Amazon.com, Inc. (AMZN) is one of the largest Internet retailers in the world. Best Buy Co., Inc. (BBY) is a leading retailer of consumer electronics and media products in the United States, while Wal-Mart Stores, Inc. (WMT) is the leading retailer in the United States. Amazon, Best Buy, and Wal-Mart compete in similar markets. Best Buy and Wal-Mart sell through both traditional retail stores and the Internet, while Amazon sells only through the internet. Sales and cash flow information from recent annual reports for all three companies is as follows (in millions): Amazon Best Buy Wal-Mart Sales $135,987 $39,403 $485,873 Cash flows from operating activities 16,443 2,545 31,530 Purchases of property, plant, and equipment (6,737) (582) (10,619) a. Determine the free cash flow for all three companies.
Analyze and compare Amazon.com, Best Buy, and Wal-Mart
Amazon.com, Inc. (AMZN) is one of the largest Internet retailers in the world. Best Buy Co., Inc. (BBY) is a leading retailer of consumer electronics and media products in the United States, while Wal-Mart Stores, Inc. (WMT) is the leading retailer in the United States. Amazon, Best Buy, and Wal-Mart compete in similar markets. Best Buy and Wal-Mart sell through both traditional retail stores and the Internet, while Amazon sells only through the internet. Sales and cash flow information from recent annual reports for all three companies is as follows (in millions):
| Amazon | Best Buy | Wal-Mart | |
| Sales | $135,987 | $39,403 | $485,873 |
| Cash flows from operating activities | 16,443 | 2,545 | 31,530 |
| Purchases of property, plant, and equipment | (6,737) | (582) | (10,619) |
a. Determine the
Amazon:
Best Buy:
Wal-Mart:
b. Compute the ratio of free cash flow to sales for all three companies. Round percentages to one decimal place.
Amazon:
Best Buy:
Wal-Mart:
c. How does Amazon compare to the other two companies with respect to generating free cash flow?
1. Amazon’s free cash flow is higher than Best Buy’s but lower than Wal-Mart’s. However, these companies vary greatly in size. Thus, a relative measure that can be used to compare free cash flow across the three companies is the ratio of free cash flow to sales. Using this measure, it can be seen that Amazon is stronger at generating free cash flow from sales than are Best Buy and Wal-Mart.
2. Amazon’s free cash flow is higher than that of Best Buy and Wal-Mart. However, these companies vary greatly in size. Thus, a relative measure that can be used to compare free cash flow across the three companies is the ratio of free cash flow to sales. Using this measure, it can be seen that Amazon is weaker at generating free cash flow from sales than are Best Buy and Wal-Mart.
3. Amazon’s free cash flow is higher than that of Best Buy and Wal-Mart. However, these companies vary greatly in size. Thus, a relative measure that can be used to compare free cash flow across the three companies is the ratio of free cash flow to sales. Using this measure, it can be seen that Amazon is stronger at generating free cash flow from sales than are Best Buy and Wal-Mart.
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