Case 4: Amazon.com The incredible growth of Amazon.com has put fear into the hearts of traditional retailers. Amazon's stock price has soared to amazing levels. However, it is often pointed out in the financial press that it took the company several years to report its first profit. The following financial information is taken from a recent annual report. ($ in millions) Current Year $ 31,327 54,505 Prior Year $ 24,625 Current assets Total assets 40,159 Current liabilities 28,089 22,980 Total liabilities 43,764 30,413 Cash provided by operations 6,842 5,475 Capital expenditures 4,893 3,444 Dividends paid 274 Net income (loss) Sales 88,988 74,452 Instructions a. Calculate free cash flow for Amazon for the current and prior years, and discuss its ability to finance expansion from internally generated cash. At one time, Amazon had avoided purchasing large warehouses. Instead, it used those of others. It is possible, however, that in order to increase customer satisfaction the company could build its own warehouses. How might your impression of its ability to finance expansion change? b. Discuss any potential implications of the change in Amazon's cash provided by operations from the prior year to the current year. (241)

Case 4: Amazon.com The incredible growth of Amazon.com has put fear into the hearts of traditional retailers. Amazon's stock price has soared to amazing levels. However, it is often pointed out in the financial press that it took the company several years to report its first profit. The following financial information is taken from a recent annual report. ($ in millions) Current Year $ 31,327 54,505 Prior Year $ 24,625 Current assets Total assets 40,159 Current liabilities 28,089 22,980 Total liabilities 43,764 30,413 Cash provided by operations 6,842 5,475 Capital expenditures 4,893 3,444 Dividends paid 274 Net income (loss) Sales 88,988 74,452 Instructions a. Calculate free cash flow for Amazon for the current and prior years, and discuss its ability to finance expansion from internally generated cash. At one time, Amazon had avoided purchasing large warehouses. Instead, it used those of others. It is possible, however, that in order to increase customer satisfaction the company could build its own warehouses. How might your impression of its ability to finance expansion change? b. Discuss any potential implications of the change in Amazon's cash provided by operations from the prior year to the current year. (241)

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter13: Statement Of Cash Flows

Section: Chapter Questions

Problem 3MAD

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