Vertical analysis Amazon.com, Inc. is the largest Internet retailer in the United States. Amazon’s income statements through income from operations for two recent years are as follows (in millions): Amazon.com, Inc. Operating Income Statements For the Years Ended December 31 (in millions) Year 2 Year 1 Product sales $70,080 $60,903 Service sales 18,908 13,549 Total sales $88,988 $74,452 Cost of sales $62,752 $54,181 Fulfillment 10,766 8,585 Marketing 4,332 3,133 Technology and content 9,275 6,565 General and administrative 1,552 1,129 Other operating expense (income), net 133 114 Total operating expenses $88,810 $73,707 Income from operations $178 $745 Required: a. Prepare a vertical analysis of the two operating income statements. Round percentages to one decimal place.
Vertical analysis
Amazon.com, Inc. is the largest Internet retailer in the United States. Amazon’s income statements through income from operations for two recent years are as follows (in millions):
| Amazon.com, Inc. | ||
| Operating Income Statements | ||
| For the Years Ended December 31 | ||
| (in millions) | ||
| Year 2 | Year 1 | |
| Product sales | $70,080 | $60,903 |
| Service sales | 18,908 | 13,549 |
| Total sales | $88,988 | $74,452 |
| Cost of sales | $62,752 | $54,181 |
| Fulfillment | 10,766 | 8,585 |
| Marketing | 4,332 | 3,133 |
| Technology and content | 9,275 | 6,565 |
| General and administrative | 1,552 | 1,129 |
| Other operating expense (income), net | 133 | 114 |
| Total operating expenses | $88,810 | $73,707 |
| Income from operations | $178 | $745 |
Required:
a. Prepare a vertical analysis of the two operating income statements. Round percentages to one decimal place.
Income statement: It is one of the financial statements prepared by an organization. This statement shows the revenues earned and expenses incurred during a period and thereby shows the profit or loss for the period.
Vertical analysis: It is analysis of financial statements where in each line item is shown as a percentage of items taken as a base. On the income statement all the line items are shown as percentage of sales. On the balance sheet, the line items are shown as a percentage of total assets or total liabilities. On the cash flow statement, the cash inflows or cash outflows are shown as a percentage of cash inflows.
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