Ashley B. Stark
Dickinson State University
October 18, 2012
The following document provides the trend, common-size, and horizontal analysis of Amazon, Incorporated, for the fiscal years ending 2007, 2008, 2009, 2010, and 2011. Amazon, Incorporated is a healthy company that has reached mature growth with stable returns. Overall, Amazon, Incorporated is a reasonable investment based on its historical and industry analysis and trends.
Financial Statement Analysis: Amazon, Incorporated
Amazon.com began in 1995 as part of the retail “catalog and mail-order houses” industry to serve consumers, sellers, enterprises, and creators of content with a vision of providing the world’s largest selection of products and advertising (Amazon, Inc. 2008; 2009; 2010; 2011; 2012). As a platform to connect buyers and sellers as well as a seller in its own right, Amazon sells and/or facilitates the sale of a massive variety of products from books and movies to gifts, toys, electronics, apparel, computers, games, tools, sports equipment, home décor, furniture, jewelry, grocery items, office products, musical instruments, and much, much more (Amazon, Inc., 2008; 2009; 2010; 2011; 2012). Because their “businesses are rapidly evolving and intensely competitive” (Amazon, Inc., 2012, p. 5), Amazon competes against other online retailers, e-commerce providers, brick-and-mortar retailers, and digital content providers, but has positioned itself as a reliable, efficient, and cost-competitive entity with an excellent reputation and strong customer service (Amazon, Inc., 2008; 2009; 2010; 2011; 2012). Amazon, Incorporated has positioned itself as the “go-to” online retailer for just about everything with customer service that will ensure successful trades between its sellers and consumers (Amazon, Inc., 2008; 2009; 2010; 2011; 2012). Trend Analysis
Amazon, Incorporated has shown strong growth and improvement in the last five fiscal years. From fiscal year 2007 through fiscal year 2011, Amazon demonstrated an increase of sales of just over 224% from the base year of 2007 and an overall increase of operating expenses of just under 223% from 2007 (Amazon, Inc., 2008; 2009; 2010; 2011; 2012). Overall, total income before income taxes increased by 41.5% from 2007 and net income increased by over 32.5% since the base year (Amazon, Inc., 2008; 2009; 2010; 2011; 2012). Shareholders also appreciated the earnings per share increase of almost twenty-one cents per share since 2007 (Amazon, Inc., 2008; 2009; 2010; 2011; 2012). While 2009 and 2010 were even more profitable years for Amazon demonstrated by higher net income, the company, even through the Great Recession, maintained its status as a profitable enterprise.
The balance sheet also demonstrated strong increasing trends. Total assets (and correspondingly total liabilities and equity) have increased nearly 290% since the base year of 2007 (Amazon, Inc., 2008; 2009; 2010; 2011; 2012). On the assets side, almost all assets increased by at least 100%, but marketable securities increased by 652%, inventories by 316%, net fixed assets by 713%, and goodwill by 780% (Amazon, Inc., 2008; 2009; 2010; 2011; 2012). To fund these asset increases, current liabilities increased by approximately 300% and long-term debt grew by almost 105%, resulting in a net increase of liabilities of just over 230% (Amazon, Inc., 2008; 2009; 2010; 2011; 2012). In addition, treasury stock increased by 175%, indicating management’s confidence in the organization through the repurchase of the company’s stock (Amazon, Inc., 2008; 2009; 2010; 2011; 2012). While accumulated other comprehensive income became an accumulated other comprehensive loss, Amazon turned a net retained earnings deficit of over $1,375,000,000 to a positive balance of retained earnings of $1,955,000,000, a change of over $3.3 billion (Amazon, Inc., 2008; 2009; 2010; 2011; 2012). This demonstrated not...