NEAR EAST UNIVERSITY

Faculty of Economics and Administrative Sciences

Department of Business Administration

AMAZON INCORPORATION FINANCIAL REPORT

Financial Management Project

By

MARGARET TREASURE INNIOBONG

STUDENT NO: 20234692

Lecturer:

MUMTAZ ALI

Nicosia

December, 2023.
 CHAPTER 1

INTRODUCTION
Amazon.com, also known as Amazon is an American multinational company. The company is
primarily in the business of cloud computing and electronic commerce. It was founded by Jeff
Bezos on July 6, 1994. The headquarters of the company is located in Seattle, Washington, the
US. Jeff Bezos is the Chairman, President and CEO of the company. Amazon incorporation
initially started as an online book store. After a few years, looking into the opportunity the
company diversified its business activities and also started selling software, jewelry, apparel,
furniture, electronics, leather goods, etc. The company has a number of websites and sells its
products all around the world through its websites. The company has exclusive websites for US,
Australia, United Kingdom, Canada, Germany, Italy, France, Ireland, Netherlands, Spain, Japan,
China, India, Mexico and Brazil. It superseded Wal-Mart Stores, Inc., in mid of 2015, and was
rated as most valuable retailer of America. The company is also largest cloud infrastructure
service provider in the world. The company has shown tremendous growth during past few years
in terms of increase in total assets and total revenue. The total assets of the stood at $462 million
at the end of 2022. The total revenue of the company stood at $513 million for the same period.
The company has work force of more than 1.5 million employees. The stock of the company is a
component of NASDAQ 100 and S&P 500.
Four guiding principles serve as Amazon's foundation: a long-term perspective, passion for
creation, operational excellence commitment, and customer obsession above competitive focus.
Amazon aspires to be the finest employer on Earth, the firm with the greatest focus on
customers, and the safest place to work.
While Amazon's business has changed over time, consumers' needs for more affordable pricing,
a wider range of options, and convenient services have remained consistent. Customers of
Amazon may now find what they're seeking for both online and offline. Amazon always comes
up with new methods to please its consumers, whether it's by making and distributing movies,
music, or fresh vegetables right to their door.
Amazon has invested over $530 billion in the United States over the last ten years, and have
generated more jobs in the country than any other firm. About 1.6 million indirect employments
in industries like construction and hospitality have been made possible by Amazon's investments,
in addition to the staff. Along with aggressively addressing the pressing needs of ending hunger
and homelessness and funding youth and young adult education, Amazon also actively seek to
support communities.
Amazon consistently innovates in a number of industries, such as grocery delivery and
entertainment, to meet changing customer expectations. They have made large investments in the
United States, creating a large number of employment and indirectly assisting sectors such as
hospitality and construction. Amazon's dedication to tackling social challenges goes beyond
corporate success; in addition to providing education, the company helps combat hunger and
homelessness, and supports local communities.
 CHAPTER 2

BACKGROUNG, VISION, MISSION AND PRODUCTS

BACKGROUND
In 1994, Bezos introduced his "regret minimization framework," which outlined his attempts to
avoid feeling guilty about not joining the Internet business boom at that time sooner. This helped
to spark the founding of the firm. Moving to Seattle in 1994, Bezos resigned his job as vice-
president of Wall Street company D. E. Shaw & Co. His first task was to draft a business plan for
the company that would become Amazon.com.
Following his reading of an Internet futures analysis that predicted 2,300% annual growth in
Web commerce, Bezos listed 20 potential online goods. Discs, computer hardware, software,
films, and books were among the five items he deemed to be the most promising when he
whittled down the list. After considering the vast amount of literature that is accessible in print,
the cheap cost of books, and the enormous demand for literature globally, Bezos ultimately
decided that his new company would sell books online. Bezos' Bellevue, Washington, garage
served as the initial home of Amazon.
Washington is where Amazon was first formed in 1994. Fluid Concepts and Creative Analogies:
Computer Models of the Fundamental Mechanisms of Thought by Douglas Hofstadter was the
company's first book to be offered on Amazon.com when it launched in July 1995. The business
had its public debut in October 1995. The corporation was reincorporated in Delaware in 1996.
On May 15, 1997, Amazon launched its first stock offering for public trading under the
NASDAQ ticker code AMZN. The shares were priced at US$18.00 each, which was later
divided into three smaller ones in the late 1990s.
Predicted on a four- to five-year profit horizon, Amazon's original business model was
unconventional. Stockholders were upset by the company's "slow" development, believing it
would not become profitable quickly enough to warrant investment or even ensure its long-term
survival. Despite the demise of several e-companies due to the dot-com bubble bust at the
beginning of the 21st century, Amazon managed to endure and develop further, eventually
emerging as a major force in online commerce. Ultimately, with sales exceeding $1 billion, it
made $5 million in its first profit during the fourth quarter of 2001. Even with its extraordinarily
low profit margin, this demonstrated to doubters the viability of Bezos’ unorthodox business
plan. Because of his company's success in popularizing online shopping, Time magazine
awarded Bezos the Person of the Year in 1999.

VISION
In addition to aiming to be the world's top e-commerce firm, Amazon also wants to be the
greatest employer and safest place to work in the world. As stated in their mission statement,
they are committed to the safety and well-being of their employees and place a great emphasis on
key principles including establishing a safe workplace, respecting workers' rights, and being the
industry leader in e-commerce globally. The following characteristics are linked to this
objective:
 Global reach
The company's dedication to become a market leader worldwide is emphasized by Amazon.com
Inc.'s vision statement's "global reach" section. Specifically, by designating the "Earth" as its
market, Amazon.com Inc. suggests that it wants to grow internationally into other nations and
areas.
 Best employer
The company's dedication to prioritizing its workers is shown in Amazon's corporate vision
statement's "best employer" section. They understand that building a great workplace culture and
attaining success depend heavily on their employees. As a result, Amazon considers employee
satisfaction and pleasure to be very essential.
 Safest workplace
Workplace safety is prioritized in Amazon corporate strategy as a key value for safeguarding its
workers and improving the company's reputation. Amazon has implemented diversity and
inclusion programs, made sure that its warehouses are maintained in accordance with OSHA
regulations (although sometimes forced), and given its staff access to ergonomic equipment in
order to guarantee that this aim is reached.

MISSION
Amazon's mission statement, "to be Earth's most customer-centric company," highlights the
significance of customer happiness while committing to provide its consumers appealing e-
commerce services.
Amazon's emphasis is driven by four main objectives, as stated in its mission statement: the
greatest assortment of products and services, the lowest prices, ease of e-commerce, and
leadership in the worldwide market.

PRODUCTS
Amazon offers a large variety of products in several categories, serving as a one-stop shop for
consumers. An outline of the extensive selection of goods that Amazon has to offer is shown
below:
1. Technology: Computers, cellphones, cameras, and home appliances are just a few of the
many electronic devices and accessories that Amazon offers.
2. Books & Media: Amazon started out as a bookstore and today provides a vast array of
digital content, such as novels, e-books, audiobooks, music, and movies.
3. A wide range of clothing options, as well as shoes and accessories, are available for men,
women, and kids, catering to fashion enthusiasts.
4. Kitchen & Home: Gardening supplies, furniture, décor, kitchen appliances, and home
renovation supplies are readily available to fulfill a range of household needs.
5. Games and Toys: Kids of all ages may find a wide selection of games, toys, puzzles, and
educational materials on this site.
6. Beauty & Personal Care: A range of products are available to fulfill personal care needs,
such as skincare items, grooming essentials, makeup, and medical supplies.
7. Health & fitness: Sports accessories, vitamins, exercise equipment, and wellness products
are available to promote a healthy lifestyle.
8. Amazon's food section offers fast online shopping for groceries, pantry essentials,
beverages, and home items.
9. Automobile and industrial supplies: They also carry equipment, tools, automotive
accessories, and industrial supplies.
10. A few of the many pieces of jewelry that are available to fit a range of tastes and
occasions include watches, necklaces, earrings, and rings.
11. Pet Supplies: Among the things that you may buy on Amazon to satisfy your pet's needs
for care are food, toys, grooming supplies, and accessories.
 12. Office Products: They provide a large selection of printers, stationery, office supplies,
and other items that are required for home or commercial offices.

New product categories and exclusive goods are often introduced by Amazon as part of its
continuous attempts to provide its customers a vast and ever-expanding assortment of products.
 CHAPTER 3

RATIO ANALYSIS
 Current Ratio
The capacity of a business to meet short-term or one-year-due commitments is gauged by the
current ratio, which is a liquidity ratio. Analysts and investors may use it to learn how a business
might optimize its existing assets on the balance sheet in order to pay down its current debt and
other obligations.

YEAR 2020 2021 2022

CURRENT RATIO 1.05 1.13 0.94

Currrent Ratio
1.2

0.8

0.6

0.4

0.2

0
1 2 3

The company's 2020 current ratio of 1.05 indicates that for every dollar in short-term obligations,
it has around $1.05 in short-term assets. As a result, it rises to 1.13 in 2021 and falls sharply to
0.94 in 2022. Because it is less than 1, it indicates that Amazon Incorporation may have
difficulties utilizing its present assets to pay its short-term commitments.

 Acid Test Ratio

A company's "quick assets" (cash and accounts receivable) are compared against its current
obligations using the acid-test ratio. This computation is among the six fundamental methods
used to ascertain a company's short-term liquidity, or its capacity to pay its debts on time.
 YEAR 2020 2021 2022

ACID TEST RATIO 0.86 0.90 0.72

Acid Test Ratio

1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
1 2 3

With an acid test ratio of 0.86 in 2020, 0.90 in 2021, and 0.72 in 2022, the corporation
demonstrates that it has $0.72 in liquid assets available to pay every $1 in current obligations.
This ratio shows that the business is not well-positioned to pay its short-term debts when they
become due.

 Cash Ratio
The ratio of a company's total cash and cash equivalents to its current obligations is known as the
cash ratio, or cash asset ratio. It shows a company's ability to use its cash and cash equivalents to
pay down short-term debt.

YEAR 2020 2021 2022

CASH RATIO 0.66 0.67 0.45

 Cash Ratio
0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0
1 2 3

The company's 2020 cash ratio of 0.66 indicates that for every dollar in total cash and cash
equivalent, it has around $0.66 in short-term assets. As a result, it rises to 0.67 in 2021 and falls
sharply to 0.45 in 2022. Because it is less than 1, it indicates that Amazon Incorporation may
have difficulties utilizing its total cash or cash equivalent to pay its short-term commitments.

 Debt-to-Equity
The amount of debt a firm has relative to its assets is shown by the debt-to-equity ratio, or D/E
ratio. To find it, divide the entire debt of a firm by the total equity owned by its shareholders.
The corporation may find it more difficult to pay its obligations if its debt-to-equity ratio is
larger. A percentage may also be used to represent a debt-to-equity ratio.

YEAR 2020 2021 2022

DEBT-TO-EQUITY 0.90 0.84 0.95

In 2020, the company's debt to equity ratio was 0.90, meaning that for every dollar of equity,
there was $0.90 in debt. The ratio drops to 0.84 in 2021 and rises to 0.95 in 2022. This indicates
that, as of 2022, the corporation owed $0.95 to creditors for every $1 held by shareholders.
 Debt-to-Equity
0.98
0.96
0.94
0.92
0.9
0.88
0.86
0.84
0.82
0.8
0.78
1 2 3

 Debt-to-Total Assets
Total debt divided by total assets is how one may compute a company's debt ratio. In case a
firm's debt ratio is less than 100%, it implies that its assets exceed its debt, however if it is larger
than 1.0 or 100%, it suggests the company has more debt than assets.

YEAR 2020 2021 2022

DEBT-TO-T.ASSETS 0.26 0.27 0.30

Debt-to-Total Assets
0.31

0.3

0.29

0.28

0.27

0.26

0.25

0.24
1 2 3
The company's debt to total asset ratio in 2020 was 0.26, which indicates that there was $0.26 in
debt for every dollar of assets. In 2021, the ratio rises to 0.27, and in 2022 it reaches 0.30.
Showing that as of 2022, debt accounted for almost 30% of the company's total assets.

 Total Capitalization Ratio

Capitalization ratios are a useful tool for calculating how much debt a firm has in its capital
structure. The debt-to-equity, long-term, and total debt-to-capitalization ratios are examples of
capitalization ratios.

YEAR 2020 2021 2022

TOTAL CAP. RATIO 0.67 0.62 0.65

Total Capitalization Ratio

0.68

0.67

0.66

0.65

0.64

0.63

0.62

0.61

0.6

0.59
1 2 3

 Receivable Turnover
The average number of times a corporation collects its average accounts receivable in a given
year (or accounting period) is measured by the Average Receivables Turnover Ratio.

YEAR 2020 2021 2022

REC. TURNOVER 15.73 14.28 12.13

 Receivable Turnover
18
16
14
12
10
8
6
4
2
0
1 2 3

In 2020, the average receivables turnover ratio was 15.73; it fell to 14.28 in 2021 and continued
to decline to 12.13 in 2022. This percentage only indicates that either Amazon has poor credit
policies, insufficient collection procedures, or consumers who are neither creditworthy or
financially viable.

 Inventory Turnover
The amount of inventory that is sold, consumed, and then replaced is known as inventory
turnover. The cost of products divided by the average inventory for the same time yields the
inventory turnover ratio. Strong sales are often indicated by a greater ratio and poor sales by a
lower one.

YEAR 2020 2021 2022

INVE. TURNOVER 14.06 12.36 12.97

Higher inventory turnover ratios are often associated with quicker sales, cheaper carrying costs,
and more effective inventory management. A extremely high ratio, on the other hand, might
indicate low inventory levels, which can result in stockouts or lost sales chances. Conversely, a
smaller ratio might point to slow-moving or overstocked goods.
 Inventory Turnover
14.5

14

13.5

13

12.5

12

11.5
1 2 3

 Total Assets Turnover

The ratio of total sales or revenue to average assets is known as asset turnover. Investors may
learn more about a company's asset utilization and sales effectiveness by looking at this
indicator. Investors analyze comparable businesses within the same industry or group using the
asset turnover ratio.

YEAR 2020 2021 2022

T. ASSETS TURNOVER
1.20 1.12 1.11

Total Asset Turnover

1.22

1.2

1.18

1.16

1.14

1.12

1.1

1.08

1.06
1 2 3
A decrease in the total assets turnover usually signifies a reduction in the effectiveness with
which a business is using its assets to produce sales or income. A financial ratio called total
assets turnover assesses how profitable a business is in relation to the total amount of its assets.

 Gross Profit Margin

The profit left over after deducting cost of goods sold (COGS) is known as the gross profit
margin. To put it simply, the money left over after operating expenses are deducted is known as
a company's gross profit margin. This statistic, often referred to as the gross margin ratio, is
typically stated as a percentage of sales.

YEAR 2020 2021 2022

GROSS P. MARGIN
0.13 0.14 0.13

Gross Profit Margin

0.142

0.14

0.138

0.136

0.134

0.132

0.13

0.128

0.126
1 2 3

The marginal rise in Amazon's gross profit margin in 2022 might be a sign of better cost control
or a shift in the company's sales mix that increased profitability. The declining trend between
2022 and 2021, however, may point to problems with cost control or pricing policies that affect
profitability.
  Net Profit Margin
The amount of net income or profit earned as a proportion of sales is expressed as the net profit
margin, or simply net margin. It is the proportion of a company's or business segment's net
profits to revenues. Although it is most often written as a percentage, net profit margin may also
be shown as a decimal.

YEAR 2020 2021 2022

NET PRO. MARGIN

0.05 0.07 -0.005

Net Profit Margin

0.08

0.07

0.06

0.05

0.04

0.03

0.02

0.01

0
1 2 3
-0.01

A greater net profit margin shows that, after deducting all costs, the business is more adept at
turning revenue into profit. The downward trend seen between 2021 and 2022 might indicate a
drop in income or an increase in costs that has an effect on overall profitability.

 Return on Investment
The relationship between net income and investment is known as return on investment. When an
investment yields a high rate of return on investment, its cost was well-absorbed. ROI is a metric
used in performance evaluation that helps compare the effectiveness of many investments or
assess how efficient an investment is.
 YEAR 2020 2021 2022

ROI
0.06 0.07 -0.005

Return on Investment (ROI)

0.1

0.08

0.06

0.04

0.02

0
1 2 3

-0.02

The return-on-investment gauges how well an investment produces profit and how efficient it is.
Variations in returns produced in relation to the original investment are shown by the
fluctuations in ROI across these years.

 Return on Equity
A company's profitability in proportion to its equity is gauged by its return on equity (ROE),
which is calculated as follows: ROE = Net Income/Average Shareholders' Equity. Therefore, the
ratio of net income to total equity for a fiscal year, stated as a percentage, is equal to ROE.

YEAR 2020 2021 2022

ROE
0.22 0.24 -0.01
 Return on Equity (ROE)
0.3

0.25

0.2

0.15

0.1

0.05

0
1 2 3
-0.05

Negative ROE are unusual and should raise some red flags. It can mean that throughout the year,
the company's net loss surpassed the equity held by shareholders. There might be a number of
reasons for this, including financial difficulties, write-offs, and operational losses.
 CHAPTER 4

CONCLUSION
To sum up, the financial report from Amazon demonstrates a dynamic performance
characterized by steady expansion and diversification across several industries. From its start as
an online bookshop, the firm has grown over time to become a major force in cloud computing,
e-commerce, and other industries.
The disclosed data indicates notable surges in both overall assets and revenue, which are
indicative of Amazon's deliberate global market growth and effective market penetration. Its
leadership position in the industry is further cemented by its capacity to innovate continuously in
sectors like grocery, entertainment, and technology, all while adapting to shifting customer
needs.
Nevertheless, despite these achievements, variations in a few financial ratios—like the Return on
Equity and Total Capital Ratio—showcase the intricacy of Amazon's operating environment. For
long-term financial stability and investor confidence, it will be essential to address factors that
contributed to fluctuations in these indicators.
Furthermore, despite the fact that Amazon's investments, job creation, and community support in
the US demonstrate its dedication to doing more than just making money, issues like the negative
ROE projected in 2022 call for serious consideration and strategic reevaluation.
Going forward, Amazon's focus on long-term goals, operational excellence, and customer
happiness will continue to be essential components of its success. A thorough analysis of the
company's financial plans and continuous dedication to efficiency will be essential to sustaining
its trajectory of development and resilience in the years to come as it navigates changing market
dynamics and pursues greater innovation.