Financial Statement Analysis of Amazon.Com Essay

Our company will plan to finance our strategy principally through issuing stock and cash flows from operating activities generated from the company’s normal business functions. It is undesirable for our strategy to issue debt because we would like to stay away from interest payments. Our company anticipates our debt to equity leverage ratio to be around 0.5.

In this paper I intend to provide a sound financial analysis of Tesla Motors Incorporated. I will do so by calculating and providing liquidity, profitability, and solvency ratios and then evaluating those results. Assessment of these ratios will more or less define Tesla Motors’ abilities to meet its short-term debts and obligations (liquidity), performance in relation to sales, assets, and profits or losses (profitability), and the resulting income amount, after tax deductions, against the company’s liabilities (solvency). Additionally I will compare

Financial ratios are important in assessing the two companies’ performances. Referring to Exhibit A and B, we see that Sears relied heavily on debt financing. Although its 1997 ROE was high, it had a 300 days cash conversion cycle and a slow A/R turnover ratio. After evaluating various ratios, we concluded that the driving force behind Sears’ profitability was its proprietary card business. For a retailer, a strategy of using flexible payment options to boost sales is not a viable long term solution. The slow A/R turnover and negative operating cash flow cause concerns. On the other hand, Wal-Mart had a quick cash conversion cycle of 91 days, and a working capital turnover of 24/yr (vs.10/yr for Sears). These ratios represent a retail company with sound fundamental strategies, as well as the implementation and execution of those strategies. The financial ratios gave us insights into the companies’ operating and financing strategies, putting the two companies’ annual results into

In addition, as we are comparing the profit margin and operating profit margin, we notice that interest expense, from 2006 to 2010, consumed a relative small portion of sales proceeds comparing to 2011. In 2011, the profit margin for HH is -1.46% and the operating profit margin for HH is -0.74%. Since profit margin includes interest expense in the calculation while operating profit margin does not, we can conclude that HH has about the same amount in interest expense as the amount of operating loss before interest. This finally doubles the amount of company’s loss at the end of the cycle. This big amount of interest expense leads us to study HH’s leverage ratios.

The purpose of this paper is to advise analyze the financial statements of Dillard’s, Inc. in order to recommend whether or not my client should invest $1 million in the large retail company. I will compare the financial statements of Dillard’s, Inc. its competitor, Kohl’s Corporation. Investing in retail can be risky because a retail company’s performance is very heavily influenced by factors that have nothing to do with the actual company such as the overall performance of the economy or the weather during the holiday shopping season. There is, however, potential for profitability within the retail sector. Based on my analysis, I recommend that the client should not invest in Dillard’s, Inc. for the following reasons. First, Dillard’s has experience a decline in net income in the last three years. Second, liquidity ratios indicate that they could face possible liquidity constraints in the future. Third, long-term debt paying ability ratios indicate that the company could have trouble paying off the principal of its current debt obligations. Fourth, the profitability ratios are well below industry averages, suggesting that there are more profitable companies to invest in within the industry. And finally, Investor analysis ratios provide mixed opinion of the future performance of the company. I conclude that retail can be a profitable industry to invest in if an investor has the risk tolerance and risk capacity to withstand the uncertainty, but neither Dillard’s

In conclusion, financial statements of Dollar General present the increase in company’s profitability and sales over the last two years, they reduced their expenses as well. The only information that the statements do not disclose is which brands of merchandise increased their sales, and what was the cost of goods sold compared to the profit they made. Since the company was concerned about promotion of their private brand it would be helpful to know what percent of sales does their private brand make comparison to other brands. Nevertheless, the long-term liquidity risk does not look as safe. The company will have to show the stability in its ratios overtime to insure investors that it has low risk and is able to repay its debt in a long run as well as maintain stable

Aside from the two aforementioned proposals the company can raise its leverage in other ways. By conducting DuPont analysis and understanding operating leverage we see that purchasing fixed assets and decreasing stockholder’s equity will raise the equity multiplier and the firm’s operating leverage. In this instance we recommend against this approach as the firm already has a large amount of excess cash above what they require to fund new positive NPV projects and purchase new assets. Investors would rather see their capital returned to them in the form of share repurchases and dividends as it is evident by the company’s cash stockpile that they can

Amazon.com and Overstock.com are the two companies that will be researched in detail. Their financials will be comb through and synopsis of their financial status will be developed. These two companies are within the same industry of selling discounted products online. This is a tough industry to do well in and competition is tough. The e-commerce marketplace is intensely and savagely competitive. Their financials tell the story and show how lean and mean these companies must run. This paper is going to touch on briefly on each company, what they do, where they are financially, ratios between the two and their industry, and look at their cashflow.

Again, we start with the income statement, where total sales is the denominator in the vertical analysis computation. The first thing you will see is that while Amazon credits three quarters of their total sales to product sales, the service sales category rose nearly eight percent as a portion of total sales over the last three years. To the credit of Amazon, they succeeded in reducing the portion of sales eaten into by expenses from 99% to just under 98%, with the cost of sales decreasing at the greatest rate (among operating expenses). Turning our attention to the balance sheet, total assets (necessarily equal to total liability plus stockholders equity) acts as our denominator for the analysis. We note that current assets make up just over half of the majority of total assets while plant property and equipment still stands out as a momentous portion of Amazon’s worth. Concurrently, while the company’s short-term liabilities have shrunk as a percentage of total assets, their long-term liabilities shot up from 7.95% to 12.58% of total assets. Given an increased reliance on long-term debt, corporate accountants must pay close attention to when the debt will mature to ensure that Amazon can anticipate that expense and address it appropriately. Thanks to vertical analysis, this

The current degree of leverage at Harvey Norman marks a return to the leverage of 2008. The 2011 Annual Report reveals a number of different reasons for this increase in leverage. The first is that total liabilities borrowings increased by $150 million. This increase comes primarily from an increase in long-term interest-bearing loans and borrowings, which increased $200 million in the last fiscal year. Other changes in the net borrowings derived from bank overdraft, commercial bills, derivatives payable, lease liabilities, and non-trade amounts owing to directors, related parties and unrelated persons (2011 Annual Report, p.114).

Liquidity represents a company’s ability to pay its short-term obligations. In the following schedule is the calculation of the ratios that are indicators of the liquidity position of a company.

The company’s debt ratios are 54.5% in 1988, 58.69% in 1989, 62.7% in 1990, and 67.37% in 1991. What this means is that the company is increasing its financial risk by taking on more leverage. The company has been taking an extensive amount of purchasing over the past couple of years, which could be the reason as to why net income has not grown much beyond several thousands of dollars. One could argue that the company is trying to expand its inventory to help accumulate future sales. But another problem is that the company’s

The answer will be 1 .34 . this is a good sign that the company will be able to pay its obligations when they fall due . Based on both current ratios above , Sears company has a better current ratio at 1 .94 when compared with the current ratio of Walmart of only 1 .34 .B Sears Acid Test ratio Quick Assets 20201 1 .279354 Current Liabilities 15790 The quick assets are arrived at by adding the cash , cash equivalents ,receivables and marketable securities . The quick ratio is arrived at dividing the quick assets for the year 2007 of 20 ,201 . The quick ratio is 1 .28 times .Walmart Acid Test ratio Quick Assets 2423 0 .167566 Current Liabilities 14460 The quick ratio here is arrived at by dividing the quick assets of 2 ,423 for the year 2007 by the current liabilities amounting to 14 ,460 for the same year . The acid test ratio or quick ratio is .17 Based on the above data , Sears has a better quick ratio with its higher rate of 1 .28 as compared to the quick ratio or acid test ratio of Walmart at only .17 .C SOLVENCY LEVERAGE RATIOS Ability to pay long term obligations Sears 38700 The ratio of .85 . This shows that the company will be able to pay its obligations when the time of payment arrives .Walmart 45384 The Walmart will be able to pay its obligations when they

Founder and CEO Jeff Bezos opened the virtual doors of Amazon.com's online store in July 1995. The company was incorporated in 1994 in the state of Washington and reincorporated in 1996 in Delaware. The Company's principal corporate offices are located in Seattle, Washington. Amazon.com completed its initial public offering in May 1997, and its common stock is listed on the NASDAQ National Market under the ticker symbol AMZN. Amazon.com's fiscal year is based on the calendar year, and the last day of the fiscal year is December 31. The closing stock selling price for February 1, 2006 was $43.98. Amazon has never declared or paid cash dividends on its common

It seems then that companies should fully leverage the company or a least come close to doing so but there is a probability that the company enters financial distress as its leverage (D/E) increases. Financial distress can be very costly for companies, and the cost for this scenario is shown in the current market value of the levered firm's securities. Investors factor the potential for future distress into their assessment of the present value (this is where PV of distress costs is subtracted from un-levered company value and the PV of the tax-shield.) The value for the costs