Final Analysis of Amazon

By: Catherine Weltzer and Abby Herwaldt

Brian Kallback

BUS 350: Managerial Finance

3 May 2019

1
 Table of Contents
Page
Introduction………………………………………………………………………………………3
Company Overview Characteristics………………………………………………………….3-5
Financial Health…………………………………………………………………………...3
Stock Price Analysis………………………………………………………………………4
Investment Risks……………………………………………………………………….….5
Top Force from Porter’s Five Forces……………………………………………………...5
Analysis of Ratios as Evidence of Financial Position………………………………………6-31
Change Net Working Capital…………………………………………………………...6-7
Current Ratio……………………………………………………………………………8-9
Quick Ratio…………………………………………………………………………….9-10
Total Debt Ratio……………………………………………………………………...10-11
Times Interest Earned Ratio………………………………………………………….12-13
Cash Coverage…………………………………………………………………….….13-14
Avg. Days Sales Inventory…………………………………………………………...14-15
Inventory Turnover Ratio…………………………………………………………….15-16
Receivables Turnover Ratio………………………………………………………….16-17
Total Asset Turnover Ratio……………………………………………………….….18-19
Profit Margin…………………………………………………………………………19-20
EBITDA Margin……………………………………………………………………...20-21
Return on Assets……………………………………………………………………...21-22
Return on Equity……………………………………………………………………...23-24
Earnings Per Share……………………………………………………………………24-25
P/E Earning Ratio…………………………………………………………………….25-26
Market-to-Book Ratio………………………………………………….………….….26-27
Market Capitalization………………………………………………………………...28-29
Enterprise Value……………………………………………………………………...29-30
DuPont Identity………….……………………………………………………………30-31
Equity & Debt Analysis……………………………………………………….…………….31-33
Market Valuation/Equity Valuation………………………………………………….31-32
Beta Coefficient………………………………………………………………………….32
Cost of Equity Capital……………………………………….……………………….32-33
Weighted Average Cost of Capital………………………………………………………33
Conclusion………………………………………………………………………………………33
Annotated Bibliography…………………………………………………………………….34-41

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 Introduction
Online shopping is becoming increasingly popular, and in the United States, a company
called Amazon is experiencing great success in its market. However, like almost all companies,
Amazon has competitors. For the purpose of this analysis, we are going to analyze two. The first
competitor is the retail giant known as Walmart and the second is eBay, an online bidding
marketplace.1 Overall, Amazon does not have much to fear from its competitors. This may seem
like a bold statement, especially when comparing to Walmart, but while Walmart has massive
amounts of revenue, they are more brick-and-mortar stores than they are an online retailer.
Additionally, eBay is of little concern to Amazon because not only is eBay smaller, it also seems
to be declining as a whole. Subsequently, Amazon is a financially healthy force within the online
retail market. Therefore, not only is it a successful company, it is also a company worthy of
investment.

Company Overview Characteristics

Financial health
While Amazon may have some ratios that may cause concern, it also has many ratios that
give current and possible investors, confidence. Additionally, many of these ratios also help to
alleviate areas of concern which will be further discussed later. When looking at Amazon’s
competitors, we see that Walmart is financially healthy and gently increasing. On the other
hand, while eBay currently seems somewhat healthy, many of its ratio values are erratic which
causes some concern. Amazon is also increasing, like Walmart, but overall, it seems to be
increasing more rapidly. Additionally, Amazon is blue-chip stock, along with Walmart, which
indicates that it is financially sound. With Amazon’s strengths and weakness in mind, it can still
be asserted that, overall, it is certainly financially healthy

1
Please note that while both Amazon and eBay’s fiscal years end on December 31 St, Walmart ends its financial
year on January 31st

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Stock Price Analysis
Year Amazon Stock Walmart Stock eBay Stock Price Overall SPY
Price Price
2014 $310.35 $65.61 $22.08 $2,058.90
2015 $675.89 $76.52 $27.48 $2,043.94
2016 $749.87 $61.41 $29.69 $2,238.83
2017 $1,169.47 $63.56 $37.74 $2,673.61
2018 $1,501.97 $104.13 $28.07 $2,506.50

Analysis: In 2017 and 2018, Amazon’s stock price was over eleven times higher than
Walmart and eBay’s stock prices alone. This seems to make Amazon appear as an extremely
healthy company, but there are some concerns. One concern is the decrease in price from 2017 to
2018, the stock price dropped by over $300. Some of this concern is alleviated when looking at
the stock price of eBay, because it also experienced a drop in stock price.2 However, the concern
is somewhat reinvigorated when realizing that not only did Walmart’s stock price failed to drop,
but it also increased.3 Another area of concern is simply the massive price of the stock, especially
when considering the fact that Amazon does not pay out dividends. On the other hand, this value
most likely comes from the fact that since no dividend is paid out, all profits are reinvested in the
company to increase its value. Overall, when compared to its competitors and the overall SPY,
Amazon seems to be very financially healthy, though there is some concern over a price drop
and possible over-inflated price. All-in-all, Amazon is a good investment, though of course, there
is still some risk.

2
Both companies experienced a price drop of about 34%
3
Walmart’s Stock price rose by about 64%

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Investment Risks
While Amazon is a financially healthy company and a secure investment, no investment
is without risks. Nonsystematic risks of uncertainty pose the greatest threat to Amazon’s future
success. One is new entrants into the market. Amazon’s profit margin is low which means that if
new competitors enter with lower prices, Amazon will struggle to compete. Additionally, if any
of its products were recalled, the low profit margins will cause a giant loss for the company. The
biggest unsystematic risk Amazon may face in one to two years is a data breach. Right now,
many companies’ data security is being breached which is wreaking havoc on their business,
specifically with customer loyalty. When a company’s data is breached, customers are quick to
jump ship. They feel their safety is compromised and it sometimes takes a while to regain their
trust. If the data has fallen into the wrong hands, the consequences of what is done with it may
have lasting damages. Data breaches can happen at any time and with a new surge in ecommerce
and data, it is occurring now more than ever. Amazon should tread lightly, or this could destroy
them.

Porter’s Five Forces

Out of the five forces that are obstacles to the success of a business, jockeying for
position among their competitors is Amazon’s greatest strength. This force involves using; new
products, competing on prices, and massive amounts of comparison advertising (for example:
our product is better than the competitors, because it’s better4). Several factors can influence this
force. The most important of these factors is: rivalries may have differing strategies that can
cause friction and there may be numerous competitors of similar or large size (Porter,1979).
Amazon has a large rivalry with not only United Sates based Walmart and eBay, but also foreign
giant online retailer Alibaba. Both Walmart and Alibaba are significantly larger than Amazon.
However, Amazon is not without its advantages. While Wal-Mart does often have lower prices,
Amazon has even more selection than this retail giant. Furthermore, eBay has less variety and is
more customer-based. Meaning, they rely more heavily on customer participation in the bidding
of merchandise. The less customer participation, the less profit they will make. However, their
main struggle, currently, is competing against Alibaba overseas in China because Alibaba has a
large share of the online retail market. They cannot compete against their brand loyalty. Amazon
needs to increase their brand preference by demonstrating to their target market how their brand
is different than Alibaba and because of that, better. Overall, Amazon does well in differentiating
itself from its competitors. Currently, Amazon has a diverse product and service lines with
tablets, echo dots, and Prime membership. They promote themselves as the most reasonably
priced and fastest online retailer in the market. Customers know that they are reliable.
Additionally, Amazon is currently differentiating themselves as an employer by being the first
major tech company to provide American Sign Language interpreters for their deaf employees.
Since Amazon jockeys for its position among its competitors so well, it is a financially healthy
company and, therefore, would be a safe investment.

4
This example is not meant to be taken literally, rather it is more of a slight satire on typical advertisements

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 Analysis of Ratios as Evidence of Financial Position

Change Net Working Capital: Net Working Capital of Current Year – Net Working
Capital of Previous Year5

AMAZON
Year Net Working Capital of Minus Net Working Capital of Δ Net Working
Year Previous Year Capital
2014 (31.3B – 28.1B) = $3.2 B - (24.6B – 23.0B) = $1.6 B $1.6 B
2015 (35.7B – 33.9B) = $1.8 B - (31.3B – 28.1B) = $3.2 B $(1.4) B
2016 (45.8B – 43.8B) = $2.0 B - (35.7B – 33.9B) = $1.8 B $0.2 B
2017 (60.2B – 57.9B) = $2.3 B - (45.8 B – 43.8 B) = $2.0 B $0.3 B
2018 (75.1B – 68.4B) = $6.7 B - (60.2B – 57.9 B) = $2.3 B $4.4 B

WALMART
Year Net Working Capital of Year Minus Net Working Capital of Δ Net Working
Previous Year Capital
2014 (61.2B – 69.3B) = $(8.1) B - (59.9B – 71.8 B) =$(11.9) B $3.8 B
2015 (63.3B – 65.3B) = $(2.0) B - (61.2B – 69.3B) =$(8.1) B $6.1 B
2016 (60.2B – 64.6B) = $(4.4) B - (63.3B – 65.3B) =$(2.0) B $(2.4) B
2017 (57.7B – 66.9B) =$ (9.2) B - (60.2B – 64.6B) =$(4.4) B $(4.8) B
2018 (59.7B – 78.5B) = $(18.8) B - (57.7B – 66.9B) =$(9.2) B $(9.6) B

EBAY
Year Net Working Capital of Year Minus Net Working Capital of Δ Net Working
Previous Year Capital
2014 (26.53B – 17.53B) = 9.00 B - (23.28B – 12.64B)=$10.64B $(1.64) B
2015 (7.90B – 2.26B) = 5.64 B - (26.53B – 17.53B) =$9.0 B $(3.36) B
2016 (8.88B – 3.85B) = 5.08 B - (7.90B – 2.26B) = $5.64 B $(0.56) B
2017 (7.74B – 3.56B) = 4.18 B - (8.88B – 3.85B) = $5.08 B $(0.90) B
2018 (7.126B – 4.45B) = 2.67B - (7.74B – 3.56B) = $4.18 B $(1.51) B

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Net Working Capital = Current Assets – Current Liabilities

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 Analysis: Change in Net Working Capital indicates how much the difference between a
company’s net working capital is between years. If the value for Change in Net Working Capital
is positive, that indicates that difference between the more recent year’s current assets and
current liabilities is greater than the difference between the less recent year’s difference between
current assets and current liabilities. For example, in 2018, Amazon’s Change in Net Working
Capital was $4.4 billion. This is because in 2018, the difference between Amazon’s current
assets and liabilities was $6.7 billion while its 2017 difference was only $2.3 billion. Overall, a
positive number indicates that a company either increased its current assets, or decreased its
current liabilities, or some combination of both. Overall, it is better to have positive number than
a negative number. This is because the company has more liquid cash flow. It also indicates that
a company would be more easily able to get a bank loan since it currently has more liquid funds.
When looking at these companies for the most recent three years, Amazon is the only one with a
positive value for change in net working capital. Additionally, in the past three years, both eBay
and Walmart have had increasingly lower values. It is also important to mention, that many
investors prefer a higher difference between a company's current assets and current liabilities,
because it indicates that a company can easily pay off all its current debts. This means that if a
company has a positive change in net working capital, it has an increased ability to pay off
current liabilities, which investors may prefer. Therefore, based off this data, Amazon is a
financially sound company, with little risk of defaulting. Subsequently, this makes Amazon a
good investment.

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 Current Ratio: Current Assets/Current Liabilities

AMAZON
Year: Current Assets Divided By Current Liabilities Current Ratio
2014 $31,327,000,000 / $28,089,000,000 1.1153
2015 $35,705,000,000 / $33,887,000,000 1.0536
2016 $45,781,000,000 / $43,816,000,000 1.0448
2017 $60,197,000,000 / $57,883,000,000 1.0340
2018 $75,101,000,000 / 68,391,000,000 1.0981

WALMART
Year: Current Assets Divided By Current Liabilities Current Ratio
2014 $61,185,000,000 / $69,345,000,000 0.8823
2015 $63,278,000,000 / $65,253,000,000 0.9697
2016 $60,239,000,000 / $64,619,000,000 0.9322
2017 $57,689,000,000 / $66,928,000,000 0.8620
2018 $59,664,000,000 / $78,521,000,000 0.7600

EBAY
Year: Current Assets Divided By Current Liabilities Current Ratio
2014 $26,531,000,000 / $17,531,000,000 1.5134
2015 $7,904,000,000 / $2,263,000,000 3.4930
2016 $8,875,000,000 / $3,847,000,000 2.3070
2017 $7,744,000,000 / $3,559,000,000 2.1760
2018 $7,126,000,000 / $4,454,000,000 1.6000

Analysis: The Current ratio measures how well a company is currently able to pay of all
its current liabilities. An important benchmark for this ratio is 1.0 because it indicates that a
company is fully able to pay off their current liabilities with its current assets. Amazon’s values
for the current ratio are all above 1.0, which gives confidence to potential and current investors.

8
This confidence can be strengthened when seeing that all of Walmart’s values are under 1.0,
because Amazon is doing better in comparison. On the other hand, eBay’s ratio values were
often much higher than Amazon, which makes Amazon seem less investment worthy. However,
if an investor prefers stability with the current ratio, then Amazon is a better choice. Amazon’s
values remain relatively close while eBay’s values vary wildly. Overall, the current ratio values
for Amazon indicate that not only is Amazon financially healthy, but that it is also a good
investment.

Quick Ratio = (Current Assets – Inventory) / Current Liabilities

AMAZON
Year Current Assets Minus Inventory Divided Current Quick
By Liabilities Ratio
2014 $31,327,000,000 - $8,299,000,000 / $28,089,000,000 0.8198
2015 $35,705,000,000 - $10,243,000,000 / $33,887,000,000 0.7514
2016 $45,781,000,000 - $11,461,000,000 / $43,816,000,000 0.7833
2017 $60,197,000,000 - $16,047,000,000 / $57,883,000,000 0.7627
2018 $75,101,000,000 - $17,174,000,000 / $68,391,000,000 0.8470

WALMART
Year Current Assets Minus Inventory Divided Current Liabilities Quick
By Ratio
2014 $61,185,000,000 - $44,858,000,000 / $69,345,000,000 0.2354
2015 $63,278,000,000 - $45,141,000,000 / $65,253,000,000 0.2779
2016 $60,239,000,000 - $44,469,000,000 / $64,619,000,000 0.2440
2017 $57,689,000,000 - $43,046,000,000 / $66,928,000,000 0.2188
2018 $59,664,000,000 - $43,783,000,000 / $78,521,000,000 0.2023

EBAY
Year Current Assets Minus Inventory Divided Current Liabilities Quick Ratio
By
2014 $26,531,000,000 - N/A / $17,531,000,000 1.5134
2015 $7,904,000,000 - N/A / $2,263,000,000 3.4927
2016 $8,875,000,000 - N/A / $3,847,000,000 2.3070
2017 $7,744,000,000 - N/A / $3,559,000,000 2.1759
2018 $7,126,000,000 - N/A / $4,454,000,000 1.6000

9
 Analysis: The quick ratio is similar to the current ratio, as it also measures a company’s
ability to pay its current liabilities. However, the quick ratio is often considered a better
representation, because it does not include inventory. This is because it is not guaranteed that
inventory can be liquidized. Amazon is under 1.0, but it is still significantly higher than
Walmart. Once again, eBay's ratio is quite high. On the other hand, eBay does not have
inventory and therefore, cannot be accurately compared. It is also, once again, important to note
that eBay is significantly more inconsistent than either Walmart or Amazon. Though Amazon’s
ratio is under 1.0, it is fairly close. Additionally, as will be discussed later in the paper, Amazon
sells all of its inventory around eight times a year, which means they will be more than able to
cover their current liabilities. With this in mind, Amazon appears to be financially healthy, and
can therefore be invested in relatively safely.

Total Debt Ratio = (Total Assets – Total Equity) / Total Assets

AMAZON
Year Total Assets Minus Total Equity Divided Total Assets Total Debt
By Ratio
2014 $54,505,000,000 - $10,741,000,000 / $54,505,000,000 0.80
2015 $65,444,000,000 - $13,384,000,00 / $65,444,000,000 0.80
2016 $83,402,000,000 - $19,285,000,000 / $83,402,000,000 0.77
2017 $131,310,000,000 - $27,709,000,000 / $131,310,000,000 0.79
2018 $162,648,000,000 - $43,549,000,000 / $162,648,000,000 0.73

10
 WALMART
Year Total Assets Minus Total Equity Divided Total Assets Total Debt
By Ratio
2014 $204,751,000,000 - $81,339,000,000 / $204,751,000,000 0.60
2015 $203,706,000,000 - $85,937,000,000 / $203,706,000,000 0.57
2016 $199,581,000,000 - $83,611,000,000 / $199,581,000,000 0.59
2017 $198,825,000,000 - $80,535,000,000 / $198,825,000,000 0.59
2018 $204,522,000,000 - $80,822,000,000 / $204,522,000,000 0.60

EBAY
Year Total Assets Minus Total Equity Divided Total Assets Total Debt
By Ratio
2014 $45,132,000,000 - $19,906,000,000 / $45,132,000,000 0.56
2015 $17,755,000,000 - $6,576,000,000 / $17,755,000,000 0.63
2016 $23,847,000,000 - $10,539,000,000 / $23,847,000,000 0.56
2017 $25,986,000,000 - $8,049,000,000 / $25,986,000,000 0.69
2018 $22,819,000,000 - $6,281,000,000 / $22,819,000,000 0.72

Analysis: The total debt ratio indicates the amount of debt for every $1 in assets. An
acceptable value for the ratio depends on a company’s individual capital structure, but overall,
lower is better. By looking at either the graphs or by directly comparing the ratio, it is shown that
Amazon typically has more debt for every $1 in debt than Walmart or eBay. However, Amazon
has better consistency than eBay. Looking at this ratio alone, it would seem that Walmart is the
best investment among these three, but Walmart’s values are not extraordinarily lower than
Amazon’s. Additionally, since the values for Amazon are below 1.0, there is little risk that the
liabilities will lead to default or bankruptcy. Even though this ratio is somewhat concerning, in
2018, Amazon has decreased its total debt ratio. Overall, despite some concern, this ratio does
show that Amazon is financially sound, and can therefore be considered for investment.

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 Times Interest Earned Ratio = EBIT / Interest

AMAZON
Year EBIT Divided By Interest Times Interest
Earned Ratio
2014 $178,000,000 / $210,000,000 0.80
2015 $2,233,000,000 / $459,000,000 4.90
2016 $4,186,000,000 / $484,000,000 8.60
2017 $4,106,000,000 / $848,000,000 4.80
2018 $12,421,000,000 / $1,417,000,000 8.80

WALMART
Year EBIT Divided By Interest Times Interest
Earned Ratio
2014 $26,872,000,000 / $2,335,000,000 11.56
2015 $27,147,000,0000 / $2,461,000,000 11.08
2016 $24,105,000,000 / $2,548,000,000 9.49
2017 $22,764,000,000 / $2,367,000,000 9.66
2018 $$20,437,000,000 / $2,330,000,000 7.49

EBAY
Year EBIT Divided By Interest Times Interest
Earned Ratio
2014 $2,460,000,000 / $109,000,000 22.70
2015 $2,259,000,000 / $144,000,000 15.70
2016 $2,325,000,000 / $225,000,000 3.75
2017 $2,264,000,000 / $292,000,000 7.80
2018 $2,222,000,000 / $326,000,000 6.80

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 Analysis: The times interest earned ratio shows how well a company’s earnings cover
their interest payments. A higher value is preferred for this ratio. Amazon in 2014 has a
concerning number, as it is only .8 and significantly lower than both Walmart and eBay. By
2018, however, Amazon has the highest ratio. Overall, Amazon’s values were increasing,
Walmart’s values stayed comparatively consistent, and eBay’s values decreased with the lowest
value occurring in 2016. With this information, out of the three companies, Amazon is both the
most financially healthy, and the best investment choice.

Cash Coverage = EBTIDA/Interest

AMAZON
Year EBTIDA Divided by Interest Cash Coverage
2014 $3,959,000,000 / $210,000,000 18.85
2015 $8,514,000,000 / $459,000,000 18.67
2016 $12,302,000,000 / $484,000,000 25.42
2017 $15,584,000,000 / $848,000,000 18.38
2018 $25,034,000,000 / $1,417,000,000 17.67

WALMART
Year EBTIDA Divided by Interest Cash Coverage
2014 $35,742,000,000 / $2,335,000,000 15.21
2015 $36,320,000,000 / $2,461,000,000 14.76
2016 $33,559,000,000 / $2,548,000,000 13.17
2017 $32,844,000,000 / $2,367,000,000 13.88
2018 $30,966,000,000 / $2,330,000,000 13.29

EBAY
Year EBTIDA Divided by Interest Cash Coverage
2014 $3,158,000,000 / $109,000,000 28.97
2015 $2,946,000,000 / $144,000,000 20.46
2016 $3,007,000,000 / $225,000,000 13.36
2017 $2,940,000,000 / $292,000,000 10.07
2018 $2,918,000,000 / $326,000,000 8.95

13
 Analysis: The cash coverage ratio is another ratio that measures a company’s ability to
cover its interest expense. It should be no smaller than .5 and ideally at 1.0 or above. When
looking at the values, all three companies are comfortably above the 1.0 value. However,
Amazon overall, has higher values for this ratio and is therefore doing better. Additionally,
eBay’s values have been declining the last five years, which is concerning. Because of its high
values for cash coverage, Amazon is a reasonable investment, and it is also a firm that is
financially healthy.

Inventory Turnover Ratio = COGS / Inventory

AMAZON
Year COGS Divided By Inventory Inventory
Turnover Ratio
2014 $62,752,000,000 / $7,855,000,000 8.0
2015 $71,651,000,000 / $9,271,000,000 7.7
2016 $88,265,000,000 / $10,852,000,000 8.1
2017 $111,934,000,000 / $13,754,000,000 8.1
2018 $12,421,000,000 / $1,417,000,000 8.8

WALMART
Year COGS Divided By Inventory Inventory
Turnover Ratio
2014 $358,069,000,000 / $44,331,000,000 8.1
2015 $365,086,000,000 / $45,000,000,000 8.1
2016 $360,984,000,000 / $44,805,000,000 8.1
2017 $361,256,000,000 / $43,758,000,000 8.3
2018 $373,396,000,000 / $43,415,000,000 8.6

14
 EBAY
eBay does not have Inventory and therefore does not have an Inventory Turnover Ratio.

Analysis: Inventory Turnover ratio indicates how many times a company sold off all
their inventory within a period. The higher the ratio, the more efficiently a company manages
their inventory. Overall, Amazon’s ratio is increasing, except for 2015 which was when its
lowest value occurred. From 2014 through 2016, Walmart has very consistent values, and then
increases. Walmart has a marginally higher ratio value for every year until 2018 when Amazon’s
ratio value is larger. 2018 was also the best year for both companies. eBay, of course, cannot be
included because the corporation does not possess any inventory. Because Amazon has
consistent and healthy inventory ratio values, it makes for a favorable investment. Additionally,
based off these values, Amazon is a financially sound company.

Average Days Sales Turnover = 365 Days / Inventory Turnover Ratio

AMAZON
Year Days in a Year Divided by Inventory Turnover Ratio Avg. Days Turnover
2014 365 / 8.0 45.6
2015 365 / 7.7 47.4
2016 365 / 8.1 45.1
2017 365 / 8.1 45.1
2018 365 / 8.8 41.5

WALAMRT
Year Days in a Year Divided by Inventory Turnover Ratio Avg. Days Turnover
2014 365 / 8.1 45.1
2015 365 / 8.1 45.1
2016 365 / 8.1 45.1
2017 365 / 8.3 44.0
2018 365 / 8.6 42.4

15
 EBAY
eBay does not have Inventory and therefore does not have an Average Days Sales Turnover.

Analysis: Average sales day’s inventory, measures the number of days it takes a
company to sell all its inventory, a lower value is desired because it indicates that a company can
quickly turn its inventory into cash. However, a very low number is not ideal, because
opportunity cost may come into play. Both Amazon and Walmart have an average, average sales
days turnover value around 45. The similarity of the numbers indicates that both companies are
financially healthy. Additionally, the values also indicate that investing in Amazon is a
financially sound decision.

Receivables Turnover Ratio = Sales/Accounts Receivables

AMAZON
Year Sales Divided By Accounts Receivables
Receivables Turnover Ratio
2014 $88,988,000,000 / $5,190,000,000 17.1
2015 $107,006,000,000 / $5,633,000,000 19.0
2016 $135,987,000,000 / $6,997,000,000 19.4
2017 $177,866,000,000 / $10,752,000,000 16.5
2018 $232,887,000,000 / $14,921,000,000 15.6

16
 WALMART
Year Sales Divided By Accounts Receivables
Receivables Turnover Ratio
2014 $476,294,000,000 / $6,723,000,000 70.9
2015 $485,651,000,000 / $6,728,000,000 72.2
2016 $482,130,000,000 / $6,201,000,000 77.8
2017 $485,873,000,000 / $5,730,000,000 84.8
2018 $500,343,000,000 / $5,725,000,000 87.4

EBAY
Year Sales Divided By Accounts Receivables
Receivables Turnover Ratio
2014 $8,790,000,000 / $750,000,000 11.7
2015 $$8,592,000,000 / $610,000,000 14.1
2016 $9,298,000,000 / $606,000,000 15.4
2017 $9,927,000,000 / $644,000,000 15.4
2018 $10,746,000,000 / $704,000,000 15.3

Analysis: The receivables turnover ratio measures how quickly a company collects on its
previously sold inventory. Once again, a high value is desired for this ratio. This is a ratio in
which Walmart far outstrips Amazon and eBay. However, this is most likely because while
Amazon and eBay are solely online retailers, meaning customers cannot normally pay in cash,
Walmart does most of its sales at physical stores where cash and credit is accepted. With this in
mind, Amazon and eBay have appropriate numbers for their business styles. Based off this
information, it is reasonable to assert that Amazon is financially healthy and would make for a
good investment.

17
 Total Asset Turnover ratio= Sales/Total Asset

AMAZON
Year Sales Divided By Total Asset Total Asset
Turnover ratio
2014 $88,988,000,000 / $54,505,000,000 1.88
2015 $107,006,000,000 / $65,444,000,000 1.79
2016 $135,987,000,000 / $83,402,000,000 1.84
2017 $177,866,000,000 / $131,310,000,000 1.66
2018 $232,887,000,000 / $162,648,000,000 1.58

WALMART
Year Sales Divided By Total Assets Total Asset
Turnover Ratio
2014 $476,294,000,000 / $204,751,000,000 2.34
2015 $485,651,000,000 / $203,706,000,000 2.38
2016 $482,130,000,000 / $199,581,000,000 2.39
2017 $485,873,000,000 / $198,825,000,000 2.44
2018 $500,343,000,000 / $204,522,000,000 2.48

EBAY
Year Sales Divided By Total Assets Total Asset
Turnover Ratio
2014 $8,790,000,000 / $45,132,000,000 0.20
2015 $$8,592,000,000 / $17,755,000,000 0.27
2016 $9,298,000,000 / $23,847,000,000 0.45
2017 $9,927,000,000 / $25,986,000,000 0.40
2018 $10,746,000,000 / $22,819,000,000 0.44

18
 Analysis: The total asset turnover ratio is used to determine how many dollars in sales a
company generates for every dollar in assets. Higher values for this ratio are preferred, but it is
important to note that companies with low profit margins tend to have high asset turnover, while
high profit companies tend to have lower asset turnover. Walmart has a desirable value, while
eBay has somewhat concerning values. Amazon is situated comfortably in the middle with an
appropriate value, though it is decreasing, as of now it is a reasonable value for this ratio. When
analyzing these ideas and values, Amazon is in a healthy place, financially, and is therefore, a
company that many would deem investment worthy.

Profit margin = net income / sales

AMAZON
Year Net Income Divided By Sales Profit Margin
2014 (241,000,000) / $88,988,000,000 (.3) %
2015 596,000,000 / $107,006,000,000 .6%
2016 2,371,000,000 / $135,987,000,000 1.8%
2017 3,033,000,000 / $177,866,000,000 1.3%
2018 10,073,000,000 / $232,887,000,000 4.2%

WALMART
Year Net Income Divided By Sales Profit Margin
2014 16,022,000,000 / $476,294,000,000 3.5%
2015 16,363,000,000 / $485,651,000,000 3.5%
2016 14,694,000,000 / $482,130,000,000 3.1%
2017 13,643,000,000 / $485,873,000,000 2.9%
2018 9,862,000,000 / $500,343,000,000 2.1%

EBAY
Year Net Income Divided By Sales Profit Margin
2014 46,000,000 / $8,790,000,000 .05%
2015 1,725,000,000 / $8,592,000,000 20.1%
2016 7,266,000,000 / $9,298,000,000 78.1%
2017 (1,017,000,000) / $9,927,000,000 (10.2) %
2018 2,530,000,000 / $10,746,000,000 23.5%

19
 Analysis: Profit margin is used to determined how much net income is generated for
every dollar in sales. The higher the ratio, the safer the company is from going into the red. Both
Amazon and Walmart have small profit margins, due to the nature of their business models. On
the other hand, eBay sometimes had much higher and much lower profit margins. Another thing
to take note of is the fact that while eBay has inconsistent values and Walmart has declining
values, Amazon’s profit margin has been increasing. The increasing profit margin for Amazon,
illustrates its financial health, and further proves that Amazon should be invested in.

EBITDA Margin = EBITDA / Sales

AMAZON
Year EBITDA Divided by Sales EBITDA Margin
2014 $3,959,000,000 / $88,988,000,000 4.4%
2015 $8,514,000,000 / $107,006,000,000 8.0%
2016 $12,302,000,000 / $135,987,000,000 9.0%
2017 $15,584,000,000 / $177,866,000,000 8.8%
2018 $25,034,000,000 / $232,887,000,000 10.7%

WALMART
Year EBITDA Divided by Sales EBITDA Margin
2014 $35,742,000,000 / $476,294,000,000 7.5%
2015 $36,320,000,000 / $485,651,000,000 7.5%
2016 $33,559,000,000 / $482,130,000,000 7.0%
2017 $32,844,000,000 / $485,873,000,000 6.8%
2018 $30,966,000,000 / $500,343,000,000 6.2%

20
 EBAY
Year EBITDA Divided by Sales EBITDA Margin
2014 $3,158,000,000 / $8,790,000,000 35.9%
2015 $2,946,000,000 / $8,592,000,000 34.3%
2016 $3,007,000,000 / $9,298,000,000 32.3%
2017 $2,940,000,000 / $9,927,000,000 29.6%
2018 $2,918,000,000 / $10,746,000,000 20.7%

Analysis: The EBITDA Margin stands for earnings before interest, taxes, depreciation,
and amortization. This ratio showcases a percentage of earnings a company has left over for
interest, taxes, depreciation, and amortization. It is better to have a high margin because the
higher the margin, the more there is to spend on interest, taxes, depreciation, and amortization
and have some left over for profit. eBay has extremely high EBITDA margins compared to
Amazon and Walmart. However, its EBIDTA and sales are significantly lower than Amazon and
Walmart. Additionally, it is progressively decreasing each year while Amazon’s is slowly
increasing each year. Walmart’s EBIDTA margin has remained constant. Overall, Amazon’s
margin itself still portrays a financially healthy company that would be a good investment.

Return on Assets = Net Income / Total assets

AMAZON
Year Net Income Divided By Total Assets Return on Assets
2014 $(241,000,000) / $54,505,000,000 (-0.0044)
2015 $596,000,000 / $65,444,000,000 0.0091
2016 $2,371,000,000 / $83,402,000,000 0.0284
2017 $3,033,000,000 / $131,310,000,000 0.0231
2018 $10,073,000,000 / $162,648,000,000 0.0619

21
 WALMART
Year Net Income Divided By Total Assets Return on Assets
2014 $16,022,000,000 / $204,751,000,000 0.0815
2015 $16,363,000,000 / $203,706,000,000 0.0839
2016 $14,694,000,000 / $199,581,000,000 0.0756
2017 $13,643,000,000 / $198,825,000,000 0.0719
2018 $9,862,000,000 / $204,522,000,000 0.0515

EBAY
Year Net Income Divided By Total Assets Return on Assets
2014 $46,000,000 / $45,132,000,000 0.0010
2015 $1,725,000,000 / $17,755,000,000 0.0972
2016 $7,266,000,000 / $23,847,000,000 0.3047
2017 $(1,017,000,000) / $25,986,000,000 (0.0391)
2018 $2,530,000,000 / $22,819,000,000 0.1109

Analysis: The return on assets ratio indicates the profit per dollar of assets. It is
preferable to have a high return on assets. A company with a low ROA may be a risky
investment because it is not a good sign of company growth. Walmart has been consistent, while
eBay has been extremely inconsistent. Amazon’s ROA dramatically increased in 2017 and then
declined in 2018. On average, Walmart and Amazon’s ROAs are similar. While Amazon’s
sudden drop and current low ROA make Amazon seem like a risky investment, the overall
picture still paints Amazon as a financially healthy company and a good investment.

22
 Return on Equity = net income/ total equity

AMAZON
Year Net Income Divided By Total Equity Return on Equity
2014 $(241,000,000) / $10,741,000,000 (0.0224)
2015 $596,000,000 / $13,384,000,00 0.0445
2016 $2,371,000,000 / $19,285,000,000 0.1229
2017 $3,033,000,000 / $27,709,000,000 0.1095
2018 $10,073,000,000 / $43,549,000,000 0.2313

WALMART
Year Net Income Divided By Total Equity Return on Equity
2014 $16,022,000,000 / $81,339,000,000 0.208
2015 $16,363,000,000 / $85,937,000,000 0.204
2016 $14,694,000,000 / $83,611,000,000 0.181
2017 $13,643,000,000 / $80,535,000,000 0.172
2018 $9,862,000,000 / $80,822,000,000 0.124

EBAY
Year Net Income Divided By Total Equity Return on Equity
2014 $46,000,000 / $19,906,000,000 (0.004)
2015 $1,725,000,000 / $6,576,000,000 0.147
2016 $7,266,000,000 / $10,539,000,000 0.851
2017 $(1,017,000,000) / $8,049,000,000 0.225
2018 $2,530,000,000 / $6,281,000,000 0.288

23
 Analysis: The return on equity ratio indicates how much the stockholders received per
dollar of profit. ROE is used to measure the bottom-line of a firm’s performance. Generally, the
higher the ratio, the better. However, the appearance can be skewed because more debt and less
equity can also create a higher ROE. Amazon and eBay had extremely low ROEs in 2014, but
they have improved since then. Walmart has stayed consistent. eBay’s rose dramatically in 2016
but fell back down in line with Amazon and Walmart. Looking at this ratio, investors can be
confident that Amazon is a good investment because of its high ROE which also indicates that
Amazon is financially healthy.

Earnings per Share= net income / shares outstanding

AMAZON
Year Net Income Divided By Shares Earnings per
Outstanding Share
2014 $(241,000,000) / 465,000,805.5 $(0.54)
2015 $596,000,000 / 846,907,339.9 $1.24
2016 $2,371,000,000 / 477,000,013.3 $4.91
2017 $3,033,000,000 / 483,999,589.6 $6.15
2018 $10,073,000,000 / 490,999,820.2 $20.13

WALMART
Year Net Income Divided By Shares Earnings per
Outstanding Share
2014 $16,022,000,000 / 3,679,926,840 $4.88
2015 $16,363,000,000 / 3,584,879,770 $5.05
2016 $14,694,000,000 / 3,416,870,217 $4.57
2017 $13,643,000,000 / 3,200,503,461 $4.39
2018 $9,862,000,000 / 3,022,020,551 $3.27

EBAY
Year Net Income Divided By Shares Earnings per
Outstanding Share
2014 $46,000,000 / 1,309,329,710 $0.00
2015 $1,725,000,000 / 1,183,988,355 $1.43
2016 $7,266,000,000 / 1,086,998,990 $6.45
2017 $(1,017,000,000) / 1,028,987,811 $(1.07)
2018 $2,530,000,000 / 914,998,218.7 $1.77

24
 Average Earnings per Share Earnings per Share
7 $25.00
6 $20.00
5 $15.00
4 $10.00
3 $5.00
2 $-
1 2014 2015 2016 2017 2018
$(5.00)
0
Amazon Walmart Ebay Amazon Walmart Ebay

Analysis: The earnings-per-share ratio is the amount a company earns per share of stock.
The higher the ratio, the higher the amount a company will receive. Over the past five fiscal
years, Amazon has gradually increased and Walmart has remained fairly constant. On the other
hand, eBay’s ratio values have been erratic. A company does not want to have drastically
inconsistent earnings. Amazon is the ideal case, progressively increasing as time passes.
Therefore, Amazon is an ideal company to invest in because their earnings per share are
consistently increasing. This is also evidence of a financially healthy company.

P/E Earning Ratio = price per share / earnings per share

AMAZON
Year Price per share Divided By Earnings per P/E Ratio
share
2014 $310.35 / $(0.54) 0.00
2015 $675.89 / $1.24 545.07
2016 $749.87 / $4.91 152.72
2017 $1,169.47 / $6.15 190.16
2018 $1501.97 / $20.13 74.61

WALMART
Year Price per share Divided By Earnings per P/E Ratio
share
2014 $65.61 / $4.88 13.44
2015 $76.52 / $5.05 15.15
2016 $61.41 / $4.57 13.44
2017 $63.56 / $4.39 14.48
2018 $104.13 / $3.27 31.84

25
 EBAY
Year Price per share Divided By Earnings per P/E Ratio
share
2014 $22.08 / $0.00 0.00
2015 $27.48 / $1.43 19.22
2016 $29.69 / $6.45 4.60
2017 $37.74 / $(1.07) 0.00
2018 $28.07 / $1.77 15.86

Analysis: The P/E earnings ratio is used to indicate how much investors are willing to
pay per dollar of current assets. It can change throughout the day. The higher the ratio, the more
potential for future growth. Walmart and eBay’s have consistently stayed low, while Amazon
has fluctuated quite a bit over the five years. This shows that Amazon has plenty of potential for
future growth and would be a good investment due to its good financial health.

Market-to-Book Ratio = market value per share / book value per share

AMAZON
Year Market value per Divided By Book value per Market to book
share share ratio
2014 $310.35 / $23.10 13.44
2015 $675.89 / $28.42 23.79
2016 $749.87 / $40.43 18.55
2017 $1,169.47 / $57.25 20.43
2018 $1,501.97 / $88.69 16.93

26
 WALMART
Year Market value per Divided By Book value per Market to book
share share ratio
2014 $65.61 / $25.16 2.61
2015 $76.52 / $26.62 2.87
2016 $61.41 / $26.44 2.32
2017 $63.56 / $26.46 2.41
2018 $104.13 / $27.38 3.80

EBAY
Year Market value per Divided By Book value per Market to book
share share ratio
2014 $22.08 / $16.26 1.36
2015 $27.48 / $5.55 4.95
2016 $29.69 / $9.70 3.06
2017 $37.74 / $7.82 4.82
2018 $28.07 / $6.86 4.09

Analysis: The market-to-book ratio is used to compare the market value of the firm’s
investments with its cost. If the firm’s market-to-book ratio is below one, it may not be
successful in creating value for its shareholders. All three companies have succeeded staying
above one. Walmart and eBay stayed fairly constant. Amazon’s market-to-book ratio is
considerably higher than Walmart and eBay, indicating that they create significant value for their
shareholders, but it is more inconsistent. Regardless, Amazon’s high market-to-book ratio
indicates good financial health and opportunity for investment.

27
 Market Capitalization = Price per Share x Shares Outstanding

AMAZON
Year Price per Share Multiplied by Shares Outstanding Market Cap.
2014 $310.35 x 465,000,805.5 $144,313,000,000
2015 $675.89 x 846,907,339.9 $318,344,000,000
2016 $749.87 x 477,000,013.3 $357,688,000,000
2017 $1,169.47 x 483,999,589.6 $566,023,000,000
2018 $1501.97 x 490,999,820.2 $737,467,000,000

WALMART
Year Price per Share Multiplied by Shares Outstanding Market Cap.
2014 $65.61 x 3,679,926,840 $241,440,000,000
2015 $76.52 x 3,584,879,770 $274,315,000,000
2016 $61.41 x 3,416,870,217 $209,830,000,000
2017 $63.56 x 3,200,503,461 $203,424,000,000
2018 $104.13 x 3,022,020,551 $314,683,000,000

EBAY
Year Price per Share Multiplied by Shares Outstanding Market Cap.
2014 $22.08 x 1,309,329,710 $28,910,000,000
2015 $27.48 x 1,183,988,355 $32,536,000,000
2016 $29.69 x 1,086,998,990 $32,273,000,000
2017 $37.74 x 1,028,987,811 $38,834,000,000
2018 $28.07 x 914,998,218.7 $25,684,000,000

28
 Analysis: Market capitalization is the total value of a company according to the stock
market. The higher the number, the more conservative the investment. Lower market
capitalizations are riskier because they indicate the potential for rapid, and uncontrolled growth.
eBay has had consistently low market capitalization while Walmart has remained consistently in
the middle. On the other hand, Amazon’s market capitalization has increased dramatically over
the years. This high value indicates that Amazon is a good investment because they are
financially healthy.

Enterprise Value Ratio =Market Capitalization+ Market Value of Interest-bearing Debt-

Cash

AMAZON
Year Market Plus Market value of Minus Cash Enterprise
Capitalization interest-bearing debt Value
2014 $144,313,000,000 + $16,089,000,000 - $17,416,000,000 $142,985 MM
2015 $318,344,000,000 + $14,175,000,000 - $19,808,000,000 $312,711 MM
2016 $357,688,000,000 + $20,410,000,000 - $25,981,000,000 $352,117 MM
2017 $566,023,000,000 + $44,147,000,000 - $30,986,000,000 $578,184 MM
2018 $737,467,000,000 + $49,289,000,000 - $41,250,000,000 $745,506 MM

WALMART
Year Market Plus Market value of Minus Cash Enterprise
Capitalization interest-bearing debt Value
2014 $241,440,000,000 + $56,641,000,000 - $6,627,000,000 $291,154MM
2015 $274,315,000,000 + $50,165,000,000 - $9,135,000,000 $315,345 MM
2016 $209,830,000,000 + $50,034,000,000 - $8,343,000,000 $251,521 MM
2017 $203,424,000,000 + $42,729,000,000 - $6,602,000,000 $239,551 MM
2018 $314,683,000,000 + $42,446,000,000 - $6,456,000,000 $350,673 MM

EBAY
Year Market Plus Market value of Minus Cash Enterprise Value
Capitalization interest-bearing debt
2014 $28,910,000,000 + $7,627,000,000 - $7,816,000,000 $28,721,000,000
2015 $32,536,000,000 + $6,479,000,000 - $6,103,000,000 $33,182,000,000
2016 $32,273,000,000 + $8,960,000,000 - $7,130,000,000 $34,103,000,000
2017 $38,834,000,000 + $10,015,000,000 - $5,843,000,000 $43,006,000,000
2018 $25,684,000,000 + $9,235,000,000 - $4,898,000,000 $30,021,000,000

29
 Analysis: The enterprise value estimates how much it would take to buy all the
outstanding stock of a firm and pay off all a firm’s debt. A company usually wants their
enterprise value to be high, because that would indicate their company is worth more. However,
a high enterprise value does not necessarily indicate success because debt is also calculated
which can raise the value. Overall, Amazon has a higher enterprise value and eBay’s is
significantly lower than both Walmart and Amazon. Amazon’s value also continuously
increases. Analyzing each portion of the equation, Amazon’s debt is increasing each year, but its
market capitalization and cash significantly increase as well. Therefore, Amazon’s enterprise
value exemplifies that it is financially healthy and a good investment opportunity.

DuPont Analysis = (Profit Margin) x (Total Asset Turnover) x (Equity Multiplier)

AMAZON
Year Profit Multiplied Total Asset Multiplied Equity ROE
Margin by Turnover by Multiplier
2014 (0.003) x 1.88 x 5.07 (0.0224)
2015 .006 x 1.79 x 4.89 0.0445
2016 .018 x 1.84 x 4.32 0.1229
2017 .013 x 1.66 x 4.74 0.1095
2018 .042 x 1.58 x 3.73 0.2313

WALMART
Year Profit Multiplied Total Asset Multiplied Equity ROE
Margin by Turnover by Multiplier
2014 0.035 x 2.34 x 2.52 0.208
2015 0.035 x 2.38 x 2.37 0.204
2016 0.031 x 2.39 x 2.39 0.181
2017 0.029 x 2.44 x 2.47 0.172
2018 0.021 x 2.48 x 2.53 0.124

30
 EBAY
Year Profit Multiplied Total Asset Multiplied Equity ROE
Margin by Turnover by Multiplier
2014 0.005 x 0.20 x 2.27 (0.004)
2015 0.201 x 0.27 x 2.70 0.147
2016 0.781 x 0.45 x 2.26 0.851
2017 (0.102) x 0.40 x 3.23 0.225
2018 0.235 x 0.44 x 3.63 0.288

Analysis: The DuPont analysis is used to break-a-part return on equity to dissect where
an unsatisfactory ROE could have gone awry. It separates ROE into three components: profit
margin, total assets, and equity multiplier. As discussed previously, the higher the ROE, the
better. All three companies are fairly consistent until 2016 when eBay’s ROE dramatically
increases, only to be brought back down in 2017 and 2018. Amazon, specifically, has gently
increased over time. It is likely that this trend will continue. Therefore, investing in Amazon
would be a wise choice for investors based on this display of financial health.

Equity and Debt Analysis

Equity Valuation Method: Price-to-Sales ratio = price-per-share / sales-per-share

Company Price-per-share Divided By Sales-per-share Price-to-Sales Ratio

Amazon $1501.97 / $465.96 3.22
Walmart $104.13 / $165.79 0.63
eBay $28.07 / $10.73 2.61

31
 Analysis: Out of all the equity valuation methods, the price-to-sales ratio seemed to be
the most appropriate for Amazon because currently, dividends are not given. This ratio does not
include dividends in its formula, so it was used for all three companies in order to be able to
evaluate them equally. This ratio indicates how much a stockholder is willing to pay per dollar of
sales. Therefore, Amazon’s investors are willing to pay $3.22 per dollar earned in sales.
Compared to its competitors, Amazon’s investors are willing to pay a higher amount per dollar in
sales than Walmart or eBay’s investors. Amazon is also higher than the industry average of 3.07
(Damodaran 2019 Revenue). Overall, from an investor’s perspective, there is great value in
investing in Amazon, especially since it is a financially healthy company.

Beta Coefficient for the 2018 fiscal year

Company Beta Coefficient

Amazon 1.63
Walmart 0.37
eBay 1.35

Analysis: A beta coefficient represents systematic risk for a company relative to the
market. The overall market is always 1.0. If the beta is higher than one, it moves in the same
direction as the market at a greater rate. A positive beta below 1.0 moves with the market at a
smaller rate. With a beta coefficient of 1.63, Amazon moves in the same direction as the market
but at a higher rate. This means that if the market does well, Amazon will do even better.
However, if the market declines, Amazon will decline more dramatically. Both Walmart and
eBay have positive betas. Walmart’s is below 1.0 and eBay’s beta is surprisingly close to
Amazon at 1.35. However, it is important to note that Walmart is not entirely in the same market
as Amazon. Therefore, 1.63 seems to be an appropriate number for Amazon as it is an
investment of great return or great loss. It is riskier, but the higher the risk, the higher the return.
Additionally, the industry average is 1.42 which indicates that Amazon is not as above average
as it initially appears (Damodaran 2019 Cost). Overall, Amazon is financially healthy and while
it is more volatile, it is not a decidedly risky investment.

Cost of Equity Capital = Risk-free Rate + Beta (Risk Premium)

Company Risk-free Plus Beta Multiplied by Risk Premium Cost of Equity

Rate Capital
Amazon 3.27% + 1.63 x 5.25% 11.83%
Walmart 3.15% + 0.37 x 5.25% 3.34%
eBay 2.93% + 1.35 x 9.17% 15.31%

32
 Analysis: The Cost of Equity Capital is the rate the company is required to return to its
stockholders. The higher the percentage, the higher the risk for investors. Compared to Walmart
and eBay, Amazon seems relatively high. However, the risk-free rate and risk premium rate are
very similar to Walmart’s. The main difference between the two is Amazon’s beta which is
significantly higher. However, this should not scare away investors because when compared to
other tech giants, such as Apple or Microsoft, Amazon has a similar rate (finbox). When looking
at the big picture, Amazon is still a wise choice for an investment.

Weighted Average Cost of Capital = (Equity/Equity + Debt) X Requity + (Debt / Equity +

Debt) X RDebt X (1 – Tc)

Company Equity/ Multiplied Requity Plus Debt/ Multiplied Rdebt X RWACC

(Equity By (Equity + by (1 – Tc)
+ Debt) Debt)
Amazon 26.77% x 11.83% + 73.22% x 3.56% 5.77%
Walmart 39.52% x 3.34% + 60.48% x 3.47% 3.53%
eBay 27.53% x 15.31% + 72.47% x 3.47% 6.73%

Analysis: Weighted Average Cost of Capital is the cost of capital, such as common
stocks and bonds, weighted to determine how much return stockholders expect from the
company. The higher the percentage, the lower the value of the company and the riskier the
investment. A higher percentage is riskier because the company owes a higher amount in interest
per financed dollar to its stockholders. In the last fiscal year, Amazon’s WACC was 5.77%.
Compared to its competitors, Amazon is in the middle. However, when compared to the industry
average of 10.30%, Amazon sounds preferable (Damodaran 2019 Cost). Therefore, when
compared to the overall industry, Amazon is a financially healthy company and makes for a good
choice for as an investment.
Conclusion
Amazon is a highly successful online retailer. While some of its ratios, such as its ROA,
cause some concern, its unfavorable values pale at the number of ratios that indicate that
Amazon is financially healthy. Additionally, with a strong position in its market, Amazon has
little to fear from its main competitors. Amazon far outstrips eBay in overall performance, and
though Walmart does beat Amazon in certain aspects, Amazon’s product availability obliterates
Walmart. While Walmart and eBay have less concerning betas, Amazon’s beta is appropriate
when considering that Amazon is not only a retailer, but also a tech company. With all the
information provided above, it is clear that not only is Amazon a financially healthy company, it
is also a perfect company for investment6.

6
Disregarding all headers, titles, charts, graphs, and bibliography, our total word count is around 4,030.

33
 Annotated Bibliography

Amazon - 22 Year Stock Price History | AMZN. (n.d.). Retrieved from

https://www.macrotrends.net/stocks/charts/AMZN/amazon/stock-price-history

Macrotrends is an online research database on companies’ financials. Not only does it

provide a company’s balance and income statements, but Macrotrends also provides other values

needed to evaluate the financial health of a company, specifically its stock information. These

include a company’s price-per-share, earnings-per-share, sales-per-share, market-value-per-

share, book-value-per-share, market capitalization, market value of interest-bearing debt, and

stock price. These values can be used to calculate Amazon’s p/e earnings ratios, price-to-sales

ratio, market-to-book ratios, enterprise values, and to analyze the company’s market prices for

the past five years. Macrotrends is a credible source for this information because it’s an official

database with decades of information.

Amazon Com Inc. (2016). 2015-2013 consolidated statements of operations. Retrieved from

https://www.sec.gov/cgibin/viewer?action=view&cik=1018724&accession_number=000101

8724-16-000172&xbrl_type=v#

Amazon Com Inc. (2019). 2018-2016 consolidated statements of operations. Retrieved from

https://www.sec.gov/cgibin/viewer?action=view&cik=1018724&accession_number=000101

8724-19-000004&xbrl_type=v#

The SEC website provides all the income statements for Amazon needed between the years

2014 and 2018. It is essential to examine a company’s income statements in order to evaluate the

financial health of a company. The income statement provides the company’s EBITs, interests,

costs of goods sold, sales, and net incomes. These values can be used to calculate the company’s

times interest earned ratios, inventory turnover ratios, receivables turnover ratios, total asset

34
turnover ratios, profit margins, returns on assets, and returns on equity for the past five years.

The SEC is the most reliable source of information for obtaining a company’s balance sheets

because it is an independent federal government agency designed to enforce securities laws and

regulations. All the documents provided are official and will therefore be the most accurate.

Amazon Com Inc. (2016). 2015-2014 consolidated balance sheets. Retrieved from

https://www.sec.gov/cgibin/viewer?action=view&cik=1018724&accession_number=000101

8724-16-000172&xbrl_type=v#

Amazon Com Inc. (2017). 2016-2015 consolidated balance sheets. Retrieved from

https://www.sec.gov/cgibin/viewer?action=view&cik=1018724&accession_number=000101

8724-17-000011&xbrl_type=v#

Amazon Com Inc. (2019). 2018-2017 consolidated balance sheets. Retrieved from

https://www.sec.go/cgibin/viewer?action=view&cik=1018724&accession_number=0001018

724-19-000004&xbrl_type=v#

The SEC website provides all the balance sheets for Amazon needed between the years 2014

and 2018. It is essential to examine a company’s balance sheets in order to evaluate the financial

health of a company. The balance sheet provides the company’s current assets, current liabilities,

inventory, total assets, total equity, accounts receivables, and cash. These values can be used to

calculate the company’s current asset ratios, quick ratios, inventory turnover ratios, total debt

ratios, total asset turnover ratios, returns on assets, returns on equity, receivables turnover ratios,

and enterprise value ratios for the past five years. The SEC is the most reliable source of

information for obtaining a company’s balance sheets because it is an independent federal

government agency designed to enforce securities laws and regulations. All the documents

provided are official and will therefore be the most accurate.

35
AMAZON.COM INC.DL-NOTES 2017(17/20) REG.S Bond | Markets Insider. (n.d.). Retrieved

May 2, 2019, from https://markets.businessinsider.com/bonds/amazoncom_incdl-

notes_201717-20_regs-bond-2020-usu02320ad80

Damodaran, A. (2019, January). Cost of Capital by Sector (US). (n.d.). Retrieved from

http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/wacc.htm

Damodaran, A. (2019, January). Revenue Multiples by Sector (US). (n.d.). Retrieved from

http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/psdata.html

https://hbr.org/199/03/how-competitive-forces-shape-strategy

eBay - 21 Year Stock Price History | EBAY. (n.d.). Retrieved from

https://www.macrotrends.net/stocks/charts/EBAY/eBay/stock-price-history

Macrotrends is an online research database on companies’ financials. Not only does it

provide a company’s balance and income statements, but Macrotrends also provides other values

needed to evaluate the financial health of a company, specifically its stock information. These

include a company’s price-per-share, earnings-per-share, sales-per-share, market-value-per-

share, book-value-per-share, market capitalization, market value of interest-bearing debt, and

stock price. These values can be used to calculate eBay’s p/e earnings ratios, price-to-sales ratio,

market-to-book ratios, enterprise values, and to analyze the company’s market prices for the past

five years. Macrotrends is a credible source for this information because it’s an official database

with decades of information.

eBay Inc. (2016). 2015-2014 consolidated balance sheet. Retrieved from

https://www.sec.gov/cgibin/viewer?action=view&cik=1065088&accession_number=000106

5088-16-000265&xbrl_type=v#

36
eBay Inc. (2017). 2016-2015 consolidated balance sheet. Retrieved from

https://www.sec.gov/cgibin/viewer?action=view&cik=1065088&accession_number=000106

5088-17-000007&xbrl_type=v#

eBay Inc. (2019). 2018-2017 consolidated balance sheet. Retrieved from

https://www.sec.gov/cgibin/viewer?action=view&cik=1065088&accession_number=000106

5088-19-000006&xbrl_type=v#

The SEC website provides all the balance sheets for eBay needed between the years 2014

and 2018. It is essential to examine a company’s balance sheets in order to evaluate the financial

health of a company. The balance sheet provides the company’s current assets, current liabilities,

inventory, total assets, total equity, accounts receivables, and cash. These values can be used to

calculate the company’s current asset ratios, quick ratios, inventory turnover ratios, total debt

ratios, total asset turnover ratios, returns on assets, returns on equity, receivables turnover ratios,

and enterprise value ratios for the past five years. The SEC is the most reliable source of

information for obtaining a company’s balance sheets because it is an independent federal

government agency designed to enforce securities laws and regulations. All the documents

provided are official and will therefore be the most accurate.

eBay Inc. (2019). 2018-2016 consolidated statement of income. Retrieved from

https://www.sec.gov/cgibin/viewer?action=view&cik=1065088&accession_number=000106

5088-19-000006&xbrl_type=v

eBay Inc. (2017). 2016-2014 consolidated statement of income. Retrieved from

https://www.sec.gov/cgibin/viewer?action=view&cik=1065088&accession_number=000106

5088-17-000007&xbrl_type=v#

37
 The SEC website provides all the income statements for eBay needed between the years 2014

and 2018. It is essential to examine a company’s income statements in order to evaluate the

financial health of a company. The income statement provides the company’s EBITs, interests,

costs of goods sold, sales, and net incomes. These values can be used to calculate the company’s

times interest earned ratios, inventory turnover ratios, receivables turnover ratios, total asset

turnover ratios, profit margins, returns on assets, and returns on equity for the past five years.

The SEC is the most reliable source of information for obtaining a company’s balance sheets

because it is an independent federal government agency designed to enforce securities laws and

regulations. All the documents provided are official and will therefore be the most accurate.

EBAY INC.DL-NOTES 2016(16/22) Bond | Markets Insider. (n.d.). Retrieved May 2, 2019,

from https://markets.businessinsider.com/bonds/ebay_incdl-notes_201616-22-bond-2022-

us278642an33

Finbox. (n.d.). Retrieved May 2, 2019, from https://finbox.io/AMZN/models/wacc

Finbox. (n.d.). Retrieved May 2, 2019, from https://finbox.io/WMT/models/wacc

Finbox. (n.d.). Retrieved May 2, 2019, from https://finbox.io/EBAY/builders/wacc/2

Porter, M.E. (1979). How Competitive Forces Shape Strategy. Harvard Business Review, 1-23.

https://hbr.org/1979/03/how-competitive-forces-shape-strategy

Michael Porter is a professor at Harvard who wrote a Harvard Business Review article about

the five forces that create obstacles impairing a company’s ability to succeed. With these five

forces in mind, one can analyze a company’s ability to compete within its market against its

competitors. A company may seem to be profitable in the present, but if they are unable to hold

their own against competitor forces going forward, they may see a significant drop in market

share and profits. This is important for potential investors to analyze before investing in a

38
company. Porter is reliable and knowledgeable source who has written countless other academic

business articles.

Walmart - 47 Year Stock Price History | WMT. (n.d.). Retrieved from

https://www.macrotrends.net/stocks/charts/WMT/walmart/stock-price-history

Macrotrends is an online research database on companies’ financials. Not only does it

provide a company’s balance and income statements, but Macrotrends also provides other values

needed to evaluate the financial health of a company, specifically its stock information. These

include a company’s price-per-share, earnings-per-share, sales-per-share, market-value-per-

share, book-value-per-share, market capitalization, market value of interest-bearing debt, and

stock price. These values can be used to calculate Walmart’s p/e earnings ratios, price-to-sales

ratio, market-to-book ratios, enterprise values, and to analyze the company’s market prices for

the past five years. Macrotrends is a credible source for this information because it’s an official

database with decades of information.

Walmart Inc. (2015). 2015-2014 consolidated balance sheets. Retrieved from

https://www.sec.gov/cgibin/viewer?action=view&cik=104169&accession_number=0000104

169-15-000011&xbrl_type=v#

Walmart Inc. (2016). 2016-2015 consolidated balance sheets. Retrieved from

https://www.sec.gov/cgibin/viewer?action=view&cik=104169&accession_number=0000104

169-17-000021&xbrl_type=v#

Walmart Inc. (2018). 2018-2017 consolidated balance sheets. Retrieved from

https://www.sec.gov/cgibin/viewer?action=view&cik=104169&accession_number=0000104

169-18-000028&xbrl_type=v#

39
 The SEC website provides all the balance sheets for Walmart needed between the years 2014

and 2018. It is essential to examine a company’s balance sheets in order to evaluate the financial

health of a company. The balance sheet provides the company’s current assets, current liabilities,

inventory, total assets, total equity, accounts receivables, and cash. These values can be used to

calculate the company’s current asset ratios, quick ratios, inventory turnover ratios, total debt

ratios, total asset turnover ratios, returns on assets, returns on equity, receivables turnover ratios,

and enterprise value ratios for the past five years. The SEC is the most reliable source of

information for obtaining a company’s balance sheets because it is an independent federal

government agency designed to enforce securities laws and regulations. All the documents

provided are official and will therefore be the most accurate.

Walmart Inc. (2016). 2016-2014 consolidated statements of income. Retrieved from

https://www.sec.gov/cgibin/viewer?action=view&cik=104169&accession_number=0000104

169-16-000079&xbrl_type=v#

Walmart Inc. (2018). 2018-2016 consolidated statements of income. Retrieved from

https://www.sec.gov/cgibin/viewer?action=view&cik=104169&accession_number=0000104

169-18-000028&xbrl_type=v#

The SEC website provides all the income statements for Walmart needed between the years

2014 and 2018. It is essential to examine a company’s income statements in order to evaluate the

financial health of a company. The income statement provides the company’s EBITs, interests,

costs of goods sold, sales, and net incomes. These values can be used to calculate the company’s

times interest earned ratios, inventory turnover ratios, receivables turnover ratios, total asset

turnover ratios, profit margins, returns on assets, and returns on equity for the past five years.

The SEC is the most reliable source of information for obtaining a company’s balance sheets

40
because it is an independent federal government agency designed to enforce securities laws and

regulations. All the documents provided are official and will therefore be the most accurate.

WALMART INC. Bond | Markets Insider. (n.d.). Retrieved May 2, 2019, from

https://markets.businessinsider.com/bonds/7_550-walmart-bond-2030-us931142bf98

41