ROMBLON STATE UNIVERSITY

College of Business and Accountancy

Odiongan, Romblon

A PROJECT

REPORT ON FINANCIAL

&

RATIO ANALYSIS

Submitted by:

CEZARENE AQUINO FERNANDO

BSBA FM 3 BLK 3

________________________________

Submitted to:

RAY JOSEPH G. INOCENCIO, LPT, MABA

In Partial Fulfillment of the Requirements for the Subject

Financial Analysis and Reporting

April 2022
 I. INTRODUCTION

AMAZON COMPANY

AMAZON’S COMPANY is one of the most valuable companies in the world. It became a
household name associated with a wide selection of goods, low prices, and quick delivery.
Amazon is dominating e-commerce business and has recently started also creative
disruption in physical retail and other areas.

Amazon is a unique company, and its financial statements and annual report reflect that.
Even after 25 years in business, Amazon still focuses on growth, does not return money to
investors, and primarily reinvests an increasing amount of cash back into the business. In
1994 Jeff Bezos, a former Wall Street hedge fund executive, incorporated Amazon.com,
choosing the name primarily because it began with the first letter of the alphabet and
because of its association with the vast South American river.

AMAZON VISION

Our Vision is to be earth’s most customer centric company to build a place where people
can come to find and discover anything they might want to buy online, and endeavors to
offer its costumer’s the lowest possible price.

AMAZON MISSION

We strive to offer our costumer the lowest possible prices, the best available selection, and
the utmost convenience. To leverage technology and the expertise of invaluable employees
and to provide customer with the best shopping experience on the internet. Is to “serve
consumers through online and physical stores and focus on selection, price, and
convenience. Amazon is guided by four principles: customer obsession rather than
competitor focus, passion for invention, commitment to operational excellence, and long-
term thinking.
 II. FINANCIAL ANALYSIS
 HORIZONTAL ANALYSIS

AMAZON COMPANY

CONSOLIDATED BALANCE SHEETS

Increase (decrease)
2017 2016 AMOUNT PERCENT
Assets
Current Assets
Cash & Cash Equivalent $20,552 $ 19,334 1,218 6.29
Marketable securities 10,464 6,647 3,817 5.74
Inventories 16,407 11,461 4,946 4.31
Accounts receivable, net and 13,164 8,339 4,825 5.78
other
Total Current Assets $ 60,197 $ 45,781 14,416 3.14

Property and equipment, net $ 48,866 $ 29,114 19,752 6.78

Goodwill 13,350 3,784 9,566 2.52
Other assets 8,897 4,723 4,174 8.83
TOTAL ASSETS $ 131,310 $83,402 47,908 5.74

Liabilities and Stockholders’

Equity
Current Liabilities
Accounts Payables $34,616 $ 25,309 9,307 3.67
Accrued expenses and other 18,170 13,739 4,431 3.22
Unearned revenue 5,097 4,768 329 6.90
Total current liabilities $ 57,883 $ 43,816 14,067 3.21
Long-term debt 24,743 7,694 17,049 2.21
Other long-term liabilities 20,975 12,607 8,368 6.63
Commitment and contingencies
(note 7)

Stockholder’s Equity
Preference Stock, $0.01 par
value;
Authorized Shares-500
Issued and Outstanding Shares, _ _ _ _
none
Common Stock, $ 0.01 par value;
Authorized Shares – 5,000
Outstanding shares – 477 and 5 5 _ _
484
Treasury Stock, at cost (1,837) (1,837) _ _
Additional paid in capital 21,389 17,186 4,203 2.44
Accumulated other
comprehensive loss (484) (985) (501) (5.08)
Retained earnings 8,636 4,916 3,720 7.56
Total stockholder’s equity 27,709 19,285 8,424 4.36
Total liabilities and $ 131,310 $ 83,402 47,908 5.74
Stockholder’s equity
 AMAZON COMPANY INC.
CONSOLIDATED INCOME STATEMENT
For the years ended December 31, 2017 & 2016
Increase (decrease)
2017 2016 AMOUNT PERCENT
Net product sales $118, 573 $94,665 23,908 2.52
Net service sales 59,293 41,322 17,971 4.43
Total net sales 177,866 135,987 41,897 3.07
Operating Expenses
Cost of sales 111,934 88,265 23.669 2.68
Fulfillment 25,249 17,619 7,630 4.33
Marketing 10,069 7,233 2,836 3.92
Technology and content 22,620 16,085 6,535 4.06
General and administrative 3,674 2,432 1,242 5.10
Other operating expenses, net 214 176 38 2.15
Total operating expenses 173,760 131,801 41,959 3.18
Operating expenses 4,106 4,186 (80) (1.91)
Interest income 202 100 102 1.02
Interest expense (848) (484) 364 7.52
Other income (expense), net 346 90 256 2.84
Total non-operating income (300) (294) 6 2.04
(expense)
Income before income taxes 3,806 3,892 (86) (2.20)
Provision for income taxes (769) (1,425) (656) (4.60)
Equity-method investment activity, (4) (96) (92) (9.58)
net of tax
Net income $ 3,033 $ 2,371 662 2.79
Basic earnings per share $ 6.32 $ 5.01 4.31 8.60
Diluted earnings per share $6.15 $ 4.90 1.25 2.55
Weighted-average shares used in
computation of earnings per share:
Basic 480 474 6 1.26
Diluted 493 484 9 1.85
  VERTICAL ANALYSIS

%
2017 2016 2017 2016
Assets
Current Assets
Cash & Cash Equivalent $20,552 $ 19,334 15.65% 23.18%
Marketable securities 10,464 6,647 79.68% 79.69%
Inventories 16,407 11,461 12.49% 13.74%
Accounts receivable, net and other 13,164 8,339 10.02% 99.98%
Total Current Assets $ 60,197 $ 45,781 45.84% 54.89%

Property and equipment, net $ 48,866 $ 29,114 37.21% 34.90%

Goodwill 13,350 3,784 10.16% 45.37%
Other assets 8,897 4,723 67.75% 56,62%
TOTAL ASSETS $ 131,310 $83,402 100% 100%

Liabilities and Shareholders’

Equity
Current Liabilities
Accounts Payables $34,616 $ 25,309 26.36% 30.34%
Accrued expenses and other 18,170 13,739 13.83% 16.47%
Unearned revenue 5,097 4,768 38.81% 57.16%
Total current liabilities $ 57,883 $ 43,816 44.08% 52.53%
Long-term debt 24,743 7,694 18.84% 92.25%
Other long-term liabilities 20,975 12,607 15.97% 15.11%
Commitment and
contingencies(note 7)

Stockholder’s Equity
Preference Stock, $0.01 par value;
Authorized Shares-500
Issued and Outstanding Shares, _ _ _ _
none
Common Stock, $ 0.01 par value;
Authorized Shares – 5,000
Outstanding shares – 477 and 484 5 5 3.80% 5.99%
Treasury Stock, at cost (1,837) (1,837) 13.98% 22.02%
Additional paid in capital 21,389 17,186 16.28% 20.60%
Accumulated other (484) (985) 3.68% 11.81%
comprehensive loss
Retained earnings 8,636 4,916 65.76% 58.94%
Total stockholder’s equity 27,709 19,285 21.10% 23.12
Total liabilities and Stockholder’s $ 131,310 $ 83,402 100% 100%
equity

AMAZON COMPANY .
CONSOLIDATED INCOME STATEMENT
For the years ended December 31, 2017 & 2016

%
2017 2016 2017 2016
Net product sales $118, 573 $94,665 100% 100%
Net service sales 59,293 41,322 50% 43.65%
Total net sales 177,866 135,987 1.50% 1.43%
Operating Expenses
Cost of sales 111,934 88,265 94.40% 93.23%
Fulfillment 25,249 17,619 21.21% 18.61%
Marketing 10,069 7,233 84.91% 76.40%
Technology and content 22,620 16,085 19.07% 16.99%
General and administrative 3,674 2,432 30.98% 25.69%
Other operating expenses, net 214 176 1.80% 1.85%
Total operating expenses 173,760 131,801 1.46% 1.39%
Operating expenses 4,106 4,186 34.62% 44.21%
Interest income 202 100 1.70% 1.05%
Interest expense (848) (484) 7.15% 5.11%
Other income (expense), net 346 90 2.91% 9.50%
Total non-operating income (300) (294) 2.53% 3.10%
(expense)
Income before income taxes 3,806 3,892 32.09% 41.11%
Provision for income taxes (769) (1,425) 6.48% 15.05%
Equity-method investment (4) (96) 3.37% 1.01%
activity, net of tax
Net income $ 3,033 $ 2,371 25.57% 25.04%
Basic earnings per share $ 6.32 $ 5.01 5.33% 5.29%
Diluted earnings per share $6.15 $ 4.90 5.18% 5.17%
Weighted-average shares used in
computation of earnings per
share:
Basic 480 474 4.04% 5%
Diluted 493 484 4.15% 5.11%
  RATIO ANALYSIS

1. NETWORKING CAPITAL(CA-CL)
$105,978-$101,699
=$4,279

2. CURRENT RATIO (CURRENT ASSETS/CURRENT LIABILITIS)

$105,978/$101,699
=1.04

3. QUICK RATIO (QUICK ASSETS/QUICK LIABILITIES)

$153,223/101,699
=1.51

4. ACCOUNTS RECIEVABLE TURNOVER (NET ANNUAL CREDIT

SALES/AVERAGE ACCOUNTS RECIEVABLE)
$313,853/21,503
=14.59

5. AVERAGE COLLECTION PERIOD (USE IN 360 DAYS)

360 DAYS / 14.59
=24.67

6. INVENTORY TURN OVER

$313,853/$278,868
=1.13

7. DAYS IN SUPPLY IN INVENTORY

$278,868/365 DAYS
=764.022
8. ACCOUNTS PAYABLE TURNOVER (PURCHASES/ AVE. A/P)
9. CURRENT ASSETS TURNOVER (NET SALES/ AVE. TOTAL ASSETS)
$313,853/$214,712
=1.46

10. DEPT. TO ASSETS RATIO (TOTAL DEBT/TOTAL ASSETS)

$32,437/$214,712
=0.15

11. DEPT. TO EQUITY RATIO (TOTAL DEBT/TOTAK EQUITY)

$32,437/$46,994
=0.69

12. CAPITAL RATIO (STOCKHOLDER’S EQUITY/TOTAL ASSETS)

$46,994/$214,712
=0.22

13. INTEREST COVERAGE RATIO (NET INCOME BEFORE INTEREST AND

TAXES/ INTEREST EXPENSE)
$7,698/$1,332
=5.78

14. OPERATING CYCLE (DAYS SUPPLY IN INVENTORY + AVE.

COLLECTION PERIOD)
764.022 + 24.67
=788.692

15. GROSS PROFIT MARGIN (GROSS PROFIT/SALES)

$313,853X100
=$31,385,300
16. OPERATING RATIO (OPERATING EXPENSE/NET SALES) X100
$8,292/$313,853 X 100
 = 2.64

17. OPERATING PROFIT MARGIN (NET SALES X100)

$313,853 X100
=$ 31,385,300

18. NET PROFIT MARGIN (NET INCOME/NET SALES) X 100

$5,404/$313,853 X 100
= 1.72

19. OPERATING RETURN ON ASSETS (OPERATING INCOME/ASSETS)

$594/$214,712
=2.76

20. RETURN ON ASSETS (NET INCOME/ TOTAL ASSETS)

$5,404/$214,712
=0.025

21. RETURN ON EQUITY (NET INCOME/SHAREHOLDER’S EQUITY)

$5,404/$46,994
=0.12

22. EARNINGS PERSHARE (NET INCOME/ WEIGHTED AVERAGE SHARE

OUTSTANDING)
$5,404/$1,931
=2.79

23. PRICE EARNINGS RATIO (NET INCOME/ # OF TOTAL SHARES )

$5,404/22.38
=241,465
 24. DIVIDENDS PERSHARE

25. DIVIDENDS PAYOUT RATIO

III. SUMMARY AND FINDINGS

 ANALYSIS AND INTERPRETATION (HORIZONTAL ANALYSIS)
1.1 HORIZONTAL ANALYSIS COMPUTATION
1.2 ANALYSIS AND INTERPRETATION OF YOUR FINDINGS
 LIQUIDITY & SOLVENCY
 STABILITY OR LONG TERM FINANCIAL POSITION
 OPERATING EFFIECIENCY AND PRFITABILITY
1.3 DRAW THE IMPLICATIONS TO MANAGEMENT
1.4 STATE YOUR RECOMMENDATIONS

1.2 ANALYSIS AND INTERPRETATION OF YOUR FINDINGS

 LIQUIDITY AND SOLVENCY

- There is an increase current assets (5.74%) and increase in current liabilities (13.21%).
The increase in current assets is mainly due to cash and equivalent (6.29%) and accounts
receivable (5.78%). This could be related to increase in total net sales (3.07%). However,
the cost of sales (2.68%) has decreased in total operating expenses.

- Based on the findings and analysis, there is a decreased in the net income (2.79%)
supposedly because of the tax expenses incurred.

 STABILITY OR LONG TERM FINANCIAL POSITION

-If can be noted that growth in the stockholder’s equity (4.36%) is closely
greater that
 they growth in current liabilities (3.14%) this can be accounted as for the
marked increase in the firms retained earnings which caused the notable
growth in the total stockholder’s equity.

-Based on the results of the analysis it could be inferred that amazon

company incorporation has established its long term position.

 OPERATING EFFICIENTLY AND PROFITABILITY

-There is a favorable increased sales (3.07%), however it is negated by the

increased amount of cost of sales (2.68%). The cost of sales it mainly made
up of accounts receivables. The increase is expensed is probably due to the
operating expense (1.91%).

-In general, It can be inferred that the performance of amazon company

incorporation is considered to be unfavorable as supported by decreased of
its income before income taxes (2.20%).

1.3 DRAW THE IMPLICATIONS TO MANAGEMENT

-It is notable that there is an increase asset (5.74%), decreased in total

liabilities (3.21%) increase in total stockholder’s equity (4.36%) and
favorable increase in the total operating expense (3.18%) as well as increase
total non-operating income (expense) (2.04%)

 ANALYSIS AND INTERPRETATION (VERTICAL ANALYSIS)

1.1 VERTICAL ANALYSIS COMPUTATION

1.2 ANALYSIS AND INTERPRETATION OF YOUR FINDINGS

 STATEMENT OF FINANCIAL POSITION

 The common-size statement reveals that for both periods, the company’s current
assets represent a great bulk of the firm’s assets. This is good as it indicates
liquidity. However, deeper analysis of the statement shows that majority of the
current assets is made up of cash & cash equivalent (38.83%) and seconded by
receivables (110%). Cash & cash equivalent is one of the least liquid of all assets
under the current assets category. Again, the analyst must be able to account for
this proportion. Why are cash and receivables so high? The growth in receivable
percentage can be accounted for by the sales revenue increase. Another item worth
accounting for is the increase in the percentage of cash. What caused such increase?
The decrease in the percentage allocation for property plant and equipment must
also by noted. Although this can be caused by. Depreciation, it is worth mentioning
call for it, future acquisition of fixed assets.

The total liability percentage (96.61%) is lower than the hotel stockholder’s equity
percentage (44.22%), which means most assets were not financed by borrowings.
The decreased of liabilities in 2016 (44.08%) to 2017 (52.53%) indicates that the
firm is shifting its dependence of financing from borrowing to using more of the
owners investment. If this continues, this would be a good indication of long-term
financial position.

The owner’s equity is considered as the margin of safety by the creditors. Creditors
are happy when the owner’s equity is high. This is because the owner’s equity is
the amount can absorb any decline in the assets. In other words, in case the assets
of the company decline, the owner’s equity is the amount that can be used to pay
the creditors.

 STATEMENT OF COMPREHENSIVE INCOME

The noticeable high percentage of the cost of sales (187.63%) to sales not favorable.
This indicates that most of the sales revenue is used to cover the cost of selling. As
mentioned in the horizontal analysis, management most determine what caused this
 and established measures to remedy this. The fulfillment (18.61%) in 2016 has
decreased comparing it with the fulfillment (21.21%) in 2017. This is due to the
marked increase of the cost of sales ratio.

The decreased in the operating expense ratios favorable for firm. This indicates the
firm’s efficiency in controlling operating expense. The net income ratio (50.61%)
is favorable as indicates that there was a decrease in the net income ratio. Again
this could be accounted for by the unfavorable increase in cost of sales, which was
too high to be offset by the favorable results from the decrease in the operating
expense ratio.

ANALYSIS AND INTERPRETATION (RATIO ANALYSIS)

 LIQUIDITY RATIO

Amazon company current ratio from 2016 to 2017 but then improved from 2018 to
2019 exceeding 2016 level. It is clear that both liquidity ratios have increase
significantly year on year. This is good since it indicates that a company is in a
better position to meet its obligations. But on the other hand, it can also indicate
that a company isn’t using its assets efficiently. Since the company current assets
decline though there is still an increase in liquidity ratios. It could mean that they
have utilized almost all of their current assets to pay debt obligations or the current
liabilities without having external capital or take our loans. Looking at the current
ratio which increase (1.04%) and quick (acid-test) ratio which also increase (1.51%)
could mean that the company is stable and financially healthy enough to pay off its
debts and outstanding liabilities it has incurred.

 LEVERAGE RATIO

The debt-to-assets ratio decrease slightly in 2016 from (0.52%) by 2017 (0.44%) ,
which is good for the firm since it indicates that, even if the company does have
 debt, its operations and sales are generating enough revenue to grow its assets
through profits.
As the debt-to-assets ratio decrease, the debt-to equity ratio of the Amazon
company incorporation also decrease from (2.27%) 2016 to (2.08%) by 2017 during
2018. This change is good since the decrease in debt-to-equity ratio indicates a
lower amount of financing by debt via lenders, versus funding through equity via
stockholders. It could also mean that the firm is more financially stable that it can
attract new investors since its decrease in ratio is not that too low.

 ACTIVITY RATIOS

It can be noted that there is an increase in the total asset turnover (1.46 times). This
is good, since it indicates that the firm is more efficient in generating revenue from
assets.
The marked increase in the inventory turnover (13.74times) 2016 up to
(10.02times) 2017 is also known worth notable since this slight changes typically
means that a company is selling goods quickly, and their products. It also often
interpreted as an indicator of strong sales, suggesting greater profitability and return
on investment.
This quick inventory turnover indicates lower risk of deterioration particularly in
the case of perishable products or items with a higher risk obsolescence.
The results in the computation of accounts receivable turnover shows that there is
a decrease from (16.30times) of 2016 to (13.51times) during 2017. This decrease
in ratio isn’t good since it indicates that the company is seeing more delinquent
clients. However, this could also due to the company’s credit policy and increasing
problems with collecting receivables on time.

 PROFITABILITY RATIO

After the computations, it can be seen that there is a favorable increase in the ROA
(return on asset ratio). It shows that from year 2016 there is a return on assets ratio
 which is (35.17%) while on 2017 it turns into (43.29%). Such increase is good since
it indicates that a company is increasing its profit generation without needing as
much capital. It also indicates how well a company’s management deploys
stockholder’s capital. This increase provide an idea to the investors how effective
the company is in converting the money it’s invest into net income.
The return on equity also increase (0.12%) to (0.10%). Again, this id favorable
because it means that the company is doing a good job of increasing its profits with
each investment dollar it spends. It also indicates how profitable Amazon company
incorporation is, relative to its assets or the resources control.

IV. RECOMMENDATIONS

Amazon should build up and execute a Business substitute for dealer’s, producers,
dispensers, as well as sellers to exploit. Develop an effective differentiating
enterprise wide strategy to survive and prosper over the competition for the long-
term future. Amazon should enlarge commercials to enhance understanding
towards products different types of advertising like T.V commercials, newspapers

V. REFERENCES
(https://www.stock-analysis-on.net/NASDAQ/Company/Amazon-Inc )
(
https://www.annualreport.com/hostedDate/AnnualReportArchieve/aNASDAQ
_AMZN_2016.pdf )
( https://fourweekmba.com/amazon-vision-statement-mission-statement/ )
(Amazon.com E-commerce website)