Amazon Financial Final P

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Southern New Hampshire University *

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CORPORATE

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Finance

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Feb 20, 2024

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Amazon Financial statement analysis Addriann Huie Southern New Hampshire University Dr. Weiss February 8, 2023
Executive Summary  Amazon has become a dominant force in the e-commerce marketplace and exists in over 50 countries worldwide. There are hundreds of Amazon warehouses in other countries worldwide, with Amazon goods waiting to be shipped. It is estimated that approximately 2.7 billion people shop on Amazon. It is reported that shoppers have largely upped their shopping on Amazon in recent years due to the pandemic.     Amazon is one of the biggest retailers of food, e-Commerce, electronics, and clothing retailers, Home and Garden, and shoes to name a few. In this market of e-commerce division, some of Amazon's competitors are Target, Walmart, Home improvement stores, Clothing retailers, and Grocery stores, as well as many others.  However, recent trends show that Amazon has lost momentum due to more people wanting to shop in-store after being home for so long. Another factor that is starting to affect amazon is inflation. People need more room in their budget for luxury or random purchases as they once did, showing a slower revenue stream than in previous quarters on their financial statements.   As we analyze Amazon's financial statements, we should keep these factors that are taking place in the economy in mind. Because of this, the financial statements are limited in showing these changes in the economy. A financial statement can give the investor or analyst an idea of the past and the present and can help to project what the company will do in the future. Using these statements can determine if the company has enough liquidity, how efficiently it manages its cash, and what its assets and liabilities are. Amazon has shown that it is a safe stock for investors due to its substantial returns. Analysis Approach  In starting the analysis of this company, the first breakdown was vertical and horizontal analysis. Horizontal analysis can help you compare a company's current financial status to its past, while vertical analysis can help you compare one company's financial status to another. After this, we looked at the company's ratio, and equity helps to build a better financial picture. Finally, we can look
at the company's liquidity. A company needs to be able to pay any loans that come with dew. Knowing the company's liquidity and ratio will help you project if they can pay these if they come due.  Key Ratios  Evaluating a company's assets can help an individual or company decide. These decisions can be made based on the company's financial data. One would need to look at the company's financial statements for this information. To know how the company is doing, finding specific ratios will help you determine the health of the company. Factoring in components such as debt, liquidity, profitability, and cash flow will help answer several questions for investors. This information will be based on past and present financial statements (balance, cash flow, and income).  A company needs to make a profit to continue running. Having profit ensures they can pay their debt as the debt comes due. Profitability evaluates how a company can generate revenue beyond its expenses. Financial analysts use specific ratios to determine how the company's profits are doing. They use profit margin, return on asset, and return on equity to look at the percentages and determine if the company should make changes or if you should invest. Amazon's profit ratios for the past three years have all been positive and growing. If the trend stays the same, it will continue to rise. Liquidity shows the company's ability to pay its debt. The higher the ratio, the larger the safety net the company must cover its short-term debt. Under liquidity, you calculate the current ratio and quick ratio. Amazon's current ratio is over a one, but its quick ratio is at 0.91, showing that it may not have enough liquidity to pay off its debt if the short-term liabilities come due.  As of 2021, amazon was 48,744,000 in debt. This is a 52% percent increase from 2020, when they only had 31,816,000 in debt, a 36% increase from the year before. This show that Amazon has more than doubled its debt from 2019, when it sat 23,414,000. Long-term debt equity tells the analyst how much loans finance a company's assets. To calculate, divide long-term by equity, giving Amazon 0.35.
This means that amazons EBIT can cover its payments. Amazon's total equity is also the same. However, Amazon's interest coverage has increased over the years, having a significant range from 6 to 18%. I would change management procedures to slow down the amount of debt the company is taking on. As amazon operates, it must determine its asset turnover to determine the ratio to how fast the company assets are turning over and how they are distributing its resources. Amazon's asset turnover ratio is 1.2, which is lower than its previous years on average. But because the ratio is over one, we know the company can bring in revenue. Because Amazon is an e-commerce company, Cathey must follow the demand of what people need. Their inventory turnover rate is right within industry standard guidelines.   Cash flow ratios isolate how cash flow is used to increase or generate income and profit for the company. However, Amazon does not pay out a dividend, so this ratio isn't used for the company. Amazon chooses to use this cash to invest back into the company. Price book value looks at a company's stock price. Some investors will use this to determine if the company's stock is accurately valued. If the stock price is in the range, it shows that it is valued in line with the company price. Amazon's book value is above what the industry views as favorable. I would wait to purchase this stock as the stock price continues to fall. Amazon's price-to-sales ratio is above one, which shows that the industry is willing to pay. However, this ratio doesn't show whether the company has made or will ever profit. Vertical and Horizontal Analysis As an analyst, you must review the financial statements of the company. In this deep dive, we will primarily review the balance and income statements. The income statement shows the company, analyst, shareholder, or everyday investor at home what the company has brought and what they spent. By looking at the revenue expenses and the business's profitability, you can break down the profit and
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