Financial Performance of Amazon
Principles of Finance
Financial Performance of Amazon
Amazon.com, Inc. is an e-commerce company that gives their consumers the ability to sale and purchase goods using the internet. Since its startup in 1994, Amazon’s financials have significantly increased. As stated by Hickman, Byrd, & McPherson, 2013, “The income statement shows a company’s revenues and profits over some time period, usually a year or a quarter.” With the help of the horizontal analysis, we can show that Amazon’s revenue for the company demonstrates their level of achievement.
According to Mergent Online Amazon’s Revenue up until 2019 was $280,522,000, and the Net Income was $11,588,000. Their net Income has grown by 232% in 2018 (over 2017) and by 282% in 2019 (over 2017). The rate of growth of net income in 2019 over 2018 is 15%. In addition, revenue has grown by 30.9% in 2018 (over 2017) and by 57.7% in 2019 (over 2017). The growth rate of revenue in 2019 over 2018 is 20.45%. Net income has grown significantly higher in percentage as compared to growth in revenue. Further analysis shows Cost of Goods Sold (COGS) incl. D&A has grown by much lesser percentage as compared to percent growth in revenue. This indicates better management of the cost of goods sold within Amazon. In addition, after further analyzing the income statement, there were no negative trends to observe.
Balance sheet review
The balance sheet is what shows where a company’s financial business is at a point in time. (Hickman, Byrd, & McPherson, 2013). Within the balance sheet there are three important categories of items; assets, liabilities, and equity. Below you can see Amazon’s balance statement for the years 2017, 2018, and 2019. According to the balance sheet, the current assets have grown a total of 24.8% from 2017 to 2018, and 60% from 2017 to 2019, so current assets have increased and in line with the sales increase of 232%.
Current liabilities have increased but by very little, from 2018 at $68,391,000 to 2019 at $87,812,000. This has caused the current ratio to stay at low rates and allowed for amazon to have the ability to pay their short-term obligations or those due within one year. Current ratio has improved and maintained from 2018 to 2019. In addition, I found a negative trend within asset growth. Asset growth increased from 2018 to 2019 by 38.49% which is why the asset turnover is reduced from 1.58 in 2018 to 1.45 in 2019. This negative trend indicates that Amazon does not have the ability to use its assets to increase revenue but not by much. Within Amazon’s liabilities I also discovered that they had long-term debt increase from 2017 to 2019 by 66.7%. It shows Amazon took out a long-term loan in 2019 for $25,279,000. They have taken a long-term loan and invested it into a short-term investment and increased their cash balance but with this it caused long-term debt equity to increase from .91 in 2018 to 1.02 in 2019.
Cash Flow Statement
Cash flow statements provide a look at how change within Amazon’s balance sheet and income statements affect cash and cash equivalents, and breaks down operating, investing and finance activities of their company. Operating activities include depreciation and changes in working capital. Investing activities will include buying and selling of equipment such as machinery or facilities, securities investments, and returns from investments in securities. (Hickman, Byrd, & McPherson, 2013). Finance activities include paying dividends to shareholders, repurchasing or issuing stock, and borrowing and paying loans.
Amazon’s net cash within operating activities has increased from $18,365,000 in 2017 to $30,723,000 in 2018 and from 2018 to $38,514,000 in 2019, this is a 109.7% increase from 2017. In addition their net cash in investing activites increased from 2017 to 2018, with a slight decrease from 2018 to 2019.
Amazon’s overall performance is very strong. It surpassed my assumptions of the company and what they are capable of. Amazon is in a very strong financial position; they can keep their focus on customers and better cash flow but what they are currently doing is working well for them. They remain at the top of all their competitors.
Amazon Revenue 2006-2019: AMZN. (n.d.). Retrieved from https://www.macrotrends.net/stocks/charts/AMZN/amazon/revenue
Amazon.com Inc (NMS: AMZN). (n.d.). Retrieved from https://www-mergentonline-com.proxy-library.ashford.edu/companydetail.php?compnumber=91098&pagetype=synopsis
Dybek, M. (2020, February 1). Amazon.com Inc. (AMZN): Income Statement. Retrieved from https://www.stock-analysis-on.net/NASDAQ/Company/Amazoncom-Inc/Financial-Statement/Income-Statement
Hickman, K. A., Byrd, J. W., & McPherson, M. (2013). Essentials of finance. Retrieved from https://content.ashford.edu/
Journal, W. S. (n.d.). AMZN | Amazon.com Inc. Annual Income Statement – WSJ. Retrieved from https://www.wsj.com/market-data/quotes/AMZN/financials/annual/income-statement