1)What is Amazon.com?What is Amazon.com? 2)What does Amazon sell?What does Amazon sell? Main...
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Transcript of 1)What is Amazon.com?What is Amazon.com? 2)What does Amazon sell?What does Amazon sell? Main...
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1) What is Amazon.com?
2) What does Amazon sell?
• Main categories of products
• How products appears in the financial statements
• Products’ sales
3) The first years of sales
4) Is Amazon in a good financial position?
• Financial statements
• Liquidity
• Long-term credit risk
• Profitability
• Current market price5) Future prospects
Index
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What is Amazon.com?
• Amazon is an American company specialized in e-commerce. Its headquarter is in Seattle, and it was founded in 1994 by Jeffrey Bezos.
Index
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What does Amazon sell?
Amazon was born as a bookstore, but today it sells everything.
Index
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Main categories of products
• Instant Videos• MP3s & Cloud
Player• Kindle E-readers• Movies, Music &
Games• Books & Audible• Digital Games &
Software
• Electronics & Computers
• Home, Garden & Tools• Beauty, Health &
Grocery• Toys, Kids & Baby• Clothing, Shoes &
Jewelry• Sports & Outdoors• Automotive &
IndustrialIndex
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In the financial statements the products are divided in three main categories:
• Media• Electronics and other general merchandise
• Other
Index
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20122011
2010
0
5000
10000
15000
20000
25000
30000
35000
40000
MediaElectronics and other general merchandiseOther
Index
Products Net Sales
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The first years of sales• Amazon's initial business plan was unusual; it
did not expect to make a profit for four to five years. In fact, the first years of sales were characterized by a slow growth of the profits.
Index
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Index
1997 1998 1999 2000 2001 2002
-1000
0
1000
2000
3000
4000
5000
Net Sales Net income
Net Sales and Net income from 1997 to 2002
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Is Amazon in a good financial position?
• In order to have detailed view of the financial situation of the company it is necessary to analyze its financial statements and provide key financial analysis ratios.
Income statementBalance sheet
Index
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Index
Measures of liquidity
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Index
Measures of liquidity
2012 2011
Current Assets $21,296 $17,490
Current Liabilities 19,002 14,896
Current ratio 1.12 : 1 1.17 : 1
• the capability of paying short-term debts slightly decreased• the company’s current assets are 1.12 times its current liabilities
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Index
Measures of liquidity
2012 2011
Current Assets $21,296 $17,490
Less: Current Liabilities 19,002 14,896
Working capital $2,294 $2,594
• the amount of money available to satisfy current liabilities is going down.
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Index
Measures of liquidity
2012 2011
Net cash provided by operating activities $4,180 $3,903
• The net cash provided by operating activities increased from 2011 to 2012 by $277, which is a positive change.
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Measures of long-term credit risk
Index
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Measures of long-term credit risk
Index
2012 2011
Total liabilities:
Long-term debt $3,084 $255
Other long-term liabilities 2,277 $2,370
Total current liabilities 19,002 24,363 $14,896 17,521
Total assets 32,555 25,278
Debt ratio 74.84% 69.31%
• This trend is not favorable, since a high debt ratio means a low margin of protection to creditors against shrinkage of assets.
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Measures of long-term credit risk
Index
2012 2011
Operating income $676 $862
Annual interest expense 92 65
Interest coverage ratio 7.35 times 13.26 times
• the interest coverage of both years was strong, since it was far above 2.0.
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Measures of profitability
Index
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Measures of profitability
Index
2012 2011
Gross profit $ 15,122 $ 10,789
Net Sales 61,093 48,077
Gross profit rate 24.75% 22.44%
• These rates are satisfactory and the increase between 2011 and 2012 can be considered positive, as it means the demand for the company’s products is increasing.
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Measures of profitability
Index
2012 2011
Operating expenses $ 60,417 $ 47,215
Net sales 61,093 48,077
Operating expense ratio 98.89% 98.21%
• an operating expense ratio of 98% is not favorable, since it is excessively high.
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Measures of profitability
Index
2012 2011
Gross profit $ 15,122 $ 10,789
Less: Operating expenses 14,446 9,927
Operating income 676 862
• the profitability of the company’s basic business operations in 2011 amounted to $862, while in 2012 it decreased reaching the amount of $676.
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Current market value
Index
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Current market value
Index
2012 2011
Stock price $ 243.75 $ 173.36
• Amazon’s market value increased from $173.36 to $243.75. Therefore, the company experienced a favorable trend.
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Current market value
Index
2012 2011
Current stock price $ 243.75 $ 173.36
Earnings per share $ (0.09) $ 1.39
Price earnings ratio (2708.3) 124.5
• investors’ expectations concerning the performance of the company are not positive.
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Current market value
Index
2012 2011
Common stockholders' equity $8,192 $7,757
Shares of commonstock outstanding 453 453
Book value per share 18.08 17.12
• The book value per share in 2011 was $17.12, and in 2012 was $18.8 . Therefore, it increased generating a favorable trend.
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Future prospects
Index
Although Amazon experienced a huge decrease in net income in 2012, the company is not in a bad financial position Because there is a continuous increase in net sales.
Increase or decrease
2012 over 2011 2011 over 2010
Year 2012 Year 2011 Year 2010 Amount % Amount %
Net Sales $ 61,093.00 $ 48,077.00 $ 34,204.00 $ 13,016.00 27.07% $ 13,873.00 40.56%
Net Income $ -39.00 $ 631.00 $ 1,152.00 $ -670.00 -106.18% $ -521.00 -45.23%
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Net sales and profits from 2003 to 2012
Index
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
-10000
0
10000
20000
30000
40000
50000
60000
70000
Net SalesNet income
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Future prospects
If this trend will continue, and the costs will be reduced, the company will become extremely strong, and the net income will restart to increase. Therefore, the unfavorable trend of the net income will be reversed.
Index