1 Running Head: FINANCIAL Financial Overview Stanley Thompson MBA 6016 31 January 2016 Identify your company, its industry, and analyze the important segments (percentage of sales or subsidiaries) of your company compared to its industry and its overall business. Amazon with its headquarter in Seattle, WA is a leading e-commerce company. Amazon provides a range of products and services on retail basis through internet. The company operates in number of countries in Asia and Europe. The company resells its own product as well as providing portals to third party vendors to sell their own goods through its website. The company is also engaged in services like subscription in digital contents. Majority of the company’s revenue is derived from sales of consumer retail products to consumers. Year Ended 2013 2012 Net Sales: North America $ 44,517 $ 34,813 International $29,935$26,280 Consolidated $74,452 $61,093 Net Sales Mix: North America 60% 57% International 40% 43% Consolidated 100% 100% Perform a complete financial analysis of your chosen company's financial statements—horizontal, vertical (Percentage of Sales and Common-Size), and changes in ratios—for the last two years. The current ratios and quick ratios of Amazon for the periods 2013 and 2012 show moderate liquidity position. Current ratio has decreased from 1.12 in 2012 to 1.07 in 2013. Also liquidity ratio has decreased from 0.80 in 2012 to 0.75 in 2013. Focussing on the asset management ratios, the inventory turnover ratio , days sales outstanding ratio, fixed asset turnover ratio, total asset turnover ratios are all very much satisfactory. Moreover the ratios have remained stable over the concerned two years. Thus it can be said that that Amazon posses the ability to efficiently utilize its fixed assets to generate sales. The high inventory turnover ratio shows the company’s ability to effectively manage its inventory. Moreover the ratios have remained stable over the years 2013 and 2012 suggesting a stable position of the company in respect to asset management. From the analysis of the debt management ratio it is evident that the company uses high amount of debt in its business. This significantly increases the financial risk of the company. Analyzing the profitability ratios of the company it can be concluded that the profitability of the company is very much poor. In fact the ROE and Profit Margin of the company for year 2012 were negative suggesting that the company has performed very poorly so much as profitability is concerned and has in fact depleted value of its shareholders. The profitability ratios of the year 2013 were all positive but are very much unsatisfactory. Compare all ratios to industry averages. Evaluate the company's ratios against the.

1. 1
Running Head: FINANCIAL
Financial Overview
Stanley Thompson
MBA 6016
31 January 2016
Identify your company, its industry, and analyze the important
segments (percentage of sales or subsidiaries) of your company
compared to its industry and its overall business.
Amazon with its headquarter in Seattle, WA is a leading e-
commerce company. Amazon provides a range of products and
services on retail basis through internet. The company operates
in number of countries in Asia and Europe. The company resells
its own product as well as providing portals to third party
vendors to sell their own goods through its website. The
company is also engaged in services like subscription in digital
contents. Majority of the company’s revenue is derived from

2. sales of consumer retail products to consumers.
Year Ended 2013 2012
Net Sales:
North America $ 44,517 $ 34,813
International $29,935$26,280
Consolidated $74,452 $61,093
Net Sales Mix:
North America 60% 57%
International 40% 43%
Consolidated 100% 100%
Perform a complete financial analysis of your chosen company's
financial statements—horizontal, vertical (Percentage of Sales
and Common-Size), and changes in ratios—for the last two
years.
The current ratios and quick ratios of Amazon for the periods
2013 and 2012 show moderate liquidity position. Current ratio
has decreased from 1.12 in 2012 to 1.07 in 2013. Also liquidity
ratio has decreased from 0.80 in 2012 to 0.75 in 2013.
Focussing on the asset management ratios, the inventory
turnover ratio , days sales outstanding ratio, fixed asset
turnover ratio, total asset turnover ratios are all very much
satisfactory. Moreover the ratios have remained stable over the
concerned two years. Thus it can be said that that Amazon
posses the ability to efficiently utilize its fixed assets to
generate sales. The high inventory turnover ratio shows the
company’s ability to effectively manage its inventory. Moreover
the ratios have remained stable over the years 2013 and 2012
suggesting a stable position of the company in respect to asset
management.
From the analysis of the debt management ratio it is evident that
the company uses high amount of debt in its business. This
significantly increases the financial risk of the company.
Analyzing the profitability ratios of the company it can be
concluded that the profitability of the company is very much

3. poor. In fact the ROE and Profit Margin of the company for
year 2012 were negative suggesting that the company has
performed very poorly so much as profitability is concerned and
has in fact depleted value of its shareholders. The profitability
ratios of the year 2013 were all positive but are very much
unsatisfactory.
Compare all ratios to industry averages. Evaluate the company's
ratios against the industry averages.
Comparing Amazon’s financial ratios with industry averages, it
can be concluded that the liquidity position of the company is
below industry standard. Comparing the asset management
ratios with the industry standards it can be concluded that the
company has performed above par so far as asset management is
concerned.However, on comparing the company’s debt
management ratios with the industry standard it can be said that
the company is undertaking huge amount of financial risk which
is above industry standard.
Finally, comparing the profitability ratios of the company with
the industry standard, it can be said that the company has
performed very poorly and has failed to meet its shareholder’s
expectations regarding profitability.
Analyze the company's cash flows
From the analysis of Amazon’s cash flows for the year 2012 and
2013, it can be concluded that the company has a very stable
cash flow structure. But the net increase in cash and cash
equivalents has significantly reduced from 2815 million USD in
2012 to 574 million USD in 2013. Thus, suggesting a decline in
the Company’s cash flow model in the year 2013.
Assess the overall financial health of your company based on
this financial analysis.
Overall financial health of the company particularly its
profitability structure raises concern. So far as liquidity, cash
flow structure, and asset management is concerned the company
is able to maintain a satisfactory level of performance. Also the
significant decline in net cash inflow in the year 2013 in
comparison with the previous year raises significant concern

4. regarding the company’s financial health.
The basic importance of comparing Amazon’s financial ratios
with industry experts is to enable us to form conclusion whether
Amazon is able to meet the competitive standard and the
expectation of the stakeholders. Since Amazon has failed in
meeting the industry standard for majority of financial ratios it
can be concluded that Amazon has performed below standard
for the years 2012 and 2013.
C3 Took KitName: Stanley ThompsonMBA 6016Tool Kit for
Analysis of Financial Statements Financial statements are
analyzed by calculating certain key ratios and then comparing
them with the ratios of other firms and by examining the trends
in ratios over time. We can also combine ratios to make the
analysis more revealing, those indicated below are
exceptionally useful for this type of analysis. RATIO
ANALYSIS (Section 3.1)*AMAZON Fiscal Years starts and
ends on Jan 31, such that FY13 represents Jan 31,2012 to Jan31,
2013Input Data:20132012Year-end common stock
price$398.79$250.87Year-end shares outstanding (in
thousands)459,000454,000Tax rateAfter-tax cost of
capitalLease payments (in
thousands)$1,011,000$588,000Required sinking fund
payments$0$0Balance Sheets(in thousands of
dollars)Assets20132012Cash and
equivalents$8,658,000$8,084,000* Added to cash and
quivalents prepaid expense and deferred income taxesShort-term
investments$3,789,000$3,364,00020132012Accounts
receivable$4,767,000$3,817,00069,70149,411prepaid expenses
and
otherInventories$7,411,000$6,031,000103,73649,931deferred
income taxes Total current assets$24,625,000$21,296,000Net
plant and equipment$10,949,000$7,060,000Total
assets$40,159,000$32,555,000* Added to Total assets goodwill
and other assets20132012Liabilities and
equity2,655,0002,552,000GoodwillAccounts

5. payable$15,133,000$13,318,0001,930,0001,647,000Other
AssetsNotes payable$0$0Accruals$7,847,000$5,684,000 Total
current liabilities$22,980,000$19,002,000Long-term bonds and
other long-term liabilities$7,433,000$5,361,00020132012
Total
liabilities$30,413,000$24,363,0009,573,0008,347,000additional
paid-in capitalPreferred stock (2,00,000 shares: none
issued)$0$0-1,837,000-1,837,000treasury stockCommon stock
(459,000,000 shares oustanding 2013 and 454,000,000
outstanding in 2012$5,000$5,000-185000-239,000accumulated
other comprehensive lossRetained
earnings$2,190,000$1,916,000Total common
equity$9,746,000$8,192,000* Added to Total Common equity
additional paid-in capital, treasuary stock, and accumulated
other comprehensive incomeTotal liabilities and
equity$40,159,000$32,555,000Income Statements(in thousands
of dollars)20132012Net sales$74,452,000.0$61,093,000.0
Operating costs$73,707,000.0$60,417,000.0Earnings before
interest, taxes, depr. & amort. (EBITDA)$745,000.0$676,000.0
Depreciation$0.0$0.0 Amortization$0.0$0.0 Depreciation and
amortization$0.0$0.0Earnings before interest and taxes
(EBIT)$576,000.0$481,000.0* EBIT consists of other income
and interest income Less interest -$141,000.0-
$92,000.020132012Earnings before taxes
(EBT)$435,000.0$389,000.0-136000-80000other
income/(expense)
Taxes$161,000.0$428,000.03800040000interest incomeNet
income before preferred dividends$274,000.0-$39,000.0-71000-
155000Equity-method investment activity, net of tax
Preferred dividends$0.0$0.0Net income available to common
stockholders$274,000.0-$39,000.0Common
dividends$0.0$0.0Addition to retained earnings$274,000.0-
$39,000.0Calculated Data: Operating Performance and Cash
Flows20132012Net operating working capital
(NOWC)($2,144,000.0)($1,070,000.0)Total operating
capital$8,805,000.0$5,990,000.0Net Operating Profit After

6. Taxes (NOPAT)$576,000.0$481,000.0Net Cash Flow (Net
income + Depreciation)$274,000.0($39,000.0)Operating Cash
Flow (OCF)$576,000.0$481,000.0Free Cash Flow
(FCF)($2,239,000.0)N/ACalculated Data: Per-share
Information20132012Earnings per share (EPS)$0.60-
$0.09Dividends per share (DPS)$0.00$0.00Book value per share
(BVPS)$21.23$18.04Cash flow per share
(CFPS)$0.60($0.09)Free cash flow per share
(FCFPS)($4.88)N/ALIQUIDITY RATIOS (Section
3.2)Industry20132012AverageLiquidity ratios Current
Ratio1.071.122.22 Quick Ratio0.750.801.3ASSET
MANAGEMENT RATIOS (Section
3.3)Industry20132012AverageAsset Management ratios
Inventory Turnover10.0510.134.78 Days Sales
Outstanding23.422.80
Christopher Buzzard: To calculate the DSO ratio, a 365-day
accounting year was used.25.6*Industry leader Fixed Asset
Turnover6.808.651.89*Industry leader Total Asset
Turnover1.851.880.63DEBT MANAGEMENT RATIOS (Section
3.4)Industry20132012AverageDebt Management ratios Debt
Ratio75.73%74.84%39.30%*Industry leader Debt-to-Equity
Ratio3.122.970.65*Industry leader Market Debt
Ratio14.25%17.62%24.40*Industry leader Times Interest
Earned4.095.23196.79*Incorrect for 2013 and 2012 as interest
combined is income not expense EBITDA Coverage Ratio2.02
Brigham: (EBITDA + Lease Payments) / (Interest + Loan
Payments + Lease Payments)
2.55N/APROFITABILITY RATIOS (Section
3.5)Industry20132012AverageProfitability ratios Profit
Margin0.37%-0.06%19.96% Basic Earning
Power1.43%1.48%17.63%*Industry leader Return on
Assets0.68%-0.12%12.56% Return on Equity2.81%-
0.48%19.43%MARKET VALUE RATIOS (Section
3.6)Industry20132012AverageMarket Value ratios Price-to

7. Earnings Ratio668.05-2920.3825.77*NVIDIA doesn't account
for depreciation in their 10-K statements Same P/E P/CF Ratio
because there is no depreciation Price-to-Cash Flow
Ratio668.05-2920.38
Christopher Buzzard: P/CF ratio is calculated by dividing the
price by the net cash flow per share.
Brigham: (EBITDA + Lease Payments) / (Interest + Loan
Payments + Lease Payments)
Christopher Buzzard: To calculate the DSO ratio, a 365-day
accounting year was used.9.66 Price-to-
EBITDA245.70168.485.13*Industry Leader Market-to-Book
Ratio18.7813.903.59TREND ANALYSIS, COMMON SIZE
ANALYSIS, AND PERCENT CHANGE ANALYSIS (Section
3.7)TREND ANALYSISTrend analysis allows you to see how a
firm's results are changing over time. For instance, a firm's
ROE may be slightly below the benchmark, but if it has been
steadily rising over the past four years, that should be seen as a
good sign.A trend analysis and graph have been constructed on
this data regarding Amazon's ROE over the past 5 years.
(Nvidia and indusry average data for earlier years has been
provided.)ROEAMAZONEBAYALIBABA200922.8%19.7%20.5
4%201019.0%12.4%27.72%20118.7%20.0%26.53%2012-
0.5%13.5%21.76%20132.8%13.0%54.26%Figure 3-1 Rate of
Return on Common EquityCOMMON SIZE ANALYSISIn
common size income statements, all items for a year are divided
by the sales for that year.Figure 3-2 Common Size Income
StatementsIndustry CompositeNvidia201320132012Net
sales100.0%100.0%100.0% Operating
costs72.1%99.0%98.9%Earnings before interest, taxes, depr. &
amort. (EBITDA)27.9%1.0%1.1% Depreciation and
amortization0.0%0.0%0.0%Earnings before interest and taxes
(EBIT)27.9%0.8%0.8% Less interest 0.0%-0.2%-0.2%Earnings

8. before taxes (EBT)27.9%0.6%0.6% Taxes7.3%0.2%0.7%Net
income before preferred dividends20.6%0.4%-0.1% Preferred
dividends0.0%0.0%0.0%Net income available to common
stockholders (profit margin)20.6%0.4%-0.1%In common sheets,
all items for a year are divided by the total assets for that
year.Figure 3-3 Common Size Balance SheetsIndustry
CompositeNvidia201320132012AssetsCash and
equivalents13.0%21.6%24.8%Short-term
investments11.5%9.4%10.3%Accounts
receivable7.1%11.9%11.7%Inventories5.6%18.5%18.5% Total
current assets37.2%61.3%65.4%Net plant and
equipment62.8%27.3%21.7%Total
assets100.0%100.0%100.0%Liabilities and equityAccounts
payable12.6%37.7%40.9%Notes
payable0.4%0.0%0.0%Accruals2.3%19.5%17.5% Total current
liabilities15.3%57.2%58.4%Long-term bonds and other long-
term liabilities61.1%18.5%16.5% Total
liabilities76.4%75.7%74.8%Preferred stock0.0%0.0%0.0%Total
common equity23.6%24.3%25.2%Total liabilities and
equity100.0%100.0%100.0%PERCENT CHANGE ANALYSISIn
percent change analysis, all items are divided by the that item's
value in the beginning, or base, year.Figure 3-4 Income
Statement Percent Change AnalysisBase year =2012Percent
Change in2013Net sales21.9% Operating costs22.0%Earnings
before interest, taxes, depr. & amort. (EBITDA)10.2%
Depreciation and amortization0.0%Earnings before interest and
taxes (EBIT)19.8% Less interest 53.3%Earnings before taxes
(EBT)11.8% Taxes(62.4%)Net income before preferred
dividends(802.6%) Preferred dividends0.0%Net income
available to common stockholders(802.6%)Balance Sheet
Percent Change Analysis (not in textbook)Base year
=2012Percent Change in2013AssetsCash and
equivalents7.1%Short-term investments12.6%Accounts
receivable24.9%Inventories22.9% Total current
assets15.6%Net plant and equipment55.1%Total
assets23.4%Liabilities and equityAccounts payable13.6%Notes

9. payable0.0%Accruals38.1% Total current
liabilities20.9%Long-term bonds and other long-term
liabilities38.6% Total liabilities24.8%Preferred stock
(2,00,000 shares: none issued)0.0%Common stock (459,000,000
shares oustanding 2013 and 454,000,000 outstanding in
20120.0%Retained earnings14.3%Total common
equity19.0%Total liabilities and equity23.4%DU PONT
ANALYSIS (Section 3.8) ROE =(Profit margin)(TA
turnover)(Equity
Multiplier)AMAZON20132.81%0.37%1.854.12AMAZON 2012-
0.48%-0.06%1.883.97Industry Average20.72%19.96%0.631.65
AMAZON2009.0 2010.0 2011.0 2012.0 2013.0
0.2275 0.1901 0.0866 -0.0049
0.0281140980915247 EBAY
2009.0 2010.0 2011.0 2012.0 2013.0 0.1969
0.1243 0.1995 0.1354 0.1298 ALIBABA
0.2054 0.2772 0.2653 0.2176 0.5426
ROE
(%)