $146,043,000 to
$201,875,000 from 2022 to 2023, driven by a 31.92% rise in paid-in capital and a 36.52%
increase in retained earnings. From 2021 to 2022, stockholders’ equity grew by 5.64% from
$138,245,000 to $146,043,000, mainly due to a 35.11% increase in paid-in capital.
4. Which balance sheet accounts experienced the most significant changes from year
to year? What events may have caused these changes?
The most significant changes were in current assets, property, plant, and equipment, and other
assets. Current assets increased by 17.41% from 2022 to 2023 due to higher cash and cash
equivalents, likely from strong cash flows or financing. Property, plant, and equipment rose by
9.35%, reflecting infrastructure investments. Other assets surged by 31.10%, likely from
acquisitions or deferred tax assets increases.
5. Were there any other significant observations from your review of the balance
sheets?
6
Stockholders’ equity increased by 38.25% from 2022 to 2023, driven by higher paid-in capital
and retained earnings, indicating strong profitability. Liabilities consistently increased, with a
notable 15.12% rise in long-term liabilities from 2021 to 2022, suggesting increased borrowing
for expansion. The 326.64% increase in treasury stock from 2021 to 2022 indicates significant
share repurchases.
Based on the information in the statement of comprehensive income, respond to the
following questions.
1. Did the company have foreign currency translation adjustments? If yes, were there
significant changes from year to year? What were the reasons for these changes?
Yes, Amazon had foreign currency translation adjustments. From 2022 to 2023, there was a
significant positive change from a loss of $(2,586,000) to a gain of $1,027,000. The prior year,
from 2021 to 2022, also saw a notable change from a loss of $(819,000) to a larger loss of
$(2,586,000). These fluctuations are likely due to changes in exchange rates affecting the value
of Amazon’s foreign operations and transactions.
2. Did the company have unrealized gains (losses) on securities? If yes, were there
significant changes from year to year? What were the reasons for these changes?
Yes, the company had unrealized gains (losses) on securities. From 2022 to 2023, there was a
significant positive change from a loss of $(525,000) to a gain of $416,000. This change can be
attributed to fluctuations in the market value of Amazon’s available-for-sale debt securities,
reflecting changes in market conditions and interest rates.
3. Did the company have unrealized gains (losses) on pension obligations? If yes, were
there significant changes from year to year? What were the reasons for these
changes?
7
There is no mention of unrealized gains (losses) on pension obligations in the provided statement
of comprehensive income for Amazon. Therefore, this is not applicable.
4. Were there any other significant observations from your review of the statements of
comprehensive income? If yes, please discuss.
Yes, a significant observation is the turnaround in comprehensive income from a loss of
$(5,833,000) in 2022 to a gain of $31,872,000 in 2023. This substantial improvement is
primarily driven by a shift from a net loss to net income and positive changes in other
comprehensive income items such as foreign currency translation adjustments and unrealized
gains on securities.
Amazon.com Inc’s Statement of Stockholder Equity
Question 1. Were there significant changes in the company’s common stock? What were
the reasons for these changes?
Yes, there were some significant changes in the joint stock company during the period.
During the current year, the company issued additional shares for cash issuance, 1,000 new
shares, and increased Additional Paid-In Capital (APIC) by 23,959,000. This means the company
raised financing by issuing new shares, thereby increasing common stock and APIC. In addition,
it practices stock-based compensation and issuance of shares under the employee benefit plans.
For example, in the current year, the company issued 141,000 shares, increasing common stock
by 1,000 and APIC by 23,959,000. This is a common practice in companies since it rewards
employees and aligns their interests with the company’s shareholders. Also, the previous year,
the company repurchased 46,000 shares at 6,000,000, reducing the outstanding shares and
impacting treasury stock. One of the strategic initiatives commonly used to return value to
8
shareholders, reduce dilution from stock-based compensation, and enhance such financial
metrics as EPS is share repurchase. Overall, big swings in common stock were attributed to
raising capital by issuing shares and share repurchase programs to manage share dilution and
shareholder value (Rikap,2022).
Question 2. Did the company repurchase any of its stocks? Why?
Yes, the company bought back its stocks in the prior year. Specifically, it repurchased
46,000 shares at a total cost of 6,000,000. The significant reasons for buying back its stocks are
to return value to shareholders, reduce share dilution, and enhance financial ratios. By buying
back its shares, a company returns the excess cash to shareholders, usually considered a gesture
of confidence in its prospects. Also, share repurchases could be used to counter dilution from
stock compensation plans and the issuance of shares under employee benefit plans to preserve
the value of existing shares. Lastly, reducing the number of outstanding shares can improve
financial ratios like EPS, which may positively affect the company’s stock price. In other words,
it was a strategized case of share buyback by the company to benefit shareholders and improve
its financial health.
Question 3. Were there significant changes in the number of shares outstanding? If so,
what are the reasons for these changes?
Yes, the number of shares outstanding changed significantly over the years. In CY, the
number of outstanding shares increased by issuing 141,000 under stock-based compensation and
employee benefit plans, thus increasing the total number of shares from 10,242,000 to
10,383,000. In PY, the company repurchased 46,000 shares, thereby reducing the number of
outstanding shares. The changes are meant to raise capital, employee gratification, and the
9
prevention of dilution. Stock issuance is one of the standard tools that aligns the interest of the
workers with that of the owners and generates funds for running various businesses. On the other
hand, share repurchases are usually carried out to return some excess cash to shareholders and
improve the financial metrics, such as earnings per share.
Question 4. Were there any other significant observations from your review of the
statement of changes in stockholders’ equity?
Other key observations of the review in the statements of changes in stockholders’ equity
are that observable changes occurred in additional paid-in capital and retained earnings. On the
APIC side, a significant increase was seen in the current year due to stock-based compensation
and the issuance of employee benefit plan stock that contributed an additional 23,959,000. A net
income of 30,425,000 contributed to the massive increase in retained earnings. Also, last year’s
comprehensive income (loss) was a significant loss of 1,093,000, which would affect
accumulated other comprehensive income. Another point noticed is that treasury stock keeps
decreasing, meaning that the company is trying to manage the amount of its outstanding shares
with share buybacks. All of this has represented the strategic financial decisions the company has
made in order to increase shareholder value and manage the equities while aligning the interests
of employees with shareholders.
Amazon.com Inc’s Cash Flow Statement
Question 1. Were there significant changes in the company’s operating cash flows? What
were the reasons for these changes?
Indeed, several changes occurred in the company’s operating cash flows over the years.
Net cash provided by the operating activities in the current year was $84,946,000, which
10
improved drastically from the previous year at $46,752,000 and two years prior at $46,327,000.
A good increase in operating cash flow may be attributed to several factors. The company
reported a net income of $30,425,000 in the current year, compared to a net loss of $2,722,000 in
the prior year. In addition, there were increases in adjustments, such as depreciation and
amortization, and working capital components, like changes in accounts payables and accrued
expenses. All these elements combined to drive the significant increase in net cash provided by
operating activities, which reflected improved operational efficiency and profitability.
Question 2. Were there significant changes in the company’s investing cash flows? What
were the reasons for these changes?
Significant changes in the company’s investing cash flows occurred over the years. Net
cash used in investing activities was $49,833,000 in the current year, compared to $37,601,000
in the prior year and $58,154,000 two years prior. The fluctuation in investing cash flows is
mainly due to changes in capital expenditures and acquisitions that the company has been
making. In the current year, the firm has made heavy purchases of property and equipment
amounting to $ 52,729,000, indicating a significant expansion and up-gradation-related activity
of the firm’s assets. Second, the proceeds from selling property and equipment were lower than
in previous years. While these investments are crucial for the firm’s long-term growth and
operational capacity, they have also caused considerable cash outflows in the short term.
Question 3. Were there significant changes in the company’s financing cash flows? What
were the reasons for these changes?
There were significant changes in the company’s financing cash flows over the years.
Specifically, whereas the net cash used in financing activities in the current year was
$15,879,000, the previous year had a net cash inflow of $9,718,000, and two years ago, it was
11
$6,291,000. These changes mainly emanated from decisions on debt and equity financing that
the company had made. In the current year, a significant outflow was caused by the repayment of
short-term and long-term debt to $25,677,000 and $3,676,000, respectively. There were also
principal repayments related to finance leases and financing obligations. In contrast, last year, the
firm had more significant inflows from short-term debt with lower outflows due to repayment,
hence net positive financing cash flow. These variations reflect the strategic management of the
company in the aspect of finance and balancing debt financing with the obligation of repayment
(Souza et al.,2022).
Question 4. What were the most significant sources of cash?
The firm’s most significant sources of cash were net cash provided by operating activities
and proceeds from short-term debt and other financing activities. The net cash provided by
operating activities was $84,946,000, which is the current year’s largest source of cash inflow.
This sizable amount demonstrates that the company can produce cash through its core business
operations. Proceeds from short-term debt provided another enormous inflow of $18,129,000.
These inflows are crucial to sustaining the firm’s operations and investments (Chizmar et
al.,2020).
Question 5. What were the most significant uses of cash?
The most significant uses of cash included purchases of property and equipment,
repayment of short-term and long-term debt, and treasury stock repurchases. Specifically, in the
current year, the company spent $52,729,000 purchasing property and equipment, thus making
substantial capital investments to expand its operation capacity. Besides, large outflows were
made to repay short-term and long-term debt, amounting to $25,677,000 and $3,676,000,
respectively. These debt repayments are essential for controlling the company’s leverage and
12
financial health. Besides, repurchasing treasury stock of $6,000,000 in the previous year
indicates its strategy for returning value to shareholders (Oubari et al., n.d).
Question 6. What were the most significant reasons for the differences between net income
and cash flows from operating activities?
The differences between net income and cash flows from the operating activities are
primarily due to non-cash expenses and changes in working capital components. Depreciation
and amortization is the significant non-cash expense that affects cash flows by $48,663,000
without affecting net income during the current year. Stock-based compensation of $24,023,000
is another non-cash expense adjusting operating cash flows. Other working capital items, such as
accounts receivables, inventories, and accounts payable, also cause differences. For example, a
rise in accounts receivable implies sales made on credit that increase net income but do not
immediately generate cash inflow. On the other hand, an increase in accounts payable represents
expenses incurred but not yet paid, and it positively affects cash flow (Darcy,2023).
Question 7. Were there any other significant observations from your review of the
statements of cash flows?
From the analysis taken out on the statement of cash flows, it is observed that the
strategic attention of the company has been toward investment in property and equipment and the
management of debt by way of repayment. The continuous capital expenditure in appreciable
quantities does point to a strategy of long-term growth and operational expansion. Furthermore,
the fact that the company can consistently produce operating solid cash flows despite
fluctuations in net income speaks to the robustness of the operational efficiency. Including a
significant stock-based compensation in the remuneration package may align employee interests
with company performance. Lastly, treasury stock buyback unrelated to the current year speaks
13
to the company’s commitment to returning value to shareholders and managing its equity
structure effectively (Weigel, 2022).
References
Chizmar, S., Castillo, M., Pizarro, D., Vasquez, H., Bernal, W., Rivera, R., … & Cubbage, F.
(2020). A discounted cash flow and capital budgeting analysis of silvopastoral systems in
the Amazonas region of Peru. Land, 9(10), 353.
Darcy, L. G. (2023). Equity valuation: Amazon. com Inc (Doctoral dissertation).
Oubari, A., Badawi, S., Kittaneh, N., & Nobanee, H. Financial Analysis: A Comparison Study
between Amazon and Walmart.
Rikap, C. (2022). Amazon: A story of accumulation through intellectual rentiership and
predation. Competition & Change, 26(3-4), 436-466.
Souza, L. E. V. D., Fetz, M., Zagatto, B. P., & Pinho, N. S. (2022). Violence and illegal
deforestation: the crimes of “Environmental Militias” in the Amazon forest. Capitalism
Nature Socialism, 33(2), 5-25.
Weigel, M. (2022). What You Don’t Know About Amazon. International New York Times, NANA
14
Ratio Analysis of Amazon
1: Liquidity Analysis
The liquidity ratio measures whether the business can pay its due payments on time. The
following table presents Amazon’s liquidity ratio for the three years.
Ratio
Current Year
Prior Year
2 Years Prior
Current Ratio
1.05
0.94
1.14
Quick Ratio
0.84
0.72
0.91
Current Cash Debt
0.53
0.31
0.65
Amazon experienced ups and downs in its liquidity position during the three years. The current
ratio for Amazon decreased from 1.14 in 2021 to 1.05 in 2023. It is below the industry
average of 1.09. The quick ratio also revealed a mixed trend, decreasing from 0.91 in
2021 to 0.72 in 2022, and rising to 0.84 in 2023. The quick ratio for the industry was
0.72. The current cash-debt ratio declined from 0.65 in 2021 to 0.53 in 2023. Amazon
does not have enough current assets to pay its due obligations. Its liquidity position is
much weaker than other industry leaders and all ratios are below the industry averages.
2: Profitability Analysis
Ratio
Current Year
Prior Year
2 Years Prior
Profit margin on sales
5.29%
-0.53%
7.10%
Return on Assets
5.76%
-0.59%
7.93%
Return on Equity
15.07%
-1.86%
24.13%
Earnings Per Share
2.93
-0.27
3.28
Price Earnings Ratio
51.85
-316.06
50.87
Payout ratio
–
–
–
15
The profitability ratio measures the profitability of an enterprise. It is the net result of several
decisions taken and policies followed by management during an accounting period. The
first ratio is net profit margin which measures profit margin on net sales giving profit per
dollar sale. The net profit margin declined from 7.10% in 2021 to 5.29% in 2023.
Amazon suffered a loss in 2022. The net profit margin for the industry was 4.89% in
2023. Amazon was slightly ahead of the industry median in generating net income from
sales. Its Assets turnover and return on equity declined during the three years. Amazon
did not do better than the industry leaders. It generated less sales on its assets and
returned lower on equity.
Earnings per share denotes the revenue generated per outstanding share. Amazon’s EPS
decreased from 3.28 in 2021 to 2.93 in 2023. The EPS was negative during 2022. The
declining EPS indicates Amazon’s profitability has decreased compared to 2021. Its EPS
was well behind the industry average of 5.24. However, its price-to-earnings ratio
increased from 50.87 in 2021 to 51.85 in 2023. The industry median was 46.61. The
higher PE ratio suggests investors expect Amazon stock to grow. Amazon does not pay
dividends. Hence, we could not calculate its payout ratio.
3: Efficiency Analysis
Ratio
Current Year
Prior Year
2 Years Prior
Account Receivable Turnover
12.15
13.66
28.57
Inventory Turnover
9.0
8.62
16.69
Asset Turnover
1.16
1.16
2.23
16
Its account receivable turnover declined from 28.57 to 13.66 and 12.15 during the three years.
The declining receivable trends suggest customers, on average are not paying the bill on
time compared to other competitors. Other industry players (key competitors) had better
cash collections. However, Amazon did better on industry average.
A lower cash collection could deprive them of the funds they could have used to invest in
productive assets. Amazon could turn its inventory 9 times during 2023. It had turned its
inventory 16 times in 2021. The same ratio for the industry is 9.0 times. Amazon
compares very well with the industry ratio and did better than fewer
companies. However, it did not turn its assets as efficiently as in 2021. The declining
asset turnover ratio indicates Amazon’s management failed to efficiently use assets for
generating sales. Comparatively, other companies did better in turning assets to generate
sales.
4: Solvency Analysis
Ratio
Current Year
Prior Year
2 Years Prior
Debt to Assets
0.62
0.68
0.67
Interest Coverage
12.8
-1.51
22.09
Cash Debt Coverage
0.26
0.30
0
The declining trend in the debt-to-asset ratio indicates Amazon raised more money via equity.
The ratio is below the industry median of 0.81, meaning Amazon is relatively safe. It
won’t have an issue in obtaining credit for future projects. Amazon’s ability to cover its
debt cost with operating income has declined in 2023 than 2021. It could cover interest
12 times in 2023. Times interest earned in the industry in 2023 is 14 times. Amazon is in
17
a weaker position than competitors to pay its service cost on its interest-bearing debts.
However, it does not emerge as a risk for the company. In addition, a declining and a
lower than the industry average cash-debt coverage ratio reflects a weak liquidity
position.
Conclusion
In Summary, the liquidity position of Amazon is weak to some extent, and is not in a position to
pay off its short-term financial obligation. The businesses may have to liquidate their
fixed assets or look for other resources to meet their short-term obligations. Amazon did
not perform well compared to its competitors on the efficiency scale. On a long-term
basis, Amazon is financially less risky. It is earning a higher return on its assets and its
stock owners. Its profitability position is better than competitor companies.
Notes to the Financial Statements
Reviewing the notes to the financial statements, or ‘footnotes,’ can yield very important
information that can be used in an analysis of a company. This is so because the financial
statements do not elsewhere report important details and other information that are
included in this section. You could say the notes serve as a means of clarifying the
summary information in the statements. As a result, some of these notes can be relatively
long. While this may be the case, it is imperative that investors read the notes to the
financial statements so as not to miss the important information contained therein.
Some important items contained in the notes to the financial statements include, but are not
limited to, the following. Take note of any significant observations you come across in
your review.
18
Significant accounting policies
Revenue Recognition: Amazon identifies and records revenues when the customer gains control
of products or services. This is evident in the “Net product sales” and “Net services
sales.”
Inventory Valuation: Amazon’s inventories are stated at a lower cost or net realizable value on a
first-in-first-out (FIFO) basis. At the end of the year, which ended on December 31, 2023,
the inventory was holding at $33.318 billion.
Depreciation: Depreciation is provided using the straight-line method over the useful lives of the
respective assets. The significant expenditure included here is the technology and content
expenses ($85.622 billion in 2023), which are being depreciated.
Depreciation of long-lived assets
Another cost for Amazon that we consider essential is depreciation expense, especially for
property and equipment. This expense represents the decrease in the value of the firm’s
assets over a period owing to usage, deterioration, and technological changes. For
instance, the balance sheet notes that the value of long-term investments, such as property
and technology equipment, has gradually reduced over the last few years, which suggests
that depreciation continues. These depreciations are essential in assessing the cost of
sustaining Amazon’s extensive structures, including its data centers and fulfillment
networks.
Valuation of inventory
Amazon’s balance sheet shows the quantity of available stock for sale. For the inventory, the
first-in, first-out method is used to reduce asset overstatement, and the lower cost or
market valuation method is used. The inventory at the end of December 31, 2023, was
19
estimated to be $ 33. 318 billion. This figure shows the extent of Amazon’s business and
proves the effectiveness of supply chain management and inventory control.
Derivatives and hedging
Amazon may also employ other techniques like hedging and derivative financial instruments to
manage exchange and interest rate risks. These instruments minimize possible negative
impacts on cash flow and earnings. Although the available sheets did not disclose any
figures or specific details regarding derivative transactions, it is reasonable to expect that
such a vast multinational company as Amazon would use hedging instruments to
minimize fluctuations in its financial results, given its numerous global operations.
Intangibles
Intangible assets are items such as goodwill, patents, or trademarks, which have no physical form
but are valuable in determining the value of Amazon. These assets are usually created
through acquisitions or internal development of the company. Generally, the notes to the
financial statements give information on how such intangibles have been valued and
amortized. Amazon’s most probable value drivers include proprietary technologies,
relationships with motivated customers, and brand value.
Investment
Using Amazon’’s balance sheet, we notice that it has made significant investments in marketable
securities at $13.393 billion as of December 31, 2023. Such investments may include the
bonds, equities, and other financial securities Amazon uses to invest its cash. Therefore,
the nature and size of these investments give some clues as to Amazon’s approach to
liquidity management and attitude to risk.
Contingencies
20
Contingencies are those future obligations or risks that are contingent on the occurrence of future
events, including lawsuits and regulatory proceedings. The notes state many legal
proceedings, tax appeals, and other probable financial exposures in the specific fields.
The items above are essential to evaluate risks that might impact Amazon and alter the
company’s future profits.
Debt
Debt levels can be derived from the balance sheet, which details Amazon’s short- and long-term
debt. They consist of bonds, loans, and other credit facilities through which Amazon
finances its operations and capital expenditures. These notes generally contain
information on the conditions of this debt, such as interest rates, time of repayment, and
other conditions known as covenants. To properly analyze leverage and the company’s
financial health, examining the debt structure at Amazon is imperative.
Leases
The leases are recorded in the balance sheet and fall under the liabilities classification. These
include the operating lease for the offices, warehouse, and equipment. The financial
statements reveal the specifics of these agreements, including future obligations under the
lease, which helps to determine Amazon’s financial liabilities and the effects of lease
recognition on its statement of financial position.
Subsequent events
The next are the subsequent events, which occur after the balance sheet date and before the date
when the financial statements are delivered, which would be after December 31, 2023.
These can be about the economic status or any operation carried out within the company.
Although no information was presented after the facts were mentioned, it is revealed that
21
Amazon delivers such information in notes to offer the most comprehensive and accurate
picture of its state of affairs.
Any other significant items
This section contains other significant events which have affected the financial statements or
changes in the estimates. For example, additional information on changes in accounting
policies, substantial transactions, or adjustments of prior periods may be disclosed here.
These items are relevant to the company’s financial health and non-recurring events that
may affect its income statement.
External Auditor’s Report
It is imperative you review the external auditor’s report. It is based on the auditor’s opinion and
should provide reasonable assurance as to whether the company is operating according to
appropriate accounting standards. It should also reveal whether or not the company is a
going concern.
The report should take one of the following forms:
1. Unqualified (unmodified) opinion – This is generally referred to as a clean opinion. This type
of report is issued when the auditor believes the company is free from any material
misrepresentations and the accounting records have been prepared in accordance with
generally accepted accounting principles (GAAP) or the international financial reporting
standards (IFRS).
2. Qualified opinion – This report is very similar to the unqualified opinion. The reason for this
type of report is generally because the accounting records have not been prepared
according to GAAP or IFRS. An additional paragraph explaining the reason for the
unqualified opinion is included.
22
3. Adverse opinion – This type of report suggests that the accounting records have not been
prepared in accordance with GAAP or IFRS, and there is gross misrepresentation in the
financial reports.
4. Disclaimer of opinion – There are times when the auditor is unable to perform the necessary
tasks and, therefore unable to issue a report. If this happens, the auditor issues a
disclaimer of opinion.
Who are the auditors for this company?
____________________________________________________________
Which of the opinions above was provided by the auditors?
Amazon’s auditors typically issue an unqualified opinion, suggesting that the financial statements
fairly represent the company’s financial position.
Decision Time
Now that you have spent much time reviewing and analyzing the selected company, its
competitors, and the industry to which it belongs, it is time for you to make some
decisions.
How does this company compare to its competitors? Explain.
When comparing Amazon to other key market competitors like Walmart, Alibaba, eBay, Target,
and Shopify, Amazon is a clear market leader in both the e-commerce and cloud
computing business markets. For the year ended 2023, Amazon reported its total net sales
at $574.785 billion, which is significantly higher than the capacity of most of its
competitors. Walmart, which competes with Amazon in retail, had revenues of around
$610.91 billion, further illustrating its dominance in offline retail; however, it does not
have the technology portfolio that Amazon does. Specifically, AWS generates a
23
substantial portion of Amazon’s revenue and profit. Alibaba has revenues of around 126
billion and dominates the Chinese market, while Amazon has a global market and
diversified services. While eBay has revenues of about $10 billion and specializes in
online auctions and marketplace, it is significantly less diverse than Amazon, which
offers Prime and AWS, among many other things. Target and Shopify also stand far
behind Amazon; the former has approximately $109 billion in revenues, whereas the
latter is an e-commerce-enabling platform for businesses to sell their products. Amazon’s
capital expenditure in technology infrastructure and its capability to innovate and expand
internationally sets it up a notch higher than its rivals, putting it in a strategic position to
dominate multiple sectors.
How does this company compare to the industry in which it operates? Explain.
Amazon is one of the largest e-commerce companies and cloud providers, ahead of most
competitors in size, scope, and capabilities. In 2023, Amazon posted its total net sales of
$574.785 billion, making it one of the leading e-commerce companies in the world with
an e-commerce market where it consistently creates records in terms of customer
conveniences, delivery timelines, and range of products offered. Another company
innovation is using artificial intelligence, such as self-serve recommendations and
automatic warehouses, which have enhanced productivity and become the new norm of
what customers expect from such companies in the sector. AWS is still the market leader
in the cloud computing industry with $80 billion in revenue, far beyond other competitors
like Azure and Google Cloud. AWS offers a wide variety of services and products and is
constantly improving and expanding, thus becoming the essential cloud platform for
many businesses today and strengthening Amazon’s dominance in the market. While
24
most other e-commerce companies and tech giants offer some services related to
Amazon, they do not provide a fully integrated service in the way that Amazon does,
which gives it a wide-ranging hold over multiple aspects of the market. In contrast,
companies tend to focus on one or two areas. This diversified business model not only
strengthens Amazon’s competitive position but also serves as a buffer in case of market
shocks, making the giant a force to reckon with in all its sectors.
What do analysts have to say about this company?
Most analysts have provided positive recommendations for the firm through its three competitive
strengths: market dominance, substantial revenue model diversity, and unceasing
advancement. This viewpoint viewed the company’s range as scalable while concurrently
moving into fresh markets, including the healthcare and grocery sectors. Furthermore,
AWS remains a popular subject to discuss among analysts since its profitability is still
under scrutiny while offering Amazon the cash to fund different segments.
Analysts also note several factors, including Amazon’s cash flow efficiency and balance sheets,
especially in periods of economic hardship. One of the most common strategies attributed
to its longevity is the company’s focus on the customer and the capacity to predict shifts
in consumer behavior.
What do analysts have to say about this industry?
The e-commerce and cloud computing sectors are considered to be favorable within the industry
by analysts, signifying satisfactory growth in the background of digitalization and
consumers’ propensity to buy, as well as ongoing migration to the cloud. The e-commerce
segment is forecast to maintain a positive outlook, given the ongoing shifts of consumers
25
and businesses toward the digital platform. In contrast, the cloud computing segment is
expected to rise as different enterprises switch toward digital platforms.
Analysts strongly suggest that giants like Amazon are more likely to benefit from such
tendencies because they have a head start. The industry is expected to evolve with
advanced technologies like AI and machine learning, penetrating the value proposition
and business processes of the organizations in the industry.
Would you invest in this company? Why?
Factors such as Amazon’s robust financials, vast and diverse market coverage, and continually
rising stock prices make the company a very appealing investment. The mentioned
strengths characterize the company as an innovative and adaptable business capable of
making its operations scalable across different sectors or industries in the future.
Moreover, the fact that Amazon is a leader in cloud computing through AWS, its focus
on expanding to new markets, and its dedication to customers make it less risky and more
appealing.
Amazon’s rich and diverse product portfolio, good cash flow and capital management, and
prudent capital expenditure on new technologies and suitable infrastructure also play
positive roles in its long-term growth model. Despite some threats, including competition
pressure and regulation inequalities, the overall strength of the company’s performance
review and market status is clear evidence that it will maintain its dominance in the
international market.