A case study of Amazon

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Case Assignment: Amazon, Inc. Review of Managerial Vs. Financial Accounting Principles
Stacey Troup
Managerial Accounting/MBA-612
May 15, 2019
Professor Dr. Andreas Walker
Touro University Worldwide

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Abstract
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Keywords: xxx

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Amazon, Inc. - Conceptual Overview
Amazon has been a company to watch since the mid-1990s. Currently, one of the first
companies to reach a valuation of over $1T, investors flock to the company stock and retain it for
the long haul. This review will cover the concepts of how Amazon applies both financial
accounting and managerial accounting concepts to its business platform to ensure profitability,
how things such as breakeven points and overhead are calculated against both products they
resell as well as products they manufacture, and finally, the formulas and calculations investors
look for in this publically traded firm to determine liquidity, profitability, financial strength, and
longevity amidst their acquisitions and financing of new business ventures as they continue to
grow in size and value beyond the expectations of everyone in the world of finance/investing.
Amzon, Inc. – Company Overview
After becoming the youngest VP for D.E. Shaw, an investment house in New York City
(N.A., Jeff Bezos, N.D.), Bezos took a gamble on his future when he left his lucrative position in
corporate finance, borrowing $300,000 from his parents for seed money and starting
Amazon.com as an online bookseller in 1995. With that money, he began enlisting the
assistance of a crew of 10 people to run the company out of his Seattle, WA garage after moving
his family to that location prior to the IPO (Biography.Com Editors, 2014).
Financial advisors and the industry as a whole were vastly unprepared for the success that
Amazon would showcase in the world of business, finance, and emerging markets. The
company went public in 1997 at just $18.00 per share while analysts pondered the possibility of
the company’s success as an online bookseller while other retailers continued to build their own
sites as an attempt to thwart the company’s success (Leonhardt & Carter, 2018).

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Over the years, Bezos continued to “up the ante” of his business ventures, as will be
discussed in detail, all the while driving up his business profile, stock price, valuation, company
profile, holdings, and personal investments through carefully planned investments and strategies
that have served the Amazon founder well over the years.
Amazon Growth & Diversification of Assets
Following the IPO in 1997, Jeff Bezos did not sit idly by riding the wave of success
afforded him through his business ventures of online book sales. Early on, Bezos recognized the
need for change in the future in terms of the availability of products to consumers via the
internet. He continued this theory as he was determined to grow the company size and presence
through carefully planned acquisitions and offerings within his both business and personal life.
Amazon began to grow shortly after the IPO was offered. By 1998 the company had
expanded from its books offerings to CD’s, videos, clothes, electronics, toys, etc. through its
business affiliates and partnerships with suppliers. This was the first implication that Amazon
had the intention to help small businesses flourish as it offered products which were not readily
available to the general public at the brick and mortar stores. During this time, analysts in the
financial industry questioned if Amazon could survive the tech bubble but Bezos was determined
to see it through. Going from sales of $21k a week in 1995 to $17B per year by 2011, he proved
that the site was exactly what consumers were searching for (Biography.Com Editors, 2014).
2006 brought another change for Amazon in the form of its first VOD service and by the
time the company reached its 10 year anniversary, they decided to branch out into their own
offerings. Consumers embraced the first generation release of the Kindle as a cost-saving
alternative to the IPad™ from Apple™ (Biography.Com Editors, 2014). However, in 1999 he
was awarded his first patent for the “buy it now” button offering which is a precursor to the data

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mining methods of today. Taking from his small company offerings and technology
backgrounds, he continued to grow the offerings of the company through the third party
marketplace, and by 2003 had launched Amazon Web Services which was a licensed platform
for sales available to other companies to help them grow their presence and sales online while
becoming pioneers in the future of data mining and artificial intelligence (AI) (DePillis &
Sherman, 2018).
Seeking to continue his global dominance in the virtual space, he launched Joyo
Amazon™ in China as a rival to Alibaba.com, which has yet to come to the success rates of the
dominant Chinese online retailer who has enjoyed great success the US markets through extreme
price slashing methods. February 2, 2005, is a red letter day in history as this is the day Amazon
Prime™ was introduced. Now one of the most valuable assets held by the company, it has
expanded from offering just two-day shipping to members to allowing VOD streaming, music,
grocery delivery, etc. as the program is ever evolving to meet the demands of the consumers –
including select market drone delivery service through one of Bezo’s personal companies (as of
2019) (DePillis & Sherman, 2018).
The continued quest for increased valuation of his company stock, Bezos began not only
partnering with businesses but he acquired a number of them as well as a means to diversify the
corporate portfolio of Amazon. Among these acquisitions include Audible in 2008
(audiobooks), Zappos in 2009 (Shoes), and Kiva Systems in 2012 which is the robotics company
behind the automated warehouses and fulfillment centers Bezos runs. 2013 brought the
monumental purchase of the Washington Post newspaper company from the longtime grasp of
the Graham family for over $200M. In addition, Amazon also announced Sunday package
delivery available for members as his stock began to climb to $354.38. With the failed

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smartphone release in 2014 came the acquisition of Twitch (gaming platform) which is a resale
product through Amazon Web Services (DePillis & Sherman, 2018). A full view of money
spent to diversify the offerings of Amazon as well as the acquired companies can be found Here
(Zaroban, 2018).
By the time the first retail store opened in Seattle, WA, Amazon stock had soared to
$628.35 per share and November of that same year brought the highly sought after and long-
lived Amazon Echo™ offerings (bringing the stock to $659.68) (DePillis & Sherman, 2018).
2017 brought the most landmark deal to fruition when Bezos decided that Amazon should
acquire Whole Foods for $13.7B through a highly confidential and structured bond offering to
select investment banks. Public knowledge of this acquisition caused the stock to jump to
$987.71 per share when word hit the street as the stock continued to grow at exponential pace
(Linnane, 2017) (Ungarino, 2018) (DePillis & Sherman, 2018).
In 2018, Amazon reached $1T in market cap as the stock soared to $2039.57 per share.
As a result, the company announced a corporate policy of $15.00 per hour minimum wage for
workers as locals stammered to acquire entry-level jobs with the internet giant (lowering the
stock to $1971.31 as of October 2. The final hit to Amazon came when the company announced
plans for a second headquarters and NYC was announced to be the winner. Due to heavy
demands from the retailer in the form of tax incentives and other concerns over their presence in
the area, NYC and Amazon could not come to terms on the development of this location due to
the controversy and the demands the company placed on the government. This maneuver
resulted in a heavy stock drop to $1,621 per share as of February 14, 2019 (DePillis & Sherman,
2018). As of February 22, 2019, shares in Amazon continued to fall and were recorded at $1,630
per share with a market cap of 801.055B (Amazon Market Watch, N.D.) (Goodman, 2019).

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Amazon, Inc. – Cost Calculation Review
Amazon, Inc. – Review of Profitability and Methodologies for Resale Inventory
Amazon, Inc – Review of Profitability Concepts for Amazon™ Branded Products
Investor Review of Profitability and Liquidity
Conclusion