|Type of paper:||Essay|
|Categories:||Amazon Financial management|
Amazon is a multinational firm that offers online retail shopping services. Amazon provides good and services in three segments, namely; North American, Amazon Web Services (AWS) and International segments. The corporation sells everything from sportswear, books, tennis rackets, electronics, food, kid's toys, jewel gems, and gold-silver. Amazon was among the initial firms to sell its products using an online platform, which remains to be its main source of revenue (Brigham, 2019). The company's services entail publishing, fulfillment, database provision, co-branded credit cards, online content subscriptions, and advertisements. It permits clients to access their merchandise directly via mobile applications and website.
The AWS provides reliable, inexpensive and scalable cloud computing services. The North American segment largely consists of customer merchandises on a retail level. The international section provides product and services across the world (Milnes, 2019). Amazon Global ships millions of merchandise to more than 100 nations worldwide. The organization and management of the company affect bookkeeping and monetary information and the resolutions made (Brigham, 2019). The company ensures that the product groups, geographic region, and functions are properly managed to achieve the intended profits. This way, the company can maintain its financial statements and continue with its operations.
Recent Financial Performance
Amazon.com Inc. has been doing quite well in online commerce. The key basis of revenue for Amazon.com is the sale of its products and services to clienteles. According to NASDAQ (2019), the total revenue was $135 billion in 2016, $177billion in 2017 and $232 billion in 2018. The cost of revenue in the year 2016, 2017 and 2018 resulted in changes in gross profit. The gross profit was $47 billion in 2016, $65 billion in 2017 and $93 billion in 2018. The operating expenses of the company increase year by year. Interest expenses stand out since they have been increasing by almost a double value every year. In 2016, Amazon reported $4 million interest expense. The following years were $848 million and $1 billion consecutively (Raj & Pandey, 2019).
The cash flow statements provide information regarding a firm's cash incomes and cash compensation in the course of an accounting period. According to NASDAQ (2019), the cash flow from operating activities was $17 billion in 2016, $18 billion in 2017 and $30 billion in 2018. The cash flow from investing activities was -9 billion dollars in 2016, -27 billion dollars in 2017 and -12 billion dollars in 2018. Cash flow from financing activities was -3 billion dollars in 2016, -9 billion dollars in 2017 and -10 billion dollars in 2018 (Kaplan, 2019).
Amazon.com Inc. reported huge profits in the last three years and matched estimates for revenue in its annual results. Based on the report provided above, it is clear the company's product income is growing by more than 35% annually (Stock-on-Net, 2019). Amazon has been intensifying its processes and merchandises sale via various acquisitions. For instance, Amazon acquired Eero, a producer of a WiFi system for $97 million. The shares after acquisition rose to $3.54 from $0.03 per share (Zeller, Kolstolansky & Bozoudis, 2019).
Current Financial Health
Amazon.com Inc. grows as a start-up company-revenues increased to $233 billion in 2018. The company has also been recording good profits for the last three years. Amazon's long-term debt and Capital Lease Obligation in the second quarter of 2019 was $58, 463 million. The total stockholder's equity was $53, 061 million in the second quarter of 2019. Moreover, the corporation's debt to equity in the second quarter of 2019 was 1.10 (NASDAQ, 2019). A great debt to equity ratio denotes that a firm has been belligerent in funding its development with debt. Amazon's Account receivable for the second quarter of 2019 was $16,747 million and revenue was $63 million. Therefore, days sales outstanding was 24.10 (CNN, 2019).
Amazon has the right resources for growth. In terms of cash, the company has shown its readiness to invest more money in various sectors of its business. Key people starting with Jeff Bezos and cutting edge technologies have been accountable for the corporation's progress. If the company's reputation is anything to go by, then customers will keep supporting the brand. The main reason for the 'no' dividend in Amazon is that Jeff Bezos sees no requirement for the income (Investing.com, 2019). Return on investment is not recommendable because it might have huge impacts on the stakeholders.
Amazon has $5.5 billion operating cash and $ billion free cash flow do not illustrate its real status. This can be attributed to elements like depreciation that reported at $3.3 billion. The stock reported a value of $1.1 billion while the capital lease was $2.7 billion (MGMRESEARCH, 2019). Amazon cannot become too big to fast because the world is becoming a global village. With the increasing network coverage across the world, Amazon will have a better chance of expanding and addressing the customers' needs. Slow growth does not mean financial risks. It means that the competition is becoming stiff hence slowing the acquisition of market share (Allitt, 2016). The company is undervalued because the online market is too big for an accurate valuation. Due to the current status of Amazon, I would gladly invest in Amazon.
Allitt, M. (2016). Creating financial value: A guide for senior executives with no financial background. London: Bloomsbury Information.
Brigham, K. (2019). How Amazon makes money. Retrieved from: https://www.cnbc.com/2019/02/12/how-amazon-makes-money.html on date 27/8/2018
CNN (2019). AMZN - Amazon.com Inc Company Profile - CNNMoney.com. [online] Money.cnn.com. Retrieved from: https://money.cnn.com/quote/profile/profile.html?symb=AMZN on date 27/8/2018
Investing.com. (2019). Amazon.com Inc (AMZN). Retrieved from: https://www.investing.com/equities/amazon-com-inc-financial-summary on date 27/8/2019
Kaplan, M. (2019). Amazon Posts Stellar 2018 Financial Results; 2019 Not as Bright | Practical Ecommerce. [online] Practical Ecommerce. Retrieved from: https://www.practicalecommerce.com/amazon-posts-stellar-2018-financial-results-2019-not-as-bright on date 27/8/2018.
MGMRESEARCH. (2019). Amazon Revenues and Profits Analysis - 2019 Update. Retrieved from: https://mgmresearch.com/amazon-revenues-and-profits-analysis-2019-update/ on date 27/8/2019
Milnes, H. (2019). Amazon is chasing growth and shifting resources to third-party sellers. Retrieved from: https://digiday.com/marketing/amazon-chasing-growth-shifting-resources-third-party-sellers/ on date 27/8/2019.
NASDAQ. (2019). AMZN Company Financials. Retrieved from: https://www.nasdaq.com/symbol/amzn/financials?query=cash-flow on date 27/8/2019
Raj, U., & Pandey, A. (2019). Valuation and Analysis of E-Business: With Special Reference to Amazon and eBay. Journal of Commerce & Accounting Research, 8(1). Retrieved from: http://www.publishingindia.com/jcar/47/valuation-and-analysis-of-e-business-with-special-reference-to-amazon-and-ebay/765/5313/
Salinas, S. (2018). Amazon reaches $1 trillion market cap for the first time. Retrieved from: https://www.cnbc.com/2018/09/04/amazon-hits-1-trillion-in-market-value.html on date 27/8/2019
Stock-on-Net (2019). Amazon.com Inc. (AMZN) | Valuation Ratios. [online] Stock Analysis on Net. Retrieved from: https://www.stock-analysis-on.net/NASDAQ/Company/Amazoncom-Inc/Valuation/Ratios#Historical-Valuation-Ratios-Summary on date 27/8/2018.
Zeller, T., Kostolansky, J., & Bozoudis, M. (2019). An IFRS-Based Taxonomy of Financial Ratios. Accounting Research Journal, 32(1). pp. 20-35. https://doi.org/10.1108/ARJ-10-2017-0167.
Consolidated Income Statement
Annual Income Statement (values in 000's)Get Quarterly DataPeriod Ending: Trend 12/31/2018 12/31/2017 12/31/2016 12/31/2015
Total Revenue $232,887,000 $177,866,000 $135,987,000 $107,006,000
Cost of Revenue $139,156,000 $111,934,000 $88,265,000 $71,651,000
Gross Profit $93,731,000 $65,932,000 $47,722,000 $35,355,000
Research and Development $0 $0 $0 $0
Sales, General and Admin. $81,310,000 $61,826,000 $43,536,000 $33,122,000
Non-Recurring Items $0 $0 $0 $0
Other Operating Items $0 $0 $0 $0
Operating Income $12,421,000 $4,106,000 $4,186,000 $2,233,000
Add'l income/expense items $257,000 $548,000 $190,000 ($206,000)
Earnings Before Interest and Tax $12,678,000 $4,654,000 $4,376,000 $2,027,000
Interest Expense $1,417,000 $848,000 $484,000 $459,000
Earnings Before Tax $11,261,000 $3,806,000 $3,892,000 $1,568,000
Income Tax $1,197,000 $769,000 $1,425,000 $950,000
Minority Interest $0 $0 $0 $0
Equity Earnings/Loss Unconsolidated Subsidiary $9,000 ($4,000) ($96,000) ($22,000)
Net Income-Cont. Operations $10,073,000 $3,033,000 $2,371,000 $596,000
Net Income $10,073,000 $3,033,000 $2,371,000 $596,000
Net Income Applicable to Common Shareholders $10,073,000 $3,033,000 $2,371,000 $596,000
Cash Flow Statements
Period Ending: Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Period Length: 12 Months 12 Months 12 Months 12 Months
Cash From Operating Activities 30723 18365 17272 11920
Cash From Investing Activities -12369 -27084 -9876 -6450
Cash From Financing Activities -7686 9928 -3740 -3763
Net Change in Cash 10317 1922 3444 1333
AMZN Long Term Debt to Equity (Jun 30 2019)II. Quarter (Mar 31 2019)I. Quarter (Dec 31 2018)IV. Quarter (Sep 30 2018)III. Quarter (Jun 30 2018)II. Quarter
Y / Y Equity Change 51.62 % 53.86 % 57.17 % 58.67 % 50.75 %
Y / Y Long Term Debt Change -5.31 % -5.35 % -5.04 % -0.11 % 220.68 %
Long Term Debt to Equity MRQ 0.44 0.48 0.54 0.63 0.7
Overall Ranking # # # # #
Seq. Equity Change 9.61 % 11.16 % 11.31 % 11.8 % 11.23 %
Seq. Long Term Debt Change 0.03 % -0.74 % -4.82 % 0.19 % -0.01 %
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Free Essay in Finance: Amazon Financial Performance and Health. (2022, Feb 18). Retrieved from https://speedypaper.net/essays/amazon-financial-performance-and-health
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