Financial Statement Analysis Report
Tatevik Safaryan Tamara Sahakyan
FT MBA 1
BA330, Financial Management
February 06, 2012
Financial Ratio Analysis
Du Pont Identity analysis
Cash Flow Analysis
Estimation of the Beta of the Stock
Stock Price Trend
Our advice to future investors
Appendix 1 Consolidated Financial Statements of Amazon.Com Inc.
Appendix 2 - Tables and Figures of Financial Ratios and Du Pont Identity Analysis
Appendix 3 – Calculations of Cash Flow For 2010 and 2011
Appendix 4 – Figures of beta stock analysis
Appendix 5 – The graph of stock price trend
Amazon.com, Inc. (Amazon.com) is a customer-centric organization founded in 1994 in the state of Washington. The company has 3 main groups of customers: consumers, sellers and enterprises. Amazon is online retailer that is mainly focused on selection, price and shopping convenience. Besides its core functions it also provides other marketing and promotional services, such as online advertising, and co-branded credit card agreements that generate additional revenues. Amazon operates in two segments: North America and International. The business of the company is greatly affected by the seasonality. Historically, the company makes greater profits in the 4th quarter which ends 31 December. This research paper will first of all analyze the company’s financial ratios, cash flow statement and beta of the stock as well as try to determine which events affect stock price fluctuations. The stock price trend analysis of the company will give an overview about its position in the market and further development opportunities. At the end of the paper financial SWOT analysis will be presented as well as there will be some recommendations to future investors.
Financial Ratio Analysis
The current ratio of “Amazon.com” is relatively stable during three years preceding 2011 which indicates that the company does a good job in managing its current operations. However, there was a drop of 0.2 during 2011, and if this decline persists, the company will have shortage of current asset. The quick ratio of 1.02 for the year 2010 shows that the company is currently able to meet its short-term obligations without selling the inventory. Its decreases to 0.84 in 2011 shows that the company may have had a liquidity problem due to inability to manage current cash flows. Though there is a decrease of cash ratio in 2011 (from 0,84 to 0.35), we can assume from the balance –sheet that the company can meet its daily liabilities due to other current assets as marketable securities or account receivables. Total debt ratio is 0.69 while the debt equity ratio is 2.26 both indicating that the company is exposing itself to a large amount of debt. In 2010 the equity multiplier of “Amazon.com” was 2.74 and comparing it with 15 in 2005, we can confirm that in recent years the company has relied less on its debt in order to finance its assets. Times interest ratio of the company has also declined comparing to previous 2 years. But we can still state that the lenders of the company have a regular and periodical interest income. The inventory turnover has declined during the last years (up to 9.1), which means that the inventory turned slower. However, “Amazon.com” Inc. has higher indicator compared to its competitors and industry. The receivable turnover ratio shows us that the company collects its credit accounts and loans that money again 23.13 times in 2011. The average accounts collection period is 15-16 days, indicating that the company almost...
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