Amrican Corporation Analysis
American Corporation Analysis
All over the United States business is being conducted through the availability of products and services that are offered through the avenues of business; Amazon is no different. Amazon is one of the world’s largest online services for purchasing/selling products. In order for Amazon to maintain its position in the industry knowledge of financial health is important. In order for business owners, banks, creditors loan officers and potential business owners to understand the financial health and financial potential of a business the knowledge of financial ratio analysis must be evident and understood. Financial ratio analysis can provide detailed insight on the current performance of a business as well as potential problems that can be avoided once identified. Business owners can use several types of ratios to obtain financial information, however to specific financial ratios that can be used to identify profitability and liquidity include comparative and ratio analysis. Comparative analysis is an item-by-item comparison of two or more comparable alternatives while ratio analysis is a tool used by individuals to conduct a quantitative analysis of information in a company's financial statements.
Net income is widely used as an indicator of a company’s profitability. Further refining net income, sustainable income removes irregular items from net income to obtain “the most likely level of income to be obtained in the future” (Kimmel et al., 2011, p. 686). According to Amazon.com’s income statement, the company did not report any discontinued operations or extraordinary items, and therefore its net income is considered its sustainable income. Using 2010 as the base year, horizontal analysis is used in Table 1 to evaluate Amazon.com’s change in net sales, operating expenses, and net income in 2011 and 2012.
Table 1
Abbreviated 2012 income statement for Amazon.com with horizontal comparative analysis.
(in milliions) 2012 2011
All over the United States business is being conducted through the availability of products and services that are offered through the avenues of business; Amazon is no different. Amazon is one of the world’s largest online services for purchasing/selling products. In order for Amazon to maintain its position in the industry knowledge of financial health is important. In order for business owners, banks, creditors loan officers and potential business owners to understand the financial health and financial potential of a business the knowledge of financial ratio analysis must be evident and understood. Financial ratio analysis can provide detailed insight on the current performance of a business as well as potential problems that can be avoided once identified. Business owners can use several types of ratios to obtain financial information, however to specific financial ratios that can be used to identify profitability and liquidity include comparative and ratio analysis. Comparative analysis is an item-by-item comparison of two or more comparable alternatives while ratio analysis is a tool used by individuals to conduct a quantitative analysis of information in a company's financial statements.
Net income is widely used as an indicator of a company’s profitability. Further refining net income, sustainable income removes irregular items from net income to obtain “the most likely level of income to be obtained in the future” (Kimmel et al., 2011, p. 686). According to Amazon.com’s income statement, the company did not report any discontinued operations or extraordinary items, and therefore its net income is considered its sustainable income. Using 2010 as the base year, horizontal analysis is used in Table 1 to evaluate Amazon.com’s change in net sales, operating expenses, and net income in 2011 and 2012.
Table 1
Abbreviated 2012 income statement for Amazon.com with horizontal comparative analysis.
(in milliions) 2012 2011