Company evaluation

Ratio Analysis

  • Current: 1.08 & Acid-Test: .77 - low liquidity
  • Debt to Equity: 3.89 & LT Debt to Equity: 1.36 - heavily debt leveraged
  • Low profit margins - typical of retail industry
  • P/E of 529.04 in 2015 - strong market presence

Unrecorded Asset Analysis

  • Research and Development, Employee Workforce, & Vision Statement
  • Innovative projects: Amazon Prime Air & AmazonFresh
  • Vision Statement: “To be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online”

Operating Activities Analysis

  • Core & Permanent Income: Product Sales & Service Sales
  • Core & Permanent Expenses: Cost of Sales, Marketing, & Fulfillment
  • Comprehensive & Transitory Income/Expenses: Foreign currency translation adjustments, reclassification adjustments, & equity-method investment activity

Earnings Quality

  • Net Income vs. Operating Cash Flows
  • Sales Increase vs. A/R Increase
  • Consistent treasury stock
  • Effective in projecting future earnings

Cash Flow Analysis

  • Major sources of cash: operating cash flows, sales and maturities of marketable securities, & proceeds from LT investments
  • Major uses of cash: purchases of property and equipment, purchases of marketable securities, & repayment of leases

Organizational Strategy

  • Increase in inventory is related to Amazon's vision statement
  • Increase in property & equipment is related to management's objective to "take advantage of continued advances in technology"

Free Cash Flow

  • FCF through 2013-2015: $2 billion, $1.9 billion, & $7.3 billion
  • Increasing FCF means more flexibility to invest in development or financial opportunities

Comparative Analysis

  • Major Competitors: Ebay, Walmart, Netflix
  • Liquidity ratios are comparable to competitors
  • Debt ratios far surpass Ebay & Walmart
  • Amazon has a similar debt structure to Netflix, with a higher times interest earned ratio
  • Low operating and net profit margins due to high operating expenses

Conclusion & Evaluation

  • Growing company with strong future projections
  • Stregnths: strong sales, increased inventory selection, R&D projects, and dedicated investors
  • Areas of improvement: heavy reliance on debt financing & low profit margins due to operating expenses

References, Inc. (2014). Form 10-K 2014. Retrieved from SEC EDGAR website

Earth’s biggest selection. (n.d.). Retrieved from

Created By
Sara Beth Ruppard


Created with images by hnnbz - "amazon warehouse" • ChrisYunker - "Amazon Locker" • cpastrick - "ledger accounting business" • - "The shortlisted books corner" • edar - "business smartphone communication" • stevepb - "calculator calculation insurance" • Robert Scoble - "Amazon's front door" • MyKlick - "document file business"

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