1) What is Amazon.com?

2) What does Amazon sell?

• Main categories of products

• How products appears in the financial statements

• Products’ sales

3) The first years of sales

4) Is Amazon in a good financial position?

• Financial statements

• Liquidity

• Long-term credit risk

• Profitability

• Current market price5) Future prospects

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What is Amazon.com?

• Amazon is an American company specialized in e-commerce. Its headquarter is in Seattle, and it was founded in 1994 by Jeffrey Bezos.

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What does Amazon sell?

Amazon was born as a bookstore, but today it sells everything.

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Main categories of products

• Instant Videos• MP3s & Cloud

Player• Kindle E-readers• Movies, Music &

Games• Books & Audible• Digital Games &

Software

• Electronics & Computers

• Home, Garden & Tools• Beauty, Health &

Grocery• Toys, Kids & Baby• Clothing, Shoes &

Jewelry• Sports & Outdoors• Automotive &

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In the financial statements the products are divided in three main categories:

• Media• Electronics and other general merchandise

• Other

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Products Net Sales

The first years of sales• Amazon's initial business plan was unusual; it

did not expect to make a profit for four to five years. In fact, the first years of sales were characterized by a slow growth of the profits.

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Net Sales and Net income from 1997 to 2002

Is Amazon in a good financial position?

• In order to have detailed view of the financial situation of the company it is necessary to analyze its financial statements and provide key financial analysis ratios.

Income statementBalance sheet

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Measures of liquidity

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Measures of liquidity

2012 2011

Current Assets $21,296 $17,490

Current Liabilities 19,002 14,896

Current ratio 1.12 : 1 1.17 : 1

• the capability of paying short-term debts slightly decreased• the company’s current assets are 1.12 times its current liabilities

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Measures of liquidity

2012 2011

Current Assets $21,296 $17,490

Less: Current Liabilities 19,002 14,896

Working capital $2,294 $2,594

• the amount of money available to satisfy current liabilities is going down.

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Measures of liquidity

2012 2011

Net cash provided by operating activities $4,180 $3,903

• The net cash provided by operating activities increased from 2011 to 2012 by $277, which is a positive change.

Measures of long-term credit risk

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Measures of long-term credit risk

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2012 2011

Total liabilities:

Long-term debt $3,084 $255

Other long-term liabilities 2,277 $2,370

Total current liabilities 19,002 24,363 $14,896 17,521

Total assets 32,555 25,278

Debt ratio 74.84% 69.31%

• This trend is not favorable, since a high debt ratio means a low margin of protection to creditors against shrinkage of assets.

Measures of long-term credit risk

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2012 2011

Operating income $676 $862

Annual interest expense 92 65

Interest coverage ratio 7.35 times 13.26 times

• the interest coverage of both years was strong, since it was far above 2.0.

Measures of profitability

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Measures of profitability

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2012 2011

Gross profit $ 15,122 $ 10,789

Net Sales 61,093 48,077

Gross profit rate 24.75% 22.44%

• These rates are satisfactory and the increase between 2011 and 2012 can be considered positive, as it means the demand for the company’s products is increasing.

Measures of profitability

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2012 2011

Operating expenses $ 60,417 $ 47,215

Net sales 61,093 48,077

Operating expense ratio 98.89% 98.21%

• an operating expense ratio of 98% is not favorable, since it is excessively high.

Measures of profitability

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2012 2011

Gross profit $ 15,122 $ 10,789

Less: Operating expenses 14,446 9,927

Operating income 676 862

• the profitability of the company’s basic business operations in 2011 amounted to $862, while in 2012 it decreased reaching the amount of $676.

Current market value

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Current market value

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2012 2011

Stock price $ 243.75 $ 173.36

• Amazon’s market value increased from $173.36 to $243.75. Therefore, the company experienced a favorable trend.

Current market value

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2012 2011

Current stock price $ 243.75 $ 173.36

Earnings per share $ (0.09) $ 1.39

Price earnings ratio (2708.3) 124.5

• investors’ expectations concerning the performance of the company are not positive.

Current market value

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2012 2011

Common stockholders' equity $8,192 $7,757

Shares of commonstock outstanding 453 453

Book value per share 18.08 17.12

• The book value per share in 2011 was $17.12, and in 2012 was $18.8 . Therefore, it increased generating a favorable trend.

Future prospects

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Although Amazon experienced a huge decrease in net income in 2012, the company is not in a bad financial position Because there is a continuous increase in net sales.

Increase or decrease

2012 over 2011 2011 over 2010

Year 2012 Year 2011 Year 2010 Amount % Amount %

Net Sales $ 61,093.00 $ 48,077.00 $ 34,204.00 $ 13,016.00 27.07% $ 13,873.00 40.56%

Net Income $ -39.00 $ 631.00 $ 1,152.00 $ -670.00 -106.18% $ -521.00 -45.23%

Net sales and profits from 2003 to 2012

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Future prospects

If this trend will continue, and the costs will be reduced, the company will become extremely strong, and the net income will restart to increase. Therefore, the unfavorable trend of the net income will be reversed.

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