Unit 7 Complete Project

Unit 7: Course Project: Complete Paper

Throughout the course, students have learned the key financial analysis concepts to manage and evaluate corporate performance. In the course project, students will have the opportunity to apply all these concepts in evaluating a publicly traded company of their choice.

Directions: Complete paper with modules 2-6 components

Topic: AMAZON

Please see attached and combine assignments to flow together to complete project assignment.

Unit 3: Course Project: Locate Financial Statements
Balance Sheet
A company’s balance sheet reports its assets, liabilities, and stockholders’ equity at a
specific point in time. Amazon, like any other company, reports its annual assets, liabilities, and
stockholders’ equity in its balance sheet (Jackson, 2022). In this analysis, the goal will be to
analyze the company balance sheet for the past three years, to help understand the growth or
decline in the company’s assets, liabilities, and stockholders’ equity. From the company’s 2022
balance sheet reported in the current year’s annual report, it posted total assets of $462.675
billion. In 2021, the company posted a total asset of $420.549 billion, indicating a growth in total
assets of $42.126 billion. In 2020, the company reported a total asset of $321.195 billion, an
indication of tremendous growth in the company’s annual asset base when compared to the
previous years.
Amazon has continued to report a growth in stockholders’ equity over the years. In 2020,
2021, and 2022, the company reported $93.404 billion, $138.245 billion, and $146.043 billion in
stockholders’ equity, respectively. This indicates that the company has been expanding its
revenue streams over the years. The company’s stockholders’ equity growth has been attributed to
the increase in the company’s stock and revenues, although operating expenses for the company
have grown over the years. The company’s current and long-term liabilities have also been
growing over the years, indicating the company’s continued effort to invest in long-term growth
strategies.
Income Statement
An income statement reports the company’s financial performance over a given period. It
focuses on the company’s revenues, expenses, gains, and losses over its accounting period
(Jackson, 2022). It provides an essential insight into the company’s profitability status and allows
investors to understand whether it is profitable. It also provides valuable details about the
company’s operations, efficiency of management, underperforming sectors, and its performance
relative to other competitors in the industry (Wahlen et al., 2022). Amazon’s income statement
provides robust details about the company’s revenues, sales, expenses, and gains or losses in
various company activities or business sectors.
Based on the company’s consolidated statement of comprehensive income reported in the
company’s annual report, Amazon made tremendous in the 2020 and 2021 financial years. The
company’s net income in the two financial years stood at $21.331 billion and $33.364 billion,
respectively. However, the company made tremendous net losses during the 2020 financial year,
reporting a loss of $2.722 billion in its income statement. According to the company reports, it
made huge losses in the 2022 financial year due to its massive investment in the electric
automaker Rivian (Bose, 2023). Rivian value decreased during the 2022 operational year, thus
affecting Amazon’s revenues.
Cash Flow Statement
A cash flow statement is another important financial statement companies use to report
their financial performance over a period. It summarizes the company’s cash and cash
equivalents, including how well it generated cash (Wahlen et al., 2022). There are three main
essential components of a company’s cash flow statement. They include cash flow from
operating activities, cash flow from investing activities, and cash flow from financing activities.
Amazon reported its cash flows from different activities in its cash flow statement. The company
generated more revenues from operating activities based on the reported cash flows. For
example, in 2020, 2021, and 2022, the company’s cash flow from operating activities was
$38.514 billion, $66.064, and $46.327. It is evident that the company had more cash flow from
operations in 2021. However, in 2020, 2021, and 2022, the company’s net cash provided by or
used in investing activities were $(24.281), $(59.611), and $(58.154). The net cash used in
financing activities was $ (10. 066 billion), $(1.104 billion), and $6.291 billion.
References
Bose, A. (2023, February 3). Amazon loses $2.7 billion in 2022, reports first ‘unprofitable’ year
since 2014. Times Of India. https://timesofindia.indiatimes.com/gadgets-news/amazonloses-2-7-billion-in-2022-reports-first-unprofitable-year-since2014/articleshow/97573291.cms
Jackson, A. B. (2022). Financial statement analysis: a review and current issues. China Finance
Review International, 12(1), 1-19.
Wahlen, J. M., Baginski, S. P., & Bradshaw, M. (2022). Financial reporting, financial statement
analysis, and valuation. Cengage learning.
1
Unit 4 Course Project Financial Statement Analysis
Introduction
A global leader in technology and e-commerce by the name of Amazon.com, Inc., or
simply Amazon, has completely changed how consumers purchase online. Amazon, which Jeff
Bezos founded in 1994, has developed into one of the most valuable and significant businesses in
the world. Its broad range of goods and services, which include e-commerce, cloud computing,
digital streaming, have changed markets and consumer habits. To shed light on Amazon’s
financial health, growth trends, profitability, asset management, debt, liquidity, and cash flow,
this research paper will examine the company’s financial performance during the previous three
years.
Overview of Amazon’s Financial Statements (2020, 2021, 2022)
The paper will give a brief overview of Amazon’s most important financial data for the
last three years (2020, 2021, and 2022). These numbers are depicted in the following table (all
values are in billions of dollars).
Financial Metric
2020
2021
2022
Revenue
$280.52
$386.06
$481.19
Net Income
$11.59
$21.33
$15.83
Total Assets
$321.19
$430.78
$508.35
Total Liabilities
$180.42
$241.76
$278.57
Cash Flow from Ops
$30.45
$59.59
$45.89
Table 1: Financial statement overview
2
Revenue Growth Analysis
Amazon’s revenue has increased significantly during the past three years. The company’s
sales in 2020 were $280.52 billion, rising to $386.06 billion in 2021 and then to $481.19 billion
in 2022 (Borosky, 2020). This pattern demonstrates Amazon’s ongoing growth and capacity to
seize market share across a range of industries. The unrelenting growth of its e-commerce
activities, the rapid expansion of Amazon Web Services (AWS), and the rising number of
Amazon Prime subscribers are the main factors behind this income increase. The graph below
shows how Amazon’s revenue has increased:
Year
2020
2021
2022
Revenue
(in
billions
of USD)
$280.52
$386.06
$481.19
Revenue (in billions of USD)
Year 1
Year 2
Year 3
Table 2: Amazon’s revenue
Profitability Analysis
Investigating Amazon’s profitability measures yields interesting findings. Over the course
of the three years, the net profit margin—calculated as net income divided by revenue—has
changed. The net profit margin was 4.13% in 2020, increased to 5.52% in 2021, and then
3
decreased to 3.29% in 2022. Increased rivalry in the e-commerce and cloud computing
industries, as well as Amazon’s ongoing investments in growing its business through acquisitions
and infrastructure development, are factors influencing profitability. The alterations in profit
margins are seen in the chart below.
Year
Net
Profit
Margin
(%)
2020
2021
2022
4.13
5.52
3.29
Table 3: Alterations in Profit Margins
Asset Management Analysis
The asset turnover ratio, which indicates how well the company uses its assets to produce
income, can be used to evaluate Amazon’s asset management efficiency. Amazon’s asset
turnover ratio has consistently increased over the past three years. It was 0.875 in 2020; it rose to
0.897 in 2021 and then to 0.948 in 2022, suggesting improved asset usage efficiency. This
development shows that Amazon is using its resources more effectively to produce income and
increase shareholder value (Macrotrends, 2023). The asset turnover ratio is shown in the graph
below.
4
Year Asset
Turnover
Ratio
Year 0.875
1
Year 0.897
2
Year 0.948
3
Table 4: Asset Turnover Ratio
Debt and Liquidity Analysis
The amount of debt and Amazon’s liquidity both play important roles in determining how
stable its finances are (Narayanan, 2021). The debt-to-equity ratio, which calculates how much
debt there is compared to equity, has gradually increased over the past three years. The debt-toequity ratio was 0.561 in 2020; it rose to 0.574 in 2021 and 0.548 in 2022, respectively
(Macrotrends, 2023). This shows that Amazon’s debt to equity ratio has been gradually rising,
maybe to finance key projects. The company’s ability to fulfill its short-term obligations is
demonstrated by the current ratio, which has remained steady and robust throughout time.
Changes in the debt-to-equity ratio and current ratio are shown in the charts below.
5
Debt-to-Equity Ratio:
Year
Year 1
Year 2
Year 3
Debt-toEquity
Ratio
0.561
0.574
0.548
Debt-to-Equity Ratio
0.6
0.5
0.4
0.3
0.2
0.1
0
Year
Year 1
Series1
Table 5: debt-to-equity ratio
Current Ratio:
Year
Year
1
Year
2
Year
3
Current
Ratio
1.86
1.78
1.94
Table 6: Current Ratio
Year 2
Series2
Year 3
6
Cash Flow Analysis
Understanding Amazon’s operating, investing, and financing operations can be
accomplished through analyzing its cash flow statements. The following numbers for operating,
investment, and financing cash flow for the three years (all values are in billions of USD). The
examination of these financial flows reveals how much more money Amazon is investing in
technology and infrastructure, as well as its financing activities to support growth.
Cash Flow Category
Year 1
Year 2
Year 3
Cash Flow from Operations
$30.45
$59.59
$45.89
Investing Activities
($15.21)
($27.82)
($37.06)
Financing Activities
($10.36)
($25.92)
($8.53)
Table 7: Cash flow for the three years
Conclusion
In conclusion, the examination of Amazon’s financial performance during the last three
years sheds important light on the state and future of the company’s finances. Amazon’s sales and
asset management have demonstrated good growth despite changes in profitability. The debt-toequity ratio’s slight increase signals strategic expenditures, and Amazon is well-positioned to
cover its immediate obligations thanks to strong liquidity. Amazon has had tremendous
development because of its ongoing expansion and diversification activities, which include ecommerce, cloud computing, and digital services. However, the business also must deal with
difficulties like fierce rivalry and the requirement to keep a profit. According to the data,
Amazon is still a strong, growing business with room for expansion. Amazon needs to carefully
balance its investments for future growth if it wants to maintain its success, while maintaining
profitability and managing its debt levels effectively.
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References
Borosky MBA, P. (2020). Amazon. com 2019 Financial Statements and Financial Ratios
Analyzed. (n.p.): Independently Published.
MacroTrends, (2023). Amazon Financial Statements 2009-2023 | AMZN. Retrieved from:
https://www.macrotrends.net/stocks/charts/AMZN/amazon/financial-statements
Narayanan, D. H. (2021). Analysis of Financial Statements: (Theory and
Problems). (n.p.): Amazon Digital Services LLC – Kdp.
Unit 5: Course Project: Financial Ratio Analysis
Profitability
Profitability ratios are fiscal metrics used to gauge the capacity of the company to generate profit from
its operations. The main objective of for-profit companies is to generate revenues from its operations.
This profitability must be appraised against operating costs to ensure the company is profitable and can
produce more income from its operational activities. Most companies seek a higher profitability ratio,
which usually indicates that a company is performing well in the industry, generating more revenues,
profits, and cash flows. Amazon is a for-profit organization aiming to create high industry profit margins.
The most used profitability ratios to gauge the business’s profitability include the margin and the return
ratios (Akdemir & Şimşek, 2023). The margin ratio categories include ratios such as operating profit
margin, EBITDA, gross profit margin, net profit margin, and cash flow margin. The return ratios include
ratios such as the return on assets, return on equity, and return on invested capital.
Amazon profitability ratios
Return on Assets
Return on Equity
Table 1
2020
6.64
22.84
2021
7.93
24.13
2022
-0.59
-1.86
According to table 1, it is apparent that Amazon recorded tremendous performance in the 2020
and 2021 financial years by generating higher revenues in these financial years. The high return on asset
ratios recorded in 2020 and 2021 were ascribed to the company’s net profit margins in two financial
years. For instance, in 2020, the company’s net income was $21.3 billion, while in 2021, the company’s
net income grew to $33.4 billion. The growth in net income for the two financial years translated to
positive growth in ROA from 6.64 in 2020 to 7.93 in 2021. However, in the 2022 financial year, the
company recorded a net loss of $2.7 billion, translating to a negative ROA of -0.59. The poor
performance recorded in 2020 by the company was attributed to drastic cost-cutting measures and the
experimental projects that the company undertook in 2022. In 2022, Amazon paused grocery store
growth and cut 18,000 jobs. Part of the company’s loss in 2022 is attributed to its capital investment in
Rivian, an electric vehicle startup that continues to struggle with production delays and market
challenges. Likewise, the company’s ROE recorded continuous growth in the 2020 and 2021 financial
years. The company’s ROE grew from 22.84 to 24.13 in 2020 and 2021, respectively. However, the drastic
measures the company took to lay off about 18,000 employees and pause growth for its Amazon Go and
Amazon Fresh stores greatly affected the company’s net income relative to its stockholders’ equity.
Asset Utilization
The asset utilization ratios are financial metrics that measure the efficiency with which a company uses
its assets to generate sales revenue to reach sustainable profitability (Akdemir & Şimşek, 2023). Profitoriented companies such as Amazon desire higher asset utilization because higher asset utilization
translates to increased overall efficiency and profit margins. To better understand Amazon’s asset
utilization, analysis of two important asset utilization ratios: asset turnover ratios and inventory turnover
ratios.
Amazon asset utilization ratios
Asset Turnover Ratio
Inventory Turnover Ratio
2020
1.20
9.80
2021
1.12
8.34
2022
1.11
8.40
Asset turnover ratio measures the value of a firm’s sales or revenues in comparison with or
relative to its assets. It is an essential indicator of evaluating the effectiveness with which the firm uses
its assets to create revenue. A higher ratio indicates the company efficiently uses its assets to generate
revenue. From the table, it is evident that Amazon has a relatively good asset turnover ratio and is
effectively utilizing its assets to generate revenues. However, the company’s efficiency has diminished
relatively over the past three years, as indicated by diminishing ratios of 1.20 to 1.12 in 2020 and 2021.
The reduction in the company’s efficiency is further supported by the company’s reduction in revenues
over the same period. On the other hand, the inventory turnover ratio measures how efficiently the
company generates net sales from its fixed assets. As compared to its asset turnover ratio, the
company’s inventory turnover ratio has continued to diminish over the years, with the company
recording the lowest ratio in 2021 at 8.34. The reduction in the company’s inventory turnover and asset
turnover ratios has been attributed to its low-profit margins and high cost of goods sold in the respective
years (Al-Marzooqi & Nobanee, 2020).
Liquidity
Liquidity ratios evaluate a firm’s capacity to pay its debts as they become due. These ratios help evaluate
how quickly a firm can convert its assets and use them to meet its short-term liabilities (Al-Marzooqi &
Nobanee, 2020). A company that has the greater ratio finds it easier to use its assets to meet its shortterm debts. In this analysis, the focus will be on two essential ratios: current and quick ratios.
Amazon liquidity ratios
Current Ratio
Quick Ratio
2020
1.05
0.86
2021
1.34
0.91
2022
0.94
0.72
The Current ratio is a vital liquidity measure that estimates the ability of the organization to pay
back its short-term liabilities. Amazon has a current ratio of 1.05, 1.34, and 0.94 for the financial years
20202, 2021, and 2022. Although the company has continued to record a positive current ratio, its
performance is relatively below average since it has less than two times more current assets than current
liabilities to cover its debts. For example, in 2020, the company had a total current asset of $132.73
billion, while its current liabilities stood at $126.39 billion, meaning that its current assets are insufficient
to cover its current liabilities for at least two years of operation. The same was the case in 2021, where
the company recorded current assets of $161.58 billion and current liabilities of $142.27 billion. On the
other hand, Amazon has a quick ratio of 0.72 for the 2022 financial year, meaning that it is not able fully
pay its current liabilities. Over the past three years, the company’s ability to pay back its current liabilities
has degraded, with 2022 recording the lowest cash and cash equivalents. However, the company is still in
a position to strengthen its financial performance and ensure a better outstanding performance in its
ability to meet its short-term financial dues.
Debt Utilization
Amazon borrows billions to help meet its short-term and long-term financial needs. The debt utilization
ratio helps in analyzing the company’s total debt in relation to its total assets. This ratio also helps
understand the portion of a company’s assets financed by debt (Al-Marzooqi & Nobanee, 2020). A
greater than one ratio always indicates that a considerable portion of the company’s assets is financed
by debt and suggests that a company has more liabilities than assets. This analysis will focus on two
important debt utilization ratios: debt-to-equity and debt ratios.
Amazon debt utilization ratios
Debt/Equity Ratio
Debt Ratio
2020
0.34
0.25
2021
0.35
0.26
2022
0.46
0.32
Amazon has a debt-to-equity ratio of 0.46 for the 2022 financial year. However, this ratio has
continued to increase for the past three years, with 2020 and 2021 recording a debt-to-equity ratio of
0.34 and 0.35, respectively. Although this ratio has continued to grow over the years, Amazon has always
used a more significant portion of its equity to fund its assets. The company’s debts are relatively low, as
indicated by the low debt ratio recorded in 2020, 2021, and 2022 of 0.25, 0.26, and 0.32, respectively.
The company’s debt levels have grown over the past three years. For instance, in 2020, the company had
a total debt of $321.91 billion. The debt grew in 2021 to reach $420.55 billion. According to the
company’s annual reports, the debt level also grew in 2022 to reach a high of $462.68 billion.
References
Akdemir, D. M., & Şimşek, O. (2023). A Financial Performance Evaluation via Hybrid MCDM methods: A
case of Amazon. com Inc. Istanbul Business Research, 52(1), 199-232.
Al-Marzooqi, M. B., & Nobanee, H. (2020). Financial Analysis of Amazon. Available at SSRN 3647442.
Amazon financial ratios for analysis 2009-2023. (n.d.). Macrotrends.net. Retrieved September 18, 2023,
from https://www.macrotrends.net/stocks/charts/AMZN/amazon/financial-ratios
Unit 6: Course Project: Future Opportunity Assessment
Amazon has continuously focused on investing in growth opportunities, particularly innovative
technologies that aim to advance the company’s profitability. The company plans to invest $1 billion in a
venture investment program called the Amazon Industrial Innovation Fund (AIIF). This investment aims
to spur and support innovation in logistics, customer fulfillment, and supply chain. This investment is
also aimed to help improve customer and employee experience. As a technology company, Amazon
continues to invest in next-generation technologies in its operation. This new investment opportunity is
one of the ways that the company continues to invest in innovative technology environments to help
spur its competitiveness in the industry.
The Amazon Industrial Innovation Fund (AIIF) investment will focus on harnessing the power of
game-changing technologies in the industry, such as machine learning, robotics, artificial intelligence,
automation, and space technologies. This investment will bring new ideas across the rapidly advancing
domains. Over the next five years, the company will invest $1 billion to spur growth in innovative
technologies to empower companies to create and develop technologies in areas such as supply chain,
logistics, and customer fulfillment operations.
While this new investment opportunity is capital intensive, it is expected to boost the company’s
internal and external growth by enhancing customer and employee experience. This investment
opportunity will enable the company to incrementally increase delivery speed, improving the customer
and employee experience while working in warehouse and logistics. Although this is a long-term
investment opportunity that may take time to yield sustainable income for the company, with the
transformation technology continues to bring in organizations, Amazon will likely generate $500 million
in returns for the next five years.
Cash Ouflows
Cash Inflows
Net Cash Flows
Year 1
Year 2
Year 3
Year 4
Year 5
Total
$ (200,000,000.00) $(200,000,000.00) $ (200,000,000.00) $ (200,000,000.00) $ (200,000,000.00) $ (1,000,000,000.00)
0 $ 500,000,000.00 $ 500,000,000.00 $ 500,000,000.00 $ 500,000,000.00 $ 2,000,000,000.00
$ (200,000,000.00) $ 300,000,000.00 $ 300,000,000.00 $ 300,000,000.00 $ 300,000,000.00 $ 1,000,000,000.00
r=
CF
5%
$ (200,000,000.00)
r=
CF
PV Cash Outflows
Year
CF
PV Cash Inflows
Year
1
2
3
4
5
PV Factor
PVCF
($200,000,000)
0.952380952 ($190,476,190.48)
($200,000,000)
0.907029478 ($181,405,895.69)
($200,000,000)
0.863837599 ($172,767,519.71)
($200,000,000)
0.822702475 ($164,540,494.96)
($200,000,000)
0.783526166 ($156,705,233.29)
($865,895,334.13)
PV inflows
PV Outflows
Net Impact
$ 1,688,547,859.12
($865,895,334.13)
$ 822,652,525.00
$
5%
500,000,000.00
CF
1
2 $
3 $
4 $
5 $
PV Factor
0
500,000,000.00
500,000,000.00
500,000,000.00
500,000,000.00
PVCF
0.952380952 $
0.907029478 $
0.863837599 $
0.822702475 $
0.783526166 $
453,514,739.23
431,918,799.27
411,351,237.40
391,763,083.23
$ 1,688,547,859.12
References
Day, M. (2023). Introducing the $1 billion Amazon Industrial Innovation Fund. Retrieved September 24,
2023, from Bloomberg.com website: https://www.bloomberg.com/news/articles/2022-04-21/amazonto-invest-1-billion-in-logistics-robotics-companies