Financial Statement Analysis of Amazon.Com Essay

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Financial Statement Analysis of Amazon.com, Inc.
Introduction
The purpose of this essay is to perform financial statement analysis on Amazon.com, Inc. (NASDAQ: AMZN ). We start with an introduction of Amazon and its industry. We then evaluate the company’s financial position, liquidity, operating capability and financial flexibility using different ratios. To evaluate the financial performance of Amazon.com, Inc we disclose recurring NICO and do full ROE disaggregation.

Amazon.com’s stock price increased from $44.29 per share at the end of fiscal year 2004 to $134.52 per share at the end of fiscal year 2009. Earnings per share increased from $0.63 to $2.06. The stock closed at $118.87 on 02/01/2010.

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Amazon.com is
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The three liquidity ratios show Amazon has very good liquidity, which means it could easily satisfy current liabilities with current assets. Comparing to Amazon, Ebay is even more liquid as it could satisfy its short term liabilities purely by cash and cash equivalents. | | Amazon.com | | | eBay | | | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2009 | 2008 | Current Ratio (to one) | 1.33 | 1.30 | 1.39 | 1.33 | 1.52 | 1.57 | 2.32 | 1.70 | Quick Ratio (to one) | 1.04 | 1.00 | 1.07 | 0.99 | 1.22 | 1.27 | 2.32 | 1.70 | Cash Ratio (Acid Ratio) (to one) | 0.86 | 0.79 | 0.84 | 0.80 | 1.04 | 1.10 | 1.10 | 0.86 | | | Table 2 | | | | | |

Financial Flexibility

Financial flexibility (Solvency and leverage) is a company’s ability to adapt to unforeseen events and opportunities. Leverage means using debt (or other third party funds) to increase earnings for the owners. Table 3 presents some financial flexibility and leverage ratios of Amazon.com from 2005 to 2009 and for Ebay from 2008 to 2009. Amazon.com is a fast growing company and in the fiscal year ended 2004, they had a negative total equity, which could skew the ratios. Therefore, we did not present the ratios in 2004.

From table 3 we can see that at the end of fiscal year 2009, both Amazon.com and eBay have high financial flexibility due to low or even zero long-term debt. Their usages of leverages are both low. Although a company should try to use
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