Amazon Financial Statement Analysis Essay

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Financial HealthCompany OverviewAmazon is the world’s leading online retailer. The Seattle-based company started in 1994, selling mainly things like books and music, but it has expanded its products steadily since then. Today, Amazon is not only a retailer but also a media company, as they produce and market streaming content. They have long been an innovator in digital merchandising, and their techniques are widely-copied by competitors today. Amazon today is one of the world’s largest companies, with a vat product line. They compete against all other retailers – a consumer is often faced with a decision to go to a store to buy something, or buy it from Amazon, and this owes to their position as the default online retailer.The following is a review of the past three years of Amazon’s financial statements. During this period, the company has extended its lead as the number one online retailer (BI Intelligence, 2017), and started to grow into other businesses, including building out its streaming content business. It has continued to build out its international presence, most recently adding Australia to its list of countries (Westbrook & Kaye, 2017).Horizontal AnalysisIncome Statement20142015%2016%Revenue88988107006120%135987153%COGS6257271651115%88265141%Gross Income2641635355134%47722181%Other Expenses2623833122126%43536166%Operating Income17822331254%41862352%Non-Operating Expense289665230%294102%Net Income (loss)-241596-247%2371-984%Amazon’s horizontal income statement highlights the company’s growth over the past few years. It has seen revenues grow 53% in two years, but it’s costs have grown slower, helping the company to be more profitable from the gross income level on down. The result is that where in 2014 Amazon lost money, it made $2.3 billion in net income in 2016, mainly on the strength of having a lower cost of goods sold on its revenues in recent years than it had before.Balance Sheet20142015%2016%Cash1455715890109%19334133%Securities28593918137%6647232%Inventories829910243123%11461138%Accounts Receivable56125654101%8339149%Current Assets3132735705114%45781146%Property & Equipment1696721838129%29114172%Total Long-Term Assets2317829042125%37621162%Total Assets5450564747119%83402153%Accounts Payable1645920397124%25309154%Total Current Liabilities2808933887121%43816156%Long-Term Debt82658227100%769493%Other LT liabilities74109249125%12607170%Total Liabilities4376451363117%64117147%Shareholders' Equity1074113384125%19285180%Total Liabilities & Equity5450564747119%83402153%A horizontal analysis of the company’s balance sheet highlights this growth. The company’s current assets have grown 46% in two years, and its total assets have grown 53% in that time – the same rate at which the revenues have grown. Worth noting is that the securities have grown, where inventories grew at a slower rate than the income in either sales or cost of goods sold. This indicates that Amazon is becoming more efficient in terms of its inventory turnover and cash…

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…this point in time, because that requires further analysis of the business, the current stock price, and that sort of thing.What can be said here is that Amazon is in good financial condition. If an investor puts their money into Amazon, certainly the stock price could go down, but there is no reason to think that Amazon was end up insolvent in the foreseeable future. All questions of valuation and volatility aside, Amazon is a company is good financial health.

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There are no red flags in its liquidity ratios. Its income statements are getting stronger because revenues are growing more quickly than cost of goods sold, which has not only turned the company profitable, but substantially so. The metrics are trending in the right direction, too. All told, Amazon should be a safe investment from a solvency point of view.I do not presently see any downside risks to Amazon, because the analysis above showed not just good financial health but that the company is trending in the right direction, lowering its long-term debt, revenues growing faster than costs, and liquidity ratios improving. If there are red flags of weaknesses in….....

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